Corn and soybeans ended higher Tuesday with wheat mixed. Livestock were higher except for deferred feeders.
Corn Bounces on Lower Ratings
Corn futures ended higher with some corrective buying after the melt down on Monday. December corn was up 6 1/2 cents at $4.80 1/2.
John Heinberg with Total Farm Marketing says corn also got a boost from the 4% drop in crop ratings down to 63% good to excellent, the largest drop for the week in 20 years. That is also 10% below last year.
“That was kind of an impressive number in terms of how far it dropped, obviously reflecting that impact in those Western states, you know, leading the market down. So that’s where we saw our price recovery off of Monday’s difficult sell-off day in that regard.”
He says the recovery really didn’t do a whole lot on the charts by December at least got back above 10-day moving averages and short
-term averages but traded within Monday’s trading range.
So he thinks the market will need to sort out how big the crop is with a declining crop in the West being offset by good ratings in Iowa, Minnesota and Northern Illinois.
“Can that possibly compensate you know last year where the Western Plains compensated for the central part of the corn belt so we’ll have to see what the market thinks,” he says.
August Reports Next Gauge of Yield
Heinberg says the grain market is seeing some end of month positioning and then the market gears up for the August 12 WASDE.
“August is going to give us some interesting numbers. We got FSA data right away the first part of August. Then you got the August
12th report. You know, been a lot of chatter out there that current yield models using the weather that we’ve seen up to this point, we could have yield possibly be increased. Now we’ll see if the impact of the last couple of weeks of heat balances that when the USDA puts number together.”
But he cautions farmers not to be surprised if yield comes in higher than expected on this report.
“It’s more about the process that the USDA goes through to get that yield number put together. And they typically will start somewhere and adjust it down as we go. This is not their idea of a final yield. And same thing with everybody’s private analyst results as well. Unfortunately, it’s just what the market has to go through.”
Heinberg looked at some analog years for perspective.
“Everyone said weather this year is like 2024. Well, in August 24, they raised corn yield by 2.2 bushels per acre, only to take that away,
plus a couple extra bushels by January. I heard this was one of the strongest drops since 2020 this week for a drop in July. And guess what? In July, they raised the August yield 3.3 bushels per acre, only to take 10 away from that by the end of the year.,” he explains.
Soybeans Pop on Ratings, China
Soybeans were also slightly higher as USDA dropped crop ratings 3% to 63% good to excellent. This is also down 7% from last year’s rating.
That was part of the pop in addition to the announcement that China was going to open up an auction of some soybeans.
“Obviously, to make some room for Brazilian and U.S. beans they are still importing. You know, so maybe that gives the market a little optimism that that Chinese demand will continue,” he says.
However, he is hearing Chinese crushers are looking at the cost of U.S. and Brazil beans, the private crushers, and there’s not a lot of profitability in that Chinese crush margin. So that could slow that demand down. S
“This bean market’s been lifted so aggressively just because of different things between bean oil as well as the Chinese demand and those geopolitical headlines. Also, maybe it’s just gotten a little bit too pricey globally. So we’ll have to kind of watch that trend.”
Heinberg thinks China demand keeps the market supported.
Soybeans Watch Weather
The biggest factor that limited the rally was some of the forecasts have turned a little bit wetter, especially over the next seven days.
“You know, beans are made in August. Yeah, we got some tough weather for the corn in July, but maybe the bean weather will be what the market needs. So that was some of the reason beans were drifting off those highs from the day.”
He doesn’t think the market needs to wash out but to take some premium off an overbought market is normal, especially with the way the money likes to flow with soybeans.
“Trend might be down for a while. They’ll ride that and then turn around and find support again.”
Fill the Gap Areas?
There are gap areas on the corn and soybean charts below the market that need to be filled before either can go higher.
“On the soybean side, we did fill some of the old crop contracts August, September, but that $12.04 gap on November is still there. So that might be a point, like I said, $12 psychological value, fill the gap. We also got some moving average support around that area too that could support this market.”
And then on the corn side, the gap is a little bit lower on the December contract.
“If we still have pretty decent yield out there. We could see that market just kind of drift down and grab those areas. But those might be areas that provide us some support, you know, going into the end of the year, especially if whether we’re to stay on the drier side or just stay maybe more average,” he adds.
He is hearing forecasts for a wet fall which could allow corn to keep growing and tack on pounds.
Wheat Mixed Awaiting Black Sea Export News
The wheat market ended mixed between the three classes as it tries to access the export disruptions in the Black Sea.
Heinberg says wheat had rallied on the back of crude oil but is also watching whether or not Russia and Ukraine can reach a deal for a grain corridor.
“UN Security Council stepping forward. Ukraine talking about different types of routes or notification systems. There’s just enough things out there that the market took that premium, the extra premium out of it starting on Friday last week. You know, today it just at least kind of held in there. Again, maybe we’re at a point now we need to see an answer if it wants to go further,” he says.
The charts in the middle of an area where wheat could drop another 10 to 20 cents because it is a momentum trade.
Is the Grain Rally Over?
Just because the grain market has corrected from the highs, it doesn’t mean the rally is necessarily over according to Heinberg.
“No, and actually in a market that’s had a pretty good move to the upside, a correction back is a healthy correction in an upside market.”
Cattle Bounce
Cattle futures staged a recovery in all but deferred feeders a day after the meltdown in reaction to USDA announcing a phased reopening of the border to Mexican cattle imports starting Aug. 24.
So is the border reopening priced in?
He says, “The front end was higher in the feeder, obviously not going to see the competition from the Mexican cattle. That might be finally tied to the cash market, which today the cash index, after multiple days of being trading lower, looks like it’s going to find at least a little footing for today. The cash market is still going to drive the front end of the cattle market with the supplies that are out there from talking to producers. They’re still not cheap in terms of the sale barn at this time frame. Deferred contracts may be priced in a little bit more. competition that could be coming from the Mexican cattle.”
However, he adds that Mexico’s changed their industry since that border has been closed in terms of feedlot facilities, packing plant
facilities. “Not sure all of a sudden they’re going to shut all that down just to ship cattle across the border. So that’s going to be a wait and see in terms of that regard.”
Cash Needs to Stabilize
The cash market also needs to stabilize in the fed market to steady the futures.
Some early bids were lower to start the week but he thinks the market could develop near steady with last week.
“Carcasses actually been starting to find a little bit of footing here. Those are some things I think we need to get this market to turn around. Definitely testing some long-term support here on those. on those front end cattle that is at least holding at this timeframe where this thing could get kind of scary on the technical picture.”
The key is also whether or not the funds use market strength to sell their remaining length.
Lean Hogs Higher
Lean hog futures ended higher with August making a two month high.
He says the futures look good technically and need cutouts and cash trade to continue to advance.
“You know, we’ve had a nice run. The funds are still sitting short or pushing the end of that net short position. But unlike the live cattle market, cash market continues to climb. Retail value is well over the $100 mark. You know, so those things are very friendly in support of
this hog market right now. You know, I look at that October, December contracts. There might be a little bit of room to catch up to where the August is. So I like where the market is at this time frame,” he says.
But adds he is cautious after a pretty good price recovery in the last few weeks.
