Corn and soybeans end lower Monday, with wheat mixed. Cattle soared pulling up hogs.
Corn Sees Profit Taking
Ted Seifried with Zaner Ag Hedge says after 10-cent gains on Friday the corn market saw some profit taking.
“I mean it was a really nice reversal higher day that we had on Friday and we did get above the 100 -day moving average really from the first time since May and so you know when you have something like that happen and you can’t see that immediate technical follow -through they’re profit -taking can come back into the market,” he explains.
Corn Feels Report Hangover
He says the September WASDE was bearish for the corn market and traders had the weekend to finally let that soak in.
“Yes, USDA cut yield by 2 bushels and there are people thinking they will need to cut more in the future. However, that was a bearish acreage increase and we are still looking at a record crop at 16.8 billion plus bushels,” he says.
He also points out that even with all the adjustments the carryover still ending up at over 2.1 billion bushels.
Will Corn Yield Drop Further?
With disease pressure and dry conditions in the Eastern Corn Belt there are many in the trade that believe USDA needs to drop yields much further.
“There are some talking as low as mid-170s. I am not in that camp,” explains Seifried. “Corn is a July crop and even though it was dry in August that isn’t likely to have as much of an impact on yield as people think,”
He says USDA incorporated plot data into their estimates and used ear count, which was still high and that is why the yield did not come down a whole lot.
“I think there’s downside potential in that corn yield. I don’t think it’s a mid -170, Michelle. I think it’s maybe a 180, maybe a 182 .5, maybe a 183.”
Seifried says corn yield could drop five bu. per acre and that is unlikely to get the new crop ending stocks figure under 2 billion bu.
“I think we would need to see a nearly 10 bu. drop in the national yield, that’s a 900 million bushel reduction in production, to gets carryover under that 2 billion mark,” he says.
How Much Would Yield Need to Drop to Get Corn Ending Stocks Under 2 Billion?
That’s because if USDA lowers yield in future reports, they will also likely lower demand.
Seifried says USDA projected record demand and the market had time to look at that and realize if they cut yield they also have plenty of room to cut demand.
“Yeah exports are off to a great start and the USDA reflected that by increasing exports for for new crop corn but you look at ethanol that got lowered on on old crop you look at the new crop feed and residual and I mean every single demand category categories at or near record expectations from the USDA. And you feel like there can be some downside potential on that if the yield is lowered,” he says.
Soybeans Fade China Trade Talk Optimism
After gains on Friday in soybeans of 12 to 13 cents soybeans likely saw some profit taking on Monday.
However, Friday’s rally was partially tied to optimism about trade talks with China over the weekend.
“When traders learned that the talks were mostly focused on TikTok and not soybeans, the market faded,” he says.
However, President Trump will also be speaking to Chinese President Xi on Friday.
Soybeans Also See Report Hangover
Seifried says the soybean market also experienced some report hangover, just like corn.
While there is plenty of talk about yields needing to be lowered in future reports USDA only lowered yields .1 bu. and raised ending stocks by 10 million bu. to 300 million bu.
USDA did lower exports another 20 million bu. Seifried says that doesn’t fully account for the loss of China business.
“Even if China comes in to buy U.S. soybeans late it could mean a drop in exports of 200 million bu.” he says.
That can’t be offset by other countries, lower yields or even crush as the August NOPA crush figure came in at a record 189.810 million bushels.
Cattle Soar Monday but Can They Retest the Highs?
Cattle futures saw big gains on Monday on short covering and technical buying.
The market traded lower last week and on Friday cautious about any announcements USDA Secretary Brooke Rollins might make on New World Screwworm (NWS) while speaking in Oklahoma.
Can Futures Retest the Highs?
Seifried says in order to confirm the market is in full recovery mode he wants to see some strong follow through buying on Tuesday.
He says the market has had several daily reversals negated but the key will be if the funds liquidate on strength or the market continues to see buying.
Lean Hogs Near Contract Highs
Lean hog futures closed higher and are near contract highs on nearby contracts as funds have been driving the rally.
Seifried says technically the market looks great but he’s unsure if the rally can be sustained, especially as October futures near the psychological $100 mark.
