Corn and soybeans are lower early Wednesday with wheat slightly higher. Cattle are extending gains, with hogs mostly lower.
Corn and Soybeans Fall on Weather
Corn and especially soybean markets were down early Wednesday with rain chances for the dry areas of the Western Corn Belt in the forecast for Thursday to Saturday.
Mike Minor of Professional Ag Marketing says the weather will have a bigger impact on soybeans, which are leading the losses.
“Corn’s weather story was a little bit earlier, which we didn’t have many problems with. Pollination was a little hot, but the nighttime temps got decently low. It’s getting a little late for a weather story on the corn side.”
So the story is main about soybeans which held weather premium heading into August trying to get a clearer picture of what the weather would do.
“We had a very dry forecast kind of the end of July, beginning of August, going through the month. That’s shifted now and I would even argue like a week ago today, it was looking a lot worse than where we are today. As we look towards Thursday’s forecast locally here, you know, Western Corn Belt and South Dakota and Minnesota, I’m supposed to get an 1.0" to 1.5" rain tomorrow. And even in the next five days, almost every major corn production state is supposed to basically get an inch of rain.”
So he says it is a very bearish forecast for the next week or two compared to a week ago.
Yield Debate Raging
Certainly there’s a lot of debate with the crop ratings dropping 4% this week to 63% good to excellent for corn yield to be below the 183 trend line yield. But USDA may not reflect that in the August 12th WASDE says Minor.
“I think it’s going to be very similar to last year. Now, the next five days are critical. If we get this rainfall like they’re expecting, I view it very hard to get a low number out of the USDA in the August WASDE report. Now, their methodology, the way it’s set up, it’s very heavily weighted upon satellite imagery, what weather’s done, things like that.”
So he thinks the corn yield could be similar to last year and the record 188.8 bu. per acre figure last year that shocked the market.
He adds if this rain confirms it will be very difficult for the USDA to post sub-186.
China Tariff Tit for Tat
China has not been in with any soybean flash sales this week at the same time Beijing is pushing back on the July 24 Section 301 tariffs and the U.S. is increasing tariffs on Chinese robots and inverters.
So is this shaking up the market?
Minor says it might be but he thinks its possible Tuesday’s flash sale of 7.8 million bu. of corn to unknown was China.
“So I’m keeping a close eye on the corn side here recently, but China’s about 12% of their soybean target for new crop soybeans now. They’ve got a pretty good book on to start out the year, I think. And I’m looking forward to what we can see from China over the next couple of weeks here on purchases.”
Plus Sinograin sold over a half million metric tons out of their reserves to make room for U.S. beans.
End of Month Profit Taking? Or Rally Done?
The other segment of selling pressure is coming from profit taking as the market nears the end of the month and July posted big gains in all of the grain markets.
Some profit taking would be expected but does this signal the grain rally is over?
Minor says, “It’ll really depend on if we get some weather here. I think that lines up with expectations. If you get crude oil to go up
too much more, if you start to approach WTI around $100, I think the market starts to care a little bit about that more too.”
Plus, he says the market will also be gearing up for the August 12 WASDE Report.
Still, funds have been on the wrong side of the grain market more than once this year. “So I think they’re ready to take a win here at some point,” he adds.
Wheat Pops on Black Sea Export Disruptions?
Wheat was slightly higher early Wednesday, maybe seeing some end of month short covering but also trading concerns about Black Sea exports as fighting between Russia and Ukraine has not subsided.
Minor says, “Most of it’s just logistics, right? They’ve shut some things down. They, over the weekend, had a little bit of a ceasefire and hope that Ukraine wanted the UN to approach this situation and say, hey, Russia, stop targeting our ships specifically. You know, how much they can actually do that is pretty hard to get anything substantial out of that.”
Howver, its doesn’t change the global balance sheet because Russia just tries to export it out somewhere else at a cheaper level.
He thinks the global wheat problems in the U.S. and France may create a little bit bigger story.
Cattle Extend Gains
Cattle ended mostly higher Tuesday except deferred feeders and were extending gains slightly early Wednesday.
So has the market digested the border news and has it bottomed?
Minor says the market has the next month to digest it as the border reopens on August 24th.
“So they built in a little bit of a cushion to just say, hey, Mexico, you better not screw this up again. If you do, we won’t reopen Douglas. So I don’t even think that reopening Douglas is. the real key one going forward. I would keep an eye on some of the export ports in New Mexico that make up almost a third of the cattle that used to come in export through the United States coming through the Santa Teresa,
New Mexico location.”
Still the market has been supported the last few sessions after going down from June 16th until recently on the cattle futures and testing the bottom of this long-term uptrend tracing back to 2020.
“Then you got more bad news and had a good reason to break below that uptrend line that we’ve been playing in and, and we haven’t yet. So it’s really supportive to see this,” he adds.
Fundamental Support for Cattle
He also thinks there’s some fundamental news supporting the market including heat and death loss in some of the feedlots.
The other key is choice boxed beef values have bottomed.
“Seasonally, it’s the right time for us to bottom. The last couple days, we’ve started to see the boxed beef kind of round out that bottom. Nice support around $360. Very similar chart to what we had last year. Very similar five-year average-wise. Now let’s really put the gas to this thing and try to get this to run up again. We seasonally should be working into some more cattle from this point on until about September when we start to find a hole again.”
Hopefully that will also stop the bleeding in the cash market.
Hogs Hit Resistance
Lean hog futures were seeing slight losses as the market has hit another area of chart resistance after a strong close on Tuesday.
Minor says this is an important week for the market.
“I was hoping we could build on some of yesterday’s recovery a little bit more, but the thing I am looking at is product. It needs to respond. Demand seems good at $104, $105 cutout. We’ve had pretty good demand, but it seems like that leap to $110 finds itself incredibly difficult. The seasonal rally came late, so it’s probably going to be a little shorter.”
However, with the slow slaughter as some plants were down the cutout should have responded more.
