Grain markets ended Tuesday with corn higher, soybeans lower and wheat mixed. Live cattle were higher, feeders and hogs mostly lower.
Corn Rallies as USDA Cuts Ending Stocks
Corn rallied on Tuesday as USDA cut ending stocks by 125 million bu. in the December WASDE shaving ending stocks down to 2.029 billion bu. with a subsequent increase in corn exports. Brian Grete with Commstock Investments says he was a bit surprised by how aggressive USDA was in raising corn exports to 3.2 billion bu. which is a record. “So the increase in exports was not a surprise. The magnitude of the 125 million bushels increase is big in any month but especially in December, which is typically a quieter month. The January reports are typically the market movers right? We have the quarterly grain stocks report we have the final production numbers for that crop year,” he explains.
So Can Corn Ending Stocks Get Under 2 Billion?
So if USDA is already this aggressive can ending stocks for corn fall under 2.0 billion in the final report in January especially as USDA may cut the national corn yield like they did a year ago. Grete says it is possible the agency could trim yield but then may offset it by lowering feed and residual. He says, “Remember, we have the December 1 Grain Stocks report that day as well. And so we know that exports were record strong through the first quarter. The ethanol use was strong. And so the balancer is the feed and residual category. And so USDA will get to where it needs to be with that feed and residual category. So there is a definite possibility that we could see that offset. And remember that grain stocks report is the number that the market has historically missed by and missed by a wide margin,” he explains.
Does Corn Stay Range Bound?
Even with record exports March corn has had a difficult time sustaining rallies over the 200-day moving average and has essentially been in a trading range. Grete says whether or not corn stays in that trading range depends on soybeans. “My concern, like I said, is that soybeans pull us down. And so if soybeans continue on their downward path here, I think that corn is really going to struggle to move higher. Now, if it just treads water and stays in a choppy range, that’s probably even a victory,” he adds.
Global Corn Carryout the Bright Spot
Global ending stocks on corn were lowered by 2.2 MMT to 279.2 MMT and are nearly 14 MMT lower than last year. He says this is bullish for corn longer term if a production problem develops in South America but right now its just not enough to get the market to take off.
USDA Punts on Soybean Carryout
USDA left U.S. soybean ending stocks unchanged at 290 million bu. which wasn’t a surprise to Grete. He says USDA needs time to access whether or not China is going to live up to its full purchase commitments.
Soybean Market Tired of China Banter
Without any bullish fodder in the report and no additional confirmed Chinese business the soybean market was lower again on Tuesday on technical selling. Grete says the market is getting tired of the China banter. “What we’ve seen on the Chinese soybean purchases that have been confirmed by USDA on a daily basis is that they’re small. So we haven’t seen China come in and be a big buyer. There’s a couple of reasons for that. One, our price isn’t competitive when you factor in the extra 10% tariff that U.S. soybeans face versus Brazil. And two, that means that the state -owned firms are the ones that are buying as its not economically viable for the commercial firms to come in. And so if you don’t have that commercial buying, you’re probably going to see rather slow and maybe paste purchases by state -owned firms.”
Soy Complex React to Argentina Export Tax Cut
Soybeans, meal and bean oil were also lower on Tuesday in response to Argentina further lowering their export tax. For soybeans the tax went from 26% down to 24% and for soybean products down 2% to 22.5%.
Do Soybeans Keep Drifting Lower?
Brazil is also receiving some timely rains which is also weighing on the soybean market and so it has seen a technical breakdown. Grete says the market has confirmed a head and shoulders top on the charts and is likely to continue to fall to fill the gap area from Oct. 24. “We violated the neckline on last Friday, and that points us into that $10.60 to. $10.50 range, so on a pullback. And so I think that that’s in play on a short term basis. We have a gap above that area. So typically when you get these types of technical breakdowns, traders want to go fill gaps,” he states.
Wheat Sees U.S. Ending Stocks Unchanged, Global Stocks Rise
Wheat ended mixed on Tuesday with spillover strength from corn, which was somewhat of a gift. USDA left U.S. ending stocks unchanged at 901 million bu. but raised world carryout by 3.4 MMT to nearly 275 MMT. USDA raised Canadian production by 3 MMT to a record 40 MMT, Argentina was up 2 MMT, Russia 1 MMT and the EU 1.7 MMT. “The world is awash of wheat,” Grete says.
Cattle Taking a Breather
Live cattle futures were slightly higher on Tuesday with feeders lower but it was a quiet day as Grete says the market needs to rest. He says the cattle futures have been dominated by money flow and that has increased volatility but the futures have recovered around 50% off the lows and need to take a break before challenging those chart areas. He says the feeder cattle market was down for a second day with some concerns still lingering about the border reopening soon to Mexican cattle imports.
Hogs Lower But Still Bottoming
Lean hog futures were mostly lower but have been in the process of bottoming and Grete says that is typical from a seasonal standpoint. He says the cash index is starting to bottom as well but it has been a slow process so the futures don’t want to get too far ahead of that.
