Coarn and wheat ended mostly higher Thursday, except Chicago wheat. Soybeans sank to for the move lows. Cattle were lower, hogs higher.
Corn Sees Short Covering and Bounces Off Support
Allison Thompson with The Money Farm says corn extended gains for a second day in what looked to be end of the month short covering by the funds as they took some profits off the table.
However, she was encouraged by the way the forward or bull spreads were working in the corn.
Demand has been good with weekly exports at 13.4 million bushels old crop and new crop at 74.5 million.
Plus flash sales were announced totaling nearly 16 million bushels of new crop corn to Columbia, South Korea and unknown destinations.
Technically she says December corn has held support above the $4.07 area, which was the previous low, and bounced.
Yield Overwhelms the Corn Market
While the recovery was warranted Thompson isn’t sure how long it can last with the above trend line yield ideas circulating in the corn market.
She doesn’t think the crop is getting bigger with talk of pollination and disease issues, plus recent storm damage is several key states.
Thompson is also of the belief that the higher corn acres came in fringe states which can’t help raise the national yield well above trend line.
Corn Ignoring Demand
However, the corn market’s response to bullish demand news has been muted and trade frameworks have also failed to excite the market.
Thompson says traders want to see more consistent business and larger purchases.
Soybeans Make New Lows for the Move
Soybean futures made new lows for the move on a combination of supply and demand pressure according to Thompson.
She says weather looks favorable for the start to August which is driving ideas of strong yields but demand is also a concern, especially regarding China.
The U.S. and China have failed to reach an agreement that includes ag purchases and kicked the can down the road until possibly fall.
Thompson says China hasn’t purchased any new crop soybeans and the market wants to see a China deal or it will continue to drift and November could retest the $9.60 low.
She says the other announced trade frameworks are positive but they still lack details of how many bushels countries are committing to buy.
“The market wants to see proof of bushels first,” she explains.
Hard Red Wheat Contracts Hold, Soft Wheat Falls to Contract Lows
Hard red winter and spring wheat saw steady to higher prices with a short covering bounce off this week’s contract lows and with some spillover help from corn.
Soft red winter wheat was lower and made new contract lows as Russia has raised their wheat production and export estimate.
The wheat market has not been able to sustain a rally though as Thompson says it has been seeing hedge pressure from wheat in other areas of the Northern Hemisphere.
The other headwind has been the recent rally in the U.S. dollar index.
Grains Have Lower Month
All of the grain markets posted lower closes for the month which Thompson says may trigger additional fund or technical selling.
