Corn and wheat are mostly higher early Wednesday, with soybeans lower. Cattle soar pulling up hogs.
Corn Sees Short Covering Bounce
Kevin Duling, KD Investors, says corn is trying to bounce Wednesday off of new contract lows scored in old crop futures again Tuesday.
He thinks its mostly short covering as the market is oversold.
December corn has held above the contract lows and may be putting in a slight amount of weather premium with the forecast looking just a bit warmer for the first part of August.
However, the market continues to trade record yields and is trying to price in the extra bushels.
Wheat Futures Bounce Off Contract Lows
Wheat pushed into new contract lows on Tuesday in both hard red spring and hard red winter wheat contracts and Duling says it was tied to this week’s rally in the U.S. dollar.
“The dollar has been higher in relationship to the Euro due to the announced trade framework between the U.S. and EU over the weekend,” he days.
Wheat futures are trying to bounce Wednesday seeing some fund short short covering.
Duling thinks the winter wheat futures have also worked through additional hedge pressure that has come from extra bushels hitting the market with strong yields.
The white wheat harvest in Duling’s area of the Pacific Northwest is around 40% done and he says yields have been respectable.
Spring wheat has struggled despite crop ratings of only 49% good to excellent which is down from 74% at this same time last year, but Duling says the market hasn’t cared.
Duling says its tied to momentum trading by the funds who are short in the wheat market and continue to push the short side of the futures.
Soybeans Struggle on China Disappointment
Soybeans ended lower Tuesday and are seeing follow through selling early Wednesday.
The market is disappointed in the lack of trade progress with China after a two day meeting between trade officials in Stockholm.
Both sides agreed to a tariff truce which must be approved by President Trump.
However, Duling says this kicks the can down the road on a trade deal and may dash any hopes for China export business during the prime harvest and export window.
India Tariffs Announced
The Trump administration announced 25% tariffs on August 1 on India and possible penalties tied to purchases of Russian oil.
News reports also indicate Indian trade officials believe a deal will be worked out by September or October but they were anticipating 20% to 25% tariffs anyway.
Duling says this deal may not hold much promise for U.S. agriculture as India is not likely to move away from their protectionist stance on agricultural goods.
Cattle Repeat Record Performance
Cattle futures continue to climb into new contract and record highs and right now Duling doesn’t see much of a reason for a correction.
He advises producers to keep rolling up puts as the market climbs to protect the downside risk.
“Because when the rally is finally over, it could get ugly,” he points out.
