Corn and soybeans end higher Thursday with wheat mixed. Cattle and hogs see selling pressure.
Soybeans Make 17 Month Highs on Expectations for Yield Cuts
Soybean futures rallied into new highs for the move and 17-month highs on Thursday. Don Roose with U.S. Commodities says the market saw fund buying heading into the USDA report on expectations of lower yield. The average trade guess is right around 53 bushels per acre but he points out that with the yield reductions USDA provided in the report last November the market is anticipating a repeat, especially with the dry finish to the season.
He adds that the market will need to see a national yield of 52 bushels per acre or lower to continue to sustain the rally as much of the bullish news is priced into the futures already.
Soybean Market Awaits USDA Data on Demand and China Buys
The November WASDE will also be important in answering some of the lingering questions about soybean demand, especially regarding China. Traders will be closely watching what USDA uses for China demand in their export projection and if it will be the full 12 MMT in the trade framework or if the agency will wait for proof of sales.
USDA will also be releasing the backlog of daily export or flash sales that have gone unreported with the government shutdown. The trade will be watching for confirmation of soybean sales to COFCO and Sinograin that were reported by news wires following the trade framework announcement. There has also been speculation China may have been buying soybeans and other products under the radar but Roose says the cash market doesn’t necessarily prove that out.
Roose is somewhat concerned with the slow pace of weekly soybean export sales prior to the government shutdown and the continuation of that trend.
Conab Estimates Record Brazil Crop
Conab also released estimates on the Brazilian crop and pegged soybean production at a record 6.5 billion bushels which is was shaken off by the market.
Soybeans Don’t Spend Much Time at the $11 Level
Historically, soybeans don’t spend much time in the $11 range and so if the report is positive he thinks the market could push through resistance and eventually move close to $12. “So the choice is $11.56 is the next gap on January. Then you’re talking $11.95. That goes back into May of 2024. So those are your upside targets. But remember, on the downside, there’s still $11.18 on January and $10.63.” Which is the gap area left after the announcement of the U.S. China trade framework.
Corn Yield Cuts Also Expected
Corn also finally broke out of its 15 cent trading range and got above chart resistance at the 200-day moving average, plus made new highs for the move following soybeans. However, Roose says the push also came as the market is gearing up for a cut in national corn yield from September’s 186.7 bushel estimate. He says last year USDA started cutting yields in the fall and continued that trend into the final report in January and the trade anticipates a repeat.
“Last year around that August 12th time frame. Remember it was the August report that put us at $3.92, but we couldn’t stay there and we moved back over $4.00 quickly. And since then, the charts have kind of improved and you have this huge rounded saucer bottom on corn, which those are a slow chart, but they’re also very positive. And is it similar to last year where the yield kept going down.”
Reuters average trade estimate for yield is 184 bushels per acre but Roose says the market is already trading a 181 to 182 yield, so national yield will need to fall close to 2024’s final 179.6 bushel figure to get a major price reaction. “To get higher than this, to get another 20, 40 cents up, you’re probably going to have to be under 180. And that’s not because of the yield its because the acres are larger than last year,” he explains.
Wheat Disappoints
Wheat futures ended mixed and failed to follow the technical breakout in corn and soybeans. Roose says “wheat is an under performer.” The reason is because global supplies of wheat are ample and there are no weather problems or crop concerns, so end users are comfortable they don’t need to chase the market. He expects a slight increase in world wheat ending stocks in Friday’s WASDE but around 1 MMT.
Cattle Futures Melt With Limit Down Feeders
Cattle futures melted down on Thursday. Live cattle saw triple digit losses and many feeder cattle contracts ended limit down $9.25 with more technical selling and fund long liquidation. Some of it was headline driven. Reuters reported that USDA announced the opening of a sterile fly dispersal facility in Tampico, Mexico, in the fight against New World screwworm. “The Tampico facility will allow USDA to disperse sterile flies aerially across northeastern Mexico, including in Nuevo Leon.
Pressure also came from lower cash trade with $228 live sale prices in the South, down $3 from last week. Northern trade at $351 was light but lower than a week ago as well.
Roose says the market has been chasing negative headlines but it following the same pattern as the last bull cycle in 2014-2015 when the market topped when the news was the most positive and he thinks that happened in mid-October.
Lean Hogs Also See Technical Selling
Lean hog futures saw spillover from the collapse in the cattle futures and renewed technical selling. Roose says funds have been liquidating in that market but lower cash and cutouts added to the bearish tone.
