Grains end mixed Wednesday with livestock mostly higher.
Corn Finally Bounces
Chuck Shelby with Risk Management Commodities says corn finally saw a light short covering bounce after making new contract lows again early Wednesday in both old and new crop contacts.
He says the market needed a correction after a tough start to the week and funds covered some positions or took some profits ahead of Friday’s WASDE.
Is The Corn Market Done Going Down?
The corn market has been beat up this week as funds have sold and extended their short position in the market and the main driver has been weather.
Shelby says, “I think that probably goes back to the idea that the Western states looked like they were going to be dry and maybe have some heat and some problems but we’re seeing a lot of rain in the Western states,” he says.
Iowa’s crop is rated 84% good to excellent and nationally the corn crop rating is at a 7 year high of 74%, which is leading to ideas of higher yields.
However, Shelby thinks achieving a yield above the current trend line projection of 181 will be a heavy lift.
“The Eastern Corn Belt has actually turned out to be the one that’s had some challenges along the way so yield projections coming out from private forecasters are really high some 186 numbers. I don’t know if that’s in the cards at this moment, but certainly, you know, the funds have decided to pound the corn market down and our massive shorts.” he explains.
So is the corn market done going down?
December corn ended only about a penny higher with September still closing below $4, and if there isn’t anything bearish he thinks the market can stabilize.
However, if weather remains favorable Shelby says he can’t rule out corn retesting the 2024 lows moving into harvest.
Soybeans Lower But Hold $10
Soybeans were down from 10 to 12 cents on Wednesday and Shelby thinks the pressure came from spread unwinding with corn as there weren’t any big changes in fundamentals.
Soybean meal made new contract lows and bean oil was also lower which also contributed to the slide.
However, he thinks soybeans will find good support at $10 due to lower acres and the fact that USDA’s trend line yield of 52.5 bu. per acre may be hard to achieve with ratings at only 66% good to excellent and lower yields in double crop areas.
Farmers have struggled to plant double crop acres in the Southern part of the Corn Belt due to excessive moisture. “Those beans are getting planted later than normal which is cutting yield,” he says.
Additionally, the demand picture for soybeans has improved with recent biofuels policy announcements which will somewhat offset lower export demand tied to tariffs.
USDA Report Positioning
The grain markets also saw some position squaring ahead of Friday’s WASDE Report.
Early trade estimates are again very close to last month’s supply and demand tables, despite some of the changes in acreage and quarterly stocks. So, Shelby is expecting a quiet report.
Cattle Close Just Off Record Highs
Live and feeder cattle futures hit contract highs once again on Wednesday with expectations of steady to higher cash this week.
Holiday beef clearance was good and Shelby thinks retailers are stocking back up.
However, its hard to deny the tight supply fundamentals and Shelby says until herd rebuilding picks up or consumer demand slows down its very likely the market will continue to push to new highs.
Lean Hogs Follow Cattle
Lean hog futures saw short covering on Wednesday with spillover support from higher cattle and higher cutouts at noon.
The market has recently consolidated off contract highs with a cooling cutout market and seasonal top established in the Lean Hog Index.
However, with cattle making new highs again Shelby thinks the market will be well supported as it gets spillover strength.
Plus, he says there is more featuring of pork in grocery stores and restaurants with the higher beef prices and that is also supporting pork demand.
