Grains end mixed on Tuesday, livestock higher.
Corn Consolidates Awaiting Harvest Results
Oliver Sloup of Blue Line Futures says corn has consolidated the last two sessions after hitting chart resistance and has likely priced the 6 bushel drop in corn yield from the Pro Farmer Tour into the market.
Corn rejected the bearish news from the WASDE report with the strong price action which resulted in a rally of 24 cents off the $3.92 low in December.
He says the market may trade sideways now until harvest as traders await yield results off the combine before breaking out of the current trading range and above resistance.
“We made a nice run after that bearish WASDE report and that has basically taken us back to the 50-day moving average that we rejected yesterday that comes in near $4.17. So that’s gonna be the big barrier to get out above to really get the next leg going,” he explains.
Support comes in around $4.06 to $4.10 according to according to Sloup, which coincides with the 20-day moving average.
He says it’s possible the bottom is in the corn market but upside may be limited.
“We’re going to need to see continued demand coming to this market and potentially, you know, get some shorts to cover and see this market work back higher.”
Soybeans Await China Business
Soybeans were slightly higher on Tuesday but ended off session highs after hitting chart resistance and are also consolidating after a nearly 80-cent rally off the lows.
Sloup says, “We got to some resistance levels and now just kind of pulling back and retesting the upper end of last week’s near the $10.40 level, that’s going to be a pocket that the bulls want to defend a break and close below 1040s.
Soybeans got some bullish momentum from USDA’s lower ending stocks figure of 290 million bushels but it was based on current export demand.
Sloup says that is in question with China not buying any new crop soybeans yet from the U.S.
He says China will eventually need to buy U.S. soybeans but they may miss the prime export window.
So, until China starts buying he thinks it will be difficult to get above the overhead resistance areas hit this week.
Wheat the Sleeper Market?
Wheat ended mixed on Tuesday with Chicago futures slightly higher on short covering, while hard red winter and spring wheat were lower.
The wheat market has been a dog with the inability to stage a meaningful rally post-harvest even in the face of strong exports.
However, Sloup thinks at least Chicago wheat is starting to look constructive from a chart perspective and could be trying to put in a bottom.
“Looking at the December Chicago contract. Since the first week of this month, we’ve carved out a nice well -defined low end of the range, $5.20 to $5.25. That has acted as good support and I think could continue to be the low. If we go revisit and break that, obviously that changes things, but we’re breaking out about the 20 day moving average today for the first time since July.,”
So, he thinks wheat could be the sleeper market.
Cattle Recover Into Record Highs
Live and feeder cattle futures recovered on Tuesday and moved back into new contract and record highs once again.
This follows the news of a human case of New World Screwworm (NWS) in the U.S. which tanked the market initially Monday morning.
Sloup says the recovery was impressive as funds are buying on every break.
He thinks the market will be well supported with record cash and strong demand, with Choice beef climbing to $415.
“However, the increased volatility and the sensitivity to headlines is a good reminder that this market could change at any time and so risk management is warranted,” he says.
Lean Hogs Charts Look Constructive
Lean hog futures had a strong day Tuesday following new high in cattle.
October hit a 6-week high and closed above the 50-day moving average which Sloup says technically was very constructive.
He thinks the market may be able to build on that momentum as the funds are long nearly 106,000 contracts and have favored that market.
Plus, the futures discount to cash and tighter than normal supplies moving into fall will also be supportive.
