Grain and livestock futures were mostly higher on Wednesday, except wheat.
Corn and Soybeans Add Weather Premium
Ted Seifried, Zaner Ag Hedge, says corn and to some degree soybeans, were adding weather premium as some heat comes is predicted for much of the Corn Belt in the extended forecasts.
“The fear is this could impact pollination of the corn so the market was adding some weather premium,” he says.
From a technical standpoint corn was up for a third day, building on Monday’s reversal, and with weather as a trigger that has caused some fund traders to cover additional short positions.
Has the Corn Market Traded the Highest Yield?
Last week’s massive yield projections certainly did a number on the corn market but Seifried says the highest yield may now be factored into prices.
He says he didn’t buy into the yield projections above 185 bu. because the yield curve is not going up as fast as it was five to ten years ago with the bigger advancements in breeding and technology being made.
How Far Can Corn Rally?
December corn is right up into technical resistance on the charts again around the $4.25 level and Seifried says the market may need a bigger or sustained weather issues to take that level out and continue to rally.
Soybeans Trade China Hopes
The near term forecast is not threatening for soybeans but extended forecasts that are starting to look hotter and drier may be getting some attention from the trade.
However, Seifried thinks the bigger catalyst for Wednesday’s rally was hope for some China business with a flash sale of 4.4 million bu. of new crop soybeans to unknown destinations announced by USDA.
“Some in the trade think this might be China and there has been talk the last day or so that they were sniffing around for bids both in the Gulf and off the PNW,” he explains.
There were also news reports that President Trump would be meeting with Chinese President Xi soon also fueling trade hopes.
How Far Can Soybeans Run Technically?
Seifried says technically soybeans held the $10 mark on the November contract and that may have spurred some fund buying.
However, he thinks a rally will be tough to sustain again unless August weather stays hot and dry.
Wheat Fails to Follow Row Crops
Wheat was mixed, a disappointing finish considering the rally in neighboring corn and soybeans.
However, Seifried thinks the wheat market is still seeing some hedge pressure with 30% of the harvest yet to go in the U.S. and decent yields. And other areas of the Northern Hemisphere are also harvesting right now.
Live Cattle Make New Highs...Again
Live cattle futures have erased all of Monday’s losses and extended into new contract and all-time highs again on Wednesday.
Seifried says the futures discount to cash is supportive and is keeping the funds comfortably in their long positions.
Feeder cattle are closing in on new highs as well.
He thinks the only way for funds to lose interest and liquidate their long positions in cattle is to see some break in demand or shake up in the economy or stock market.
