Livestock and grains end mixed Wednesday.
Corn closed higher, wheat and soybeans lower after USDA kicked the can down the road in the June WASDE in nearly every category except global wheat numbers.
Oliver Sloup, Blue Line Futures, says he wasn’t expecting much out of the report, but USDA really punted. “Today’s report was a perfect example of that.”
Corn ending stocks and South American production were all left unchanged from May and so they were bearish relative to expectations.
However, corn managed to close higher in part due to the hot dry extended weather forecasts.
The close was encouraging to Sloup. “I’ve kind of been telling folks no new news in the corn market, no new bearish news I guess at the very least, is actually good news,” he explains.
Soybeans saw a 10 million bushel cut in old crop crush and a 1 million metric ton cut in Brazil soybean production, the rest of the balance sheet was unchanged.
However, Sloup is concerned about the sluggish demand for soybeans on the export front, even with the three recent flash sales of old crop soybeans to China.
USDA lowered Russia, Ukraine and EU wheat production a combined 8 million metric tons and lowered U.S. wheat ending stocks 7 million bushels from last month.
He says now the markets will turn their attention to the month end USDA Acreage and Quarterly Stocks reports, weather and the fund position.
“The June 28 reports are historically more important because they have more data packed into them. Big report at the end of the month and there is a lot of uncertainty about what we’re going to be able to produce from what just got put in the ground,” he says.
He thinks that uncertainty could spur a little short covering in corn and even other portions of the grain market heading into the end of the month and the end of the quarter.
However, Sloup says funds managers are clearly reestablishing short positions again in the grain futures. However, he thinks part of the collapse in the wheat market has also been some farmer hedge selling.
Sloup says cattle had a disappointing close after strength early in the session following the rally in equities with lower-than-expected CPI data.
After a big rally on Monday, he says there has been a lack of follow through buying the last two sessions. The risk of bird flu headlines is keeping funds from pushing the long side of the market any farther.
“Seasonally this is a strong demand period for beef. I’m optimistic on cattle but I would be lying if I said the last two days weren’t disappointing,” he adds.
Lean hog futures bounced off contract lows. After six straight weeks of lower prices and fund long liquidation Sloup believes the market is trying to bottom.
“I think the risk of long liquidation has evaporated, we’re down near the low end of the range so from the risk reward perspective I think there’s room to the upside,” he adds.
