Corn and soybeans see double digit gains on fund short covering after seven down days.
John Payne, Advance Trading, says the markets were oversold and due for a correction.
“I would consider it short covering, although there are some bullish tailwinds as we announced some corn sale this morning likely to Europe, strong weekly corn exports and rumors of China buying U.S. corn or beans with dry conditions in Southeast Asia right now. The Chinese could certainly be having weather problems. I find it difficult to trade on Chinese weather news but if that’s going to rip the market higher, I think that’s the case,” he says.
Payne says the U.S. has also gotten competitive on corn with Spain buying corn from Ukraine at higher prices of $225 per metric ton.
However, he is fearful that there will be plenty of selling when the July contracts go into delivery and corn is up into chart resistance again.
Corn, soybeans and the products as the Brazil president has proposed a 20% export tax that will slow exports and trickle down to farmers there. “These farmers are kind of at the cost of production. So, if you’re going to raise taxes in Brazil you’re going to slow growth,” he says.
Wheat futures ended mostly lower for a seventh day as the Payne says the smaller Russian wheat crop is already priced in and the U.S. crop will be better than a year ago.
“I think the question is how much business is going to come to the U.S. as these North African buyers don’t want to chase Russian offers higher and that’s the most supportive thing out there,” he says.
Cattle futures were mostly lower on renewed bird flu stories but still consolidating after recent new highs for the move. The live cattle futures are at a discount to the cash market which is positive, but Payne says you have the board weakening on the macroeconomy.
Lean hog futures make new lows for the move and then the front end of the futures rebound. The premium the futures once held to the cash index has now turned into a discount and so Payne is hopeful the market is trying to find a low. “I think in the summer months you can make that case,” he adds.
At the same time cutouts have been steady which is playing into improved profitability for processors.
However, he says it has been an ugly $18 slide off the contract highs in most months which has deeply cut into profitability.
