Corn and soybeans ended higher Monday, wheat lower. Cattle were mixed, hogs fell back.
Corn Higher on Weather But Off Highs
Corn futures gapped higher on Sunday night and made new highs for the move but could not close above resistance areas on the charts.
Weather helped push the market higher with a hot, dry forecast but why did the market close off the highs?
Dave Chatterton with Strategic Farm Marketing says the market initially traded the heat for this week which is unwelcome for corn during pollination time.
“We should see the U.S. crop, the corn crop as a whole, hit that 50% pollination mark sometime this week. And these high nighttime temperatures, 80 degrees plus are not necessarily ideal. However, it is also not a disaster as most of the weather models are currently showing some moderation in the heat by Sunday, Monday of next week,” he says.
So, the weather is not going to stay hot and dry long enough to get the market over that technical resistance.
“We struggled against the 200 and the 50-day moving average here on Monday and weren’t able to quite get through it. So, a little bit of profit taking. I wouldn’t necessarily be surprised that we take another run out of here but it wasn’t going to happen on Monday,” he adds.
Is Corn Yield Dropping?
However, is the corn yield dropping below the trend line of 183 nationally?
Chatterton thinks so. “I think when we look at what’s happening, I mean, certainly there’s some good crops across a wide portion of the belt. I think there’s also a number of problems across the wide portion of the belt that go back to planting time in spring and excess moisture and just problems that we’ve had dry in some areas, wet in others.”
He says it is not a disaster but there are just enough challenges and more on the way with fungal disease coming up tied to the weather. Those may show up at harvest time.
Strategic Farm Marketing has an internal model that shows yield at 180 bu. per acre which is under USDA’s 183. you know we’re gonna we have our model
“I would suspect that most in the trade are probably somewhere between those two numbers but we’re expecting at harvest time to find a few kind of unwelcome surprises,” he adds.
Corn Stocks Tightening Globally
Meanwhile, global corn stocks are getting tighter and are down 23.4 million metric tons (MMT) from last year and Chatterton says wheat is almost double that.
“So, when you look at that, it doesn’t take a big yield problem here in the U.S. or elsewhere, Michelle, to start to induce, you know, a pretty bullish element into our marketplace,” he says.
He says the situation is opposite of last year when the market was talking about record corn yields and how big is big in terms of the
global crop.
Soybeans Supported by Bean Oil, China
Soybean also gapped higher Sunday night with November making new highs at a high of $12.07 1/2.
The market got spillover from higher corn, sharply higher bean oil and more China business.
USDA confirmed abother 5.0 million bu. of new crop sales to China on a flash sale report.
Chatterton says Chinga bought 992,000 metric tons last week or 32 million bushels of U.S. soybeans.
“It turns out a million metric tons a week from here to the end of the year gets them to that 25 million metric tons. So USDA or FAS announcing another two cargo is being confirmed here this morning of U.S. soybeans to China. And think it’s nice to see that China’s continuing to kind of keep their pace up. Part of this is probably seasonal normal, but it’s also nice to see them buying,” he says.
However the cargoes from the U.S. are at a premium to what’s being offered out of South America.
Bean oil was also up sharply following crude oil Monday with the Iran cease fire over and the Strait of Hormuz once again closed.
More China Buying Needed
Still, soybeans can’t close above $12 and Chatterton says the market wants to see more routine buying by China before it really jumps but it is supportive.
“If you look at what 25 million metric tons does to the U.S. balance sheet, particularly if we shave a little bit off of the USDA yield ideas, it can get very tight very quick. And instead of talking at something just over 300 million bu. you’re probably talking at something just over 200 million bu. (ending stocks).”
He thinks there are some traders waiting to buy ahead of El Nino impacting the South American crop.
“But we haven’t seen that happen just yet.”
Funds Bought Last Week
Funds were generally sellers of over 59,000 contracts of their short position last week and are closer to neutral on corn.
Funds added to their length in soybeans, buying over 37,000 contracts and are now long just shy of 69,000.
But he says there is room for funds to add to those positions if they choose to.
“I think that’s the path of least resistance for right now. I mean certainly there’s a lot going on. We don’t know what the geopolitical situation may or may not hold. We’ve got supposedly a September meeting between the U.S. and China here in the U.S.”
