Corn and soybeans were slightly higher early with wheat easing. Cattle lower, milk futures mostly higher.
Corn at a Crossroads
Corn futures were higher Tuesday and early Wednesday with help from the soybean and bean oil markets and with an eye on weather.
However, Bryan Doherty with Total Farm Marketing says the corn market is at a crossroads at least the new crop contracts.
He says, “If you look at it technically right now, the market had a double top, $498.5 in December corn, a couple bearish key reversals in that same couple week window. Those are negative signs. A crossover sell on stochastics, and the market dropped off. And what happened is December corn retraced 50% of the move when prices bottomed earlier in winter after the January 12th report to where they peaked on March 9th. That was the start of the war. And then they kind of ran out of selling momentum on dry weather concerns in parts of the Midwest and then this last weekend, wet weather concerns.”
He says downward momentum was lost then and prices have edged back higher with help from a rebound in wheat and soybean oil.
However, he says prices are stalling out and need a bullish catalyst to keep rallying.
Lower Acres, Fertilizer Issues?
Demand continues strong but hasn’t resulted in a chart breakout in corn but what about the fertilizer crunch or lower acres due to high prices?
He says, “We can’t put any real numbers on the fertilizer yet. We can make assumptions on what that may or may not mean for acres. Acres will be down 3 million, but with still a million acres more on the March 31st report than the pre-report estimate. So it’s in a holding pattern right now.”
Doherty adds that high fertilizer, lower yields, lower acres, and weather events haven’t seen affected or cut the corn crop for three years worldwide. “So there’s a lot of potential, but I want to highlight that potential is often overrated.”
Corn Stalling Out?
He says Dec corn is trading around $4.84 as we and last year Dec 25 corn put in a high for the calendar year at $4.78 3/4 with a 1.5 billion bu. carryout and this year it is at 2.1 billion which is heavy.
“And then the news this week that I’m getting out of Argentina is a bigger crop. A record crop by a large amount. The USDA attache raised production to 61 MMT, up for 5 MMT. And the Rosario Grain Exchange was at 67 MMT,” he says.
Plus historically, he says the market does have a tendency to work lower into the May and June window unless there’s a weather event.
“So do we have a weather event? Do we have concerns about too dry? I don’t think we can quite play the too wet card, although it’s very impactful to some who aren’t turning a wheel. It’s just I’m running out of bullish bullets. So that’s the crossroads part of it.”
Soybeans Lifted by China Buying Talk and Bean Oil
Soybeans were higher early with the push from new contract and multi-year highs in bean oil and talk of China looking for soybeans off the Pacific Northwest.
Doherty says that could be China trying to buy ahead of the mid-May meeting.
“It’s a goodwill token. It’s putting their foot out there and saying, hey, we’ve got bigger fish to fry than soybeans, let’s buy some beans and let’s
work on those bigger fish, which is energy, which is a lot of things, technology. The beans are the visible component right now.”
Soybeans Also at a Crossroads
Doherty likes the action in soybeans but says the market is also at a crossroads and may have a difficult time getting above chart resistance.
“Soybean oil has been reflective of the whole bioenergy atmosphere that we talked about this years ago that would take time to catch up. We seem to be getting to catch up. At the same time, though, we’re losing export activity. Exports have been slow in recent weeks,” he explains.
November soybeans are up at the March highs at $11.74 1/4 and testing the double top but will need a close above that level to continue to rally.
With a 350 million bu. carryout he doesn’t think bean oil strength alone can do it.
“I mean, bean meal is not a leader. So crushers are making money. So that’s positive and may be supportive. But I’m just concerned with 350 million bushels of projected carryout that’s just too heavy to expect a rally from here without some other type catalyst. Soybean oil has already done its heavy lifting,” he explains.
Wheat Stalls Out Too
Wheat futures were softer on Wednesday as HRW wheat did not take out the March highs on Tuesday.
Doherty says the market has factored in the damage from frost and drought and needs more bullish weather news to drive higher.
“I’m going to say I’m not sure because wheat’s a finicky crop and it’s so moisture dependent in areas. What I think happened this past week is we didn’t get the real hard killing freeze that might have been forecast in some areas that really might have made a difference. Timely rains are still really, really, really beneficial right now to the wheat crop. So I think you’re still in a bit of a weather event there.”
Plus he says the world has ample wheat supplies.
“Keep in mind the WASDE report added 6 million metric tons above expectations on World carry out. So if you’re keeping score, there’s roughly 35 million bushels in a metric ton. So you’ve got an extra couple in round numbers, a couple hundred million bushels added. So it’s tough to get too friendly when you’re seeing that number tick higher,” he adds.
Cattle Take Out Support
Cattle futures were lower early Wednesday on follow through technical selling and took out key support in the June live cattle at the $243 level that held last week. With a close below that, how much lower does the market fall?
“After a big rally, it’s destined for a correction. The key is and has been can demand hold up. So one of the thoughts I have or concern that I have is that the war started March 9th. Gas prices shot higher, and we keep seeing that on the news and the media. And it’s real. Consumers are paying more. Diesel is expensive, right? Who pays for gas with cash, right? So it’s credit cards. You pay for it down the road. Well, now we’re getting down the road. So I think there is something to, if you want to try and draw a direct correlation to higher energy prices, that demand in cattle could be moving out,” he explains.
He also points out a long term double top on the charts at the $250 area and seasonally cattle can top in April after the grilling season demand is secured.
However, he says supplies are going to remain tight.
Still if June closes below support it will see a break to the 100-day moving avreage around $232 on June live cattle
Milk Market Remains Volatile
The milk futures were mostly higher on Wednesday morning but have been volatile according to Doherty, which can create opportunities.
“So we’ve seen three times now where the market all of a sudden kind of makes a spike higher, and then it’s lost at three times. And even here recently, we’re seeing a lot of back and forth, a lot of movement in the marketplace. So providing those opportunities,” he explains.
He says the traditional market movers, cheese and butter have not been the stars recently in the complex.
“The star has been the protein products, the nonfat dry milk, whey products. Things like that have helped to give the market a boost. I don’t know if they alone can, let’s call it, sustain a rally and turn this into a favorable bull market. You’re going to need the other components to come along. And I just don’t know if they’re there right now. We saw a global dairy trade two sessions in a row now losing ground. So some of that world demand seems to be slowing,” he says.
Plus, he doesn’t see any herd reduction for at least the next two or three milk production reports.
It goes back to the beef on dairy market he says.
“For sure. Huge revenue stream. Things have changed. It’s a big change. More they change, more they stay the same. Be vigilant. Look for rally
opportunities. I think the market wants to be bullish. I think traders do. The call option premium out into the fall months is very, I think, higher than usual, which would maybe suggest higher prices. At the same time, good opportunity if you’re a call seller to look at those,” he advises.
