Grains ended lower on Monday with livestock higher.
Grains See Profit Taking
Corn, soybeans and wheat ended lower on Monday seeing some profit taking after higher weekly closes in the grain complex last week according to Darren Frye, Water Street Solutions.
Plus, new crop corn and soybeans ran into chart resistance on Friday unable to take our the gap areas.
The other reason corn and soybean failed was tied to beneficial rains over the weekend in portions of the Corn Belt and a little more favorable weather forecast, with temperatures not getting quite as hot as originally forecast.
Frye explains, “On November soybeans the $10.49 1/4 area, that would be the low edge of the gap, and $4.37 on December corn, and we couldn’t quite fill it. We fell back. The weather turned a little bit more moderate here over the weekend, profit taking after a good week, but I really think this is a break that could support and then turn higher once again.”
Are the Lows In?
Seasonally its too early for the corn and soybean markets to carve out lows but the technical action, including the reversal in December corn are telling another story.
“We had a great reversal pattern on Monday. It was a double close key reversal outside bar combination. Now, those can fail later on the year. It’s hard to say if that’s going to be the low for the year because we got harvest ahead of us and this is a big crop. But definitely we made a short term low here, funds are short.”
Corn and soybeans were higher last week, but to confirm an early harvest low he says the markets will need to post a second higher weekly close this week.
When Will Corn Price in Pollination Problems?
Meanwhile, corn pollination issues are expanding as pollination moves Northward, leaving many farmers to wonder when it will be recognized by the market.
Frye says he’s unsure how many acres will be impacted by the overly tight tassels and the inadequate pollen production in certain hybrids, problem but it seems to be growing in size and scope.
“I’m hearing a lot of pollination issues as well. It’s not in every acre, it’s not in every brand, it’s not in every hybrid, but they do exist out here. Nobody really knows what’s causing it but obviously it’s hard to tie it back to environmental in my opinion just given how good the conditions are
Unfortunately, crop condition rating will not reflect this issues and it isn’t likely to have a market impact until USDA recognizes it.
“But will we know that soon? I doubt it. I bet it’ll be all the way until fall or even in the January report before we realized what really happened,” he explains.
In the meantime he recommends farmers scout their fields and check for pollination problems.
Will the Uncertainty With Trade Keep Pressure on the Grain Markets?
A deal was announced Monday with Bangladesh in which the county has committed to buying 700,000 MT of U.S. wheat annually for the next five years.
However, the date is quickly approaching for countries to strike some type of deal to avoid the Aug. 1 tariffs hikes.
Frye says this is casting some uncertainty over the market which may be keeping the fund traders from buying grains.
Plus, there is no movement yet on a deal with China and Frye doesn’t look for any resolution before harvest.
China has not purchased any new crop soybeans yet and instead has been buying record amounts from Brazil.
Cattle Repeat All-Time Highs
Cattle futures started lower on Monday morning with a hangover from Friday’s round of profit taking.
However, both live and feeder cattle futures reversed shortly after the opening and saw a sharp rally scoring contract and all-time highs in most contracts.
The futures discount to cash is supportive and is keeping funds buying on every break.
How high could prices project technically?
Frye says his analysis shows there is another $10 to $15 left in the rally.