Plus the war has heated back up in the Middle East and Black Sea region and weather needs to play out the rest of the season.
“I think if we can confirm and kind of get them to accept the idea that the seasonal lows were made in June and maybe a little bit earlier than the normal seasonal historical time period. I think they are here to buy the market,” he adds.
Wheat Eases Despite Black Sea Escalation
Soft red winter wheat made some new highs for the move on Sunday night but could not hold on to those gains and ended a bit lower on the day.
Chatterton chalks it up to profit taking. “You know looking at the week we had last week in the wheat markets, a little bit of profit taking here today. When we didn’t hold that big jump right out of the gate it was interesting action especially in terms of what happened with Ukraine and Russia over the weekend.”
He says the Black Sea region is in the fourth year of the war, but it seems like for a lot of this period that the grain assets, the infrastructure, the shipping has been kind of off limits for both sides here. It looks like that’s changing a little bit with these attacks here of late.
“We’ve got, the Kerch Strait is still closed in Russia. That’s about a third of their wheat exports come through that portion. Russia and Ukraine together, a third of global wheat exports. So certainly something that we’re going to have to kind of keep an eye on here. You know, we’ve gotten kind of immune to these headlines of strikes and problems. But at some point, if we close the shipping down very similar to what’s happened in the Strait, we’re going to constrict that wheat supply and something that needs to be paid attention to.”
The European drought story is also well known and priced in but the market will still be watching harvest results to see if it needs to add more premium to wheat, corn or barley markets.
On the Verge of a Bull Market?
So are the grains on the verge of a bull market with weather problems in Europe and other areas or is this a 2027 story?
Chattertson says the timing is the hard part, “But I do feel we have a market that’s well supported and looking for that excuse or that, that, spark to go higher. And whether that’s weather, whether that’s geopolitics and war, whether it’s something that we don’t know or can’t see or identify at this particular point, I’m not sure.”
Cattle Fails to Hold Early Gains
The cattle futures saw early corrective gains Monday, but failed to hold those levels into the close.
Live cattle ended well off highs and feeders were lower on the day as it seems the funds are selling every rally.
“Yeah, I mean, disappointing action, Michelle. I mean, after last week and getting beat up pretty good, I think $4 plus in the fats, $7 in the feeders, you know, a little bit of a dead cat bounce here was not out of line at all here this morning. Unfortunately, I think that the bad part technically is that we weren’t able to hold that into the close and we’re giving off poor signs.”
He thinks the funds are still trying to offload some of their length. Last week’s CFTC Commitment of Traders report had large
speculators long around 113 000 contracts net in the cattle for the week.
“So still you know hauling around a pretty significant long position here considering the performance of the market,” he says.
Lower Cash Again?
Cash was also lower at $248 live, down $7 to $8 from the previous week. Chatterton sees that market continuing to drift.
“Yeah, I think it’s going to be a challenge. I think packers now feel a little bit more emboldened that they can be a little bit more stingy on their bids and can maybe buy some cattle that they can actually carry forward here. I mean, bids starting the week are at $240 verses $248 trade last week.”
That may mean steady at best for the cash outlook.
Normal Seasonal?
Some of this is a normal seasonal correction as mid-July is not historically a good time to be bullish cattle according to Chatterton.
“But, you know, the way that we’ve acted coming into this seasonal is a little bit different, I think, than what we’ve had in many of the last several years. So some of that work has already been done by price. I’m surprised the funds were able to work their positions down a little bit more than what they have. So it makes for an interesting market here.”
Still he says at some point the the market needs to bottom relative to production and the tight animal numbers but the market is not there yet. .
“And I think there’s definitely a caution sign flashing, in my opinion.”
Hogs Not Able to Extend Higher Weekly Closes
August and October lean hog futures posted higher weekly closes last week but were not able to extend gains Monday.
He says, “It’s a very slow burn. You know, we’re on what is now almost a month of since that price bottom back in early June. the market you know it’s a it’s a two -step forward one step back type of a process,” he describes.
Funds have been covering some short but are still near record short at by 29,000 contracts.
“I think seasonally the fundamentals of the hog market are improving. We’re starting to see things look a little bit more current production get a little bit more in line with last year. So, you know, we’re building into it, but it’s been a pretty slow process,” says Chatterton.
