Corn, soybeans and cattle lower on Thursday with wheat and hogs higher.
John Heinberg, Total Farm Marketing, says corn and soybeans make new lows and hit prices not seen for four years.
So how ugly could these markets get?
“In my mind there is the potential for more downside especially as we’ve taken out the $4 handle on December corn and its just such a big psychological level. How we close out the week will be really key. If we can get a little recovery maybe that leaves us sideways for a little bit but right now I’m still talking the $3.50 window for December corn,” he explains.
He also thinks September corn is vulnerable with producers need to move old crop bushels.
“You know that could point to a $3.40 target zone if the selling were to really kick in,” he says.
For November soybeans Heinberg thinks the market will take out the $10 level, with $9.50 as the next psychological stop.
“And if yield and carryout continues to rise I’m not ruling out $9 soybeans by the end of the year into early spring.”
The pressure is a combination of both supply and demand according to Heinberg.
“Now obviously the supply side has been well documented....but on top of that it’s still about demand. We’re just not seeing enough activity especially on the export market. We need some sales that will move the needle and more than just routine sales like the one today with the 4.85 million bushel sale to China,” he adds.
Heinberg says prices will need to go lower to stimulate that demand but its hard to know how much lower the market needs to go before that demand does kick in.
With the strong crop conditions the market is also trading at or above the current yield projections from USDA of 181 bushels per acre for corn and 52 bpa for soybeans.
Plus fund and farmer selling is pressuring the market.
Wheat sees a short covering bounce as the market was oversold but Heinberg says there are also a few other underlying fundamental factors that are supportive.
“We’re watching what’s going on with the Matif milling wheat prices in Europe. The French crop conditions are at a multi-year low here and we’re seeing some poor quality due to excessive wetness,” he says.
Cattle futures set back with steady to $2 lower cash on Thursday, lower boxed beef cutouts at midday and August option expiration.
However, he thinks the market is looking technically tired, “I’m getting a little cautious on cattle here especially feeders breaking through that bottom side just kind of opens these charts up for some more selling.”
Lean hog futures extend gains with higher cutouts midday at over $107.
“We’ve had a nice correction but the key will be where we go from here,” he adds.
