Grain and livestock futures are lower early Tuesday except for corn.
Corn Recovers with Crude Oil
Corn futures are back higher on Tuesday morning following a recovery in the crude oil market says Vince Boddicker with Farmer Trading Company.
He says an explosion at a Texas oil refinery is having the biggest impact on the crude oil market recovery but the market is also been tied to Iran war headlines with the Strait of Hormuz still mostly closed to oil tanker traffic.
However, he says corn made new highs for the move Sunday night before selling off and maybe seeing some farmer selling.
“I think you’re working in the right direction you got that Dec contract right at $5 and it may take something to get through that and do a lot more. My goal every year with the exception last year that didn’t work is typically that $5.12 to $5.17 area you get a shot at most years
and you need weather problems to do a lot more than that,” he explains.
Lower Corn Acreage
Beyond crude oil prices, corn is also getting some support from lower acreage going into the big USDA report on March 31.
He says, “You look at taking 4 million acres away, which I think is the average guess in here somewhere around there. Not that it’s huge, but it makes a dent in that end user and the carryover number, especially if we can keep demand up as it’s been.”
Funds Defend Their Long in Corn?
The funds have built up a sizable long position in the corn, so what will it take for them to continue to defend that position?
Boddicker explains, “You know, like most things, I think you have to keep giving it fresh news. Maybe we can get something when we come back with EPA’s biofuels announcement, whether that’s this week or next week, whatever it is. It’s supposed to be within the next week.”
RVO Announcement Coming
Soybeans got a boost Monday from EPA administrator Lee Zeldin stating the biofuels blending levels would be released by the end of March and soybean oil is higher again Tuesday on that news.
However, how much is already priced in? “I think a lot of it is, but again. The real key, I think, becomes when the announcement is made, is it going to be buy the rumor, sell the fact, or can we put new highs in? If we can’t put new highs in, then if you’re a producer, you’ve probably got to get a little more defensive on corn and bean sales. You should have been making some on the way up the last three, four weeks on the rally you’ve got. I don’t think most of us like basis in the Western corn belt, but I don’t really see that improving a lot.”
China to Accept Brazil Soybeans
Soybeans are also lower with ideas that China may not buy the 8 MMT of old crop product the market had hoped for.
Not only has the China summit been delayed to May, but China and Brazil have eased the phytosanitary restrictions with soybeans to allow Brazil soybeans to move product. That may reduce the odds that China demand will return for old crop beans from the U.S.
“I think it’s negative. And when one looks at the whole thing, China likes to do their trade bartering. I think that was part of what they were doing. But if we realistically look at that South American situation and look at all the money China has put into infrastructure and other things, are they going to back away from that? I don’t think so,” he adds.
Soybeans also have an ugly bear flag formation on the daily charts in the May and July contracts.
Boddicker says, “And I think we have to remember the algorithm traders jumped on and pushed the market lower and then it cooled off a bit. And again, we’ve had some nice rallies in that $12.30, $12.40 in those front months, which is if you went back four months ago, you would have thought that’s never going to happen. But it did. So at least we had opportunities. And now we see where we go from that point.”
Higher Soybean Acreage
Soybeans are also trying to prepare for the higher soybean acreage expected in the March 31 report from USDA. However, Boddicker says its still early and the weather looks conducive for spring planting which favors corn.
“Depending on what spring is, it still seems like if you come back and if planting season is going good that farmer plants a few more quarters of corn because he likes growing corn,” he states.
The report was also as of March 1 and many farmers did not know enough about the impact of the war on fertilizer prices to change their acreage ideas according to Boddicker.
Wheat Removing Risk Premium?
The wheat market was lower Friday and Monday and is having difficulty finding footing on Tuesday as technical selling has been a factor.
The dollar is higher and a headwind and there is rain in the extended forecast.
However, Monday’s state crop ratings also showed a deterioration as Kansas was down 6%, Oklahoma down 4% and Colorado down 5%.
So, does the market have any war or weather premium in it? “I think it has some in there. If we look at what wheat has done over the last
three months compared to where we’ve been in the last three years, it seems like it’s going no place. However, now I think you’ve got a secure bottom. You’ve got the funds that aren’t going to jump on and sell every time they don’t have fresh, bullish news. So I think it helps support that market. But a good correction in looking at Kansas City May, if we took that down somewhere around $570 to $6, is that a terrible thing? No. And then see where you go from there. The real key is the next. rally we did in a week, can we take out these highs in that $6.45 to $6.50 region?”
Cattle Retreat
After strong closes on Monday cattle are seeing some profit taking pressure.
The market easily absorbed the higher placements in the Cattle on Feed but Boddicker says those bear closer analysis.
“A report last week showed sale barns during the month saw a 17% increase from last year, while private sales were 51%. Showing an attitude change in the cattle market from November into February and early March. Did we have some people that bought cattle last fall that were going to back around them until May or June or finish them and they looked at it and said, this doesn’t look as good as it did. I’m making money. I’m going to dump them. So they got put on the market earlier than they should have, which skewed the numbers.”
Plus, drought and wildfires may have also forced some selling and wheat prices were higher in February and March.
“Some of those guys that were going to continue to feed on wheat pastures might have said, hey, wheat’s coming up. I think I’m going to try to save the wheat and pull the cattle off and sell them early.”
Cattle Hinged to Equities
However, the cattle market has been hinged to the movement in the S&P 500 says Boddicker.
''It seems to be a barometer on what’s the economy going to do, what are people going to pay, what will they eat. And I really don’t think it’s quite as tight as it used to be. I think, again, after 2020, people decided they wanted to eat something that was good and they’re no longer scared of beef like people tried to scare them for many decades.”
Steady to Firmer Cash Last Week
The market also responded on Monday to steady to firmer cash trade and feedlots could hold out for better prices this week.
“The packer definitely has got better control than he had before but seeing early sales out of the Yankton, South Dakota sale barn this morning had 1570 pound conventional steers for $240.75 which is definitely higher than last week. I would think that indicates the packers are a bit hungry and maybe need something.”
Lean Hogs Lower
Lean hog futures were lower early Tuesday as funds have been liquidating but are also cautious going into the USDA Hogs and Pigs Report.
“You have to remember the cattle market hasn’t been anything stellar in the last two months and it’s going to affect the hogs and like anything else. When you get to a certain point you put a top in, which I think you’ve probably done in the hogs like the cattle,” he explains.
He thinks hogs will pull back to $101 to $103 in the June contract but that support should hold.
