Grain and livestock close mostly higher Thursday, except wheat.
Craig Turner with StoneX says corn and soybeans rebound and make fresh for the move highs on fund buying but South American weather and crop concerns are also supportive.
“It’s dry in Argentina. It’s been hot. The crop conditions, the ratings, they’ve been coming down. We are seeing a little bit of rain and the temperatures get a little bit cooler over the next week or so, but after that it still looks hot and dry. So even though the rain, the precipitation they get down there, it’ll help, but it’s not going to cure any of the stress and the drought that they have. Same for southern Brazil. So we got an old -fashioned weather rally,” he says.
He says the January WASDE put the stocks to use ratio for corn at 10% and any changes in supply or demand in the U.S. or South America could make that number even tighter which could drive up prices.
So how high can prices go?
Corn closed above resistance with deferred contracts above the $5 mark and whether or not funds continue to add to their already long net position depends largely on the export market.
“If you have to price ration a couple 100 million bushels, it could maybe go to $5.50. If you have to price ration a billion bushels, you know, all of the sudden, we’re going up to $7,” he explains.
For soybeans, Turner says the situation is less bullish.
“If South America, namely Brazil has the amount of, you know, it has a 165 or a 170 MMT soybean crop, then that’s 15 to 20 MMT more than they had last year. That’s certainly going to eat into some of the U .S. export demand,” he adds.
The funds are only slightly long in the soybean market and so they have been more bearish than they are in the corn market.
However, technically soybeans tested the 200-day moving average and a close above this area could attract more fund buying to push beans past $11.
Wheat futures ended mixed trying to follow corn and soybeans, but Turner says it continues to lag due to the strength of the U.S. dollar making U.S. wheat less competitive.
He also thinks there caution with President Trump calling on Putin to end the war.
Turner says, “When you also take a look at the Ukraine war, there’s probably going to be an incentive now to end that.”
Cattle futures made all-time highs for a second day with the border ban on Mexican feeder cattle continuing indefinitely.
Plus the futures are at a discount to the cash in both markets.
There has only been light trade this week in the South at $201 to $202, which is mostly steady to $1 higher than last week.
Will prices take the next leg higher?
Turner says the charts would project that.
“If you just take a look at technical analysis. It almost feels like we need to make one more leg higher before we can seek some kind of demand destruction because it’s not happening at these levels,” he adds.
