Corn and soybeans are higher early Wednesday with wheat mostly lower. Cattle reversed a lower opening and are trading higher with lean hog futures.
Corn and Soybeans Add Weather Premium
Vince Boddicker, Farmers Trading Company, says corn is extending gains for a third day and still seeing fund buying and short covering off the key reversal scored on Monday. However, he thinks the corn and even the soybean markets are adding some weather premium with extended forecasts looking hotter in the next 11 to 15 days when a good chunk of the corn will be pollinating.
“Late next week it could get really hot in the eastern and central Corn Belt,” he says.
Plus, tight tassel wrap is affecting corn pollination in Illinois, Iowa, Indiana and Missouri, which could negatively impact yields.
This might mean that at least the corn market has priced in the highest yield of the season after talk last week of a 185 bu. national corn yield and even some models predicting up to 190 bu.
Are Corn and Soybeans Trying to Bottom?
Boddicker says his technical analysis indicates a low this week in corn. Sub $4 corn futures seem to have stimulated some value buying by end users.
“I think we have at least a short-term bottom in here, as some of the cycles I watch indicated corn was ideally due for a short-term low on Monday,” he explains. “How much [movement] we’re going to get, I think, depends on if we get some funds that unload some shorts?”
However, there is a possibility of another 25 cent to 32 cent rally in corn before hitting major chart resistance. It will take sustained heat to push through that area.
November soybeans bounced off the $10 mark, but they are an August crop so to confirm a low in that market, Boddicker says the weather issues will need to last for a couple of weeks to hit the prime reproductive and yield setting stage.
“You really have to think $10.40 to $10.50 is going to be a tough one to get through. If we come back and we see we have problems, if that heat comes in as we talk about next weekend in the major corn growing areas and soybean growing areas and it sticks around, then you could get some things going,” he explains.
Wheat Sees More Pressure
Wheat is not following corn and soybeans on Wednesday morning and instead continues to see technical selling. Boddicker thinks the market is also seeing some harvest pressure, not from the U.S., but other areas of the Northern Hemisphere such as Europe.
September hard red spring wheat has held the $6 mark so far on the charts, but that might be difficult support to defend with the rains falling in parts of Canada and dry U.S. production areas of the Northern Plains such as Montana.
Market Watches Trade Deals and Tariff News
President Trump announced a trade framework with Indonesia on Tuesday which will lower their tariffs from 32% to 19% with U.S. exports remaining tariff-free. Indonesia has committed to purchasing $4.5 billion worth of U.S. agricultural products, primarily wheat, soybeans, soymeal and dairy products.
The country is a top five importer of U.S. soybeans and meal.
However, there is still plenty of uncertainty regarding the higher tariffs announced with various other major trading partners that will take place on Aug. 1, according to Boddicker.
Cattle Rebound Closing in on Contract Highs
Cattle reversed a lower opening again as funds step in to buy on breaks with the huge discount the futures are holding to the cash trade. August live cattle futures managed to make a new contract high and its possible the deferred live cattle and feeder cattle contracts could retest the highs again this week.
The cash trend for this week is more uncertain as the $7.78 rise in prices last week has left packer margins in the red, especially as Choice boxed beef values have cooled nearly $20 off their recent highs he says.
Lean Hog Futures Higher
Lean hog futures are following the cattle rally early Wednesday but also getting a boost from higher cash trade with the National Direct market hogs up $3.02 Tuesday. August futures also became the new spot month at a $3.26 discount to the index, which might also be attracting buying. However, Boddicker says the supplies are tightening with ongoing disease issues, whichshould mean the market has bottomed for the time being.
