Grain and livestock futures ended mostly lower on Thursday except back month hog futures.
Grains Follow Crude Oil, War Headlines
Grain markets were lower on Thursday still tied to the trend of the crude oil futures and Iran war headlines says Jeff Hoogendoorn with Professional Ag Marketing.
“You know, we had crude starting the day out significantly lower, putting those lows in fairly early in the session, and grains did very much the same thing,” he says.
He says up until this week the grain markets seemed like they were trying to divorce from the energy sector and trade their own fundamentals but that isn’t the case the last few days.
“I think today was the best example as it traded both on the lows of the day with the crude and on the highs of the day,” he explains.
Corn and Soybeans End Off Lows
So, crude oil started sharply lower Thursday with the continued news of peace talks with Iran and possibility of getting the Strait of Hormuz open, pulling down grain markets.
However, crude oil stabilized as the day progressed following additional headlines. He says, “We’ve heard some accounts that a Chinese ship incurred some damage trying to go through the Strait but we’ll have to wait for more confirmation of that.”
That reversal in the crude oil market helped to support late day buying in corn and soybeans, even bean oil.
Corn and Soybeans Hold Support
Corn and soybeans also bounced as they held key chart support and bounced off that level.
“We got underneath the moving average that we’re watching kind of mid-day like on the December corn in that $4.85 area. So we definitely had a lower low than that, but the closes kind of saved the day on the charts,” he says.
He says it was a victory for corn to close just a 1/2 cent lower versus at the low end of the trading range today.
“Something to be watching for tomorrow, though. I mean, we’ve kind of put a few days in a row now, some lower highs and some lower lows and busting through some of the moving averages and retracements. So that’ll be a big number tomorrow.”
Will Funds Defend Longs?
The funds had piled into the corn market the last week or so buying over 83,000 contract last week alone and were record long in soybean oil. So will they defend those long positions if crude oil goes down or wait to see if inflation concerns subside?
“I think they can stay in these markets for a little bit longer in the corn. But they can put a lot more contracts on the books too. From a historical standpoint it’s still early in the season for them to be completely exiting. I don’t think that needs to happen today. I think we’ve got a a month to two months left from a seasonality standpoint and then they could shed some positions,” he adds.
Plus, he thinks the inflationary concerns are far from over because it will take a while to get the Strait of Hormuz open and normalized and the managed money traders realize that.
Favorable Planting Weather
The USDA crop progress report has shown planting progress ahead of average which has also weighed on the markets.
While there have been some areas that have struggled with cold and/or wet conditions slowing planting that is starting to change.
Much of the Corn Belt is seeing some more favorable weather and the extended forecast is also conducive for planting which should result in bearish planting figures for corn and soybeans on Mondday.
“It looks to us like most everybody’s getting a window. There’s some spots out into Indiana and into Ohio that we’re a little concerned about yet, Michelle, as far as planting pace goes. But, you know, that eastern Iowa into Illinois looks like we’re going to be in pretty good shape and getting a nice window in a lot of spots.”
Weekly Exports
Weekly exports on Thursday morning were below last week for corn at 53.6 million bu. but still solid for this time of year. Plus, total exports are up 29% from a year ago.
Soybeans were only 5.2 million bu. for old crop which is a marketing low and cumulative exports are down 23% from last year which is disappointing according to Hoogendoorn.
“I think the marketplace is kind of anticipating some of that. We’re not really riding a huge wave higher as far as especially old crop soybean sales go. So I believe some of that’s priced in. We know we’re going to be lower on exports as this year kind of gets to the back half of the year, right, as far as old crop sales go. New crop is hopefully a different story. I think we’ll get a month or so down the road and we’ll start to focus on that which is why we didn’t take that news harder,” he says.
Soybeans Await China Meeting
Also holding the soybean market together is ideas that China could announce soybean purchases at the Summit next week and so it may build those premium back into heading into the meeting. Is this market building those premiums in? T
“Yes, there’s probably some optimism built in there. However, a lot of these type of meetings have been disappointing. Right. So. let’s be a little careful there if we’re truly putting some premium into the market going into into that meeting let’s approach that thing with some caution. Hopefully it’s not warranted but our history would suggest that gets a little disappointing on the actual action items,” he adds.
Wheat Story Over?
The wheat market did not recover off the lows with crude oil and was down sharply especially in hard red winter wheat contracts.
The market is continuing to remove weather premium with some rains or moisture received in dry HRW areas in Colorado and Western Kansas. Plus the frost concerns have not materialized as advertised.
So, Hoogendoorn says the wheat production concerns are starting to fade.
“Well, talk about an impressive story about buy the rumor and sell the fact, right? I mean, this crop has got a lot of issues as far as the hard red winter wheat. So it’s so impressive that we rallied before that news kind of came out, if you will, or before it was official through the USDA. Now we’re getting a lot of that information coming out on the table, but we’re taking a good 60 cents off that wheat market in the meantime. So yes, that’s very much what’s going on. That wheat story has got some age to it,” he states.
The market didn’t even react to the Oklahoma wheat tour results which pegged the crop at only 47.8 million bushels, which was well below the 106.4 million bu. figure from last year.
And while some areas missed frost there are more freezing temperatures in the forecast for this weekend, which have failed to support the market.
Cattle Lower Despite Higher Cash
Cattle futures ended off session lows but were lower on the day.
Early pressure came from lower boxed beef prices, the lower stock market and concerns that a planned meeting between President Trump and Brazil’s president may result in increased beef imports coming into the U.S. to provide some price relief to beef for consumers.
The funds sold early on the headline says Hoogendoorn.
“They wanted to take risk off on this cattle market in a big way today. We’re hearing more rumors of some discussions going on with Brazil.
We’ll see if anything comes out of that in the next 24 to 48 hours. Be watchful and mindful of that type of discussion. Not sure if that’s what spooked it or if it was something else,” he adds.
He adds the only reason cattle ended off their lows was the higher cash market. He says it started out steady but continued to build momentum.
Southern cash trade was reported at $256 to $258, up $2 to $3. Northern trade live ranged from $258 to $260 live with $402 dressed prices, up $3.
Hog Futures End Mixed
Lean hog futures ended mixed with pressure in the front end of the board on continued ample supplies and bear spreading.
He says, “The market’s been trying really hard to justify having these summer futures markets at a premium to the nearby fundamentals, right? And as time passes and we run on a pretty large lack of any good news on the fundamental standpoint, they struggle to justify that premium. That’s exactly the way the market was trading today. That’s the way it’s been trading. Today they did it in the spread market, which, you know, as producers, we have to be pretty thankful for, right? Like we’re able to sell the front end and at least we’re buying the back end was actually able to post some closes that look pretty attractive there, you know, August on back type of a thing.”
But he thinks the market is on the edge of improving with few numbers in the pipeline.
Export Restrictions Due to Pseudorabies
The other good news is so far the only export restrictions tied to pseudorabies remerging after 20 years is Mexico, but that is limited.
“We’ve got the Mexico saying that they’re not interested in our varieties meats anymore. I think that’s a real thing and gonna be in place for a for a while. I don’t know if that’s something that will drag on all summer and into the fall or not mostly a reduction in revenue for the packers. I don’t think it’s going to have a huge impact,” he says.
Still the market has been on edge awaiting those type of announcements and if there are more he thinks they will be traded negatively.
“So the two things to watch, are there more positive cases and if any more news as far as countries restricting exports for sure,” he adds.
