Grains tried to bounce early Wednesday but quickly saw a selloff in all but corn. Cattle were mixed early with hogs lower.
Corn and Soybeans Try to Bounce
Corn and Soybeans were trying to bounce on Wednesday after hitting new lows for the move with relentless fund selling pressure.
Greg McBride of Allendale says the futures are seeing a dead cat bounce as RSI levels below 20 are indicating oversold markets. The market has been sliding almost two months.
“USDA didn’t do us any favors on that last WASDE report. So the funds didn’t have a reason to hold on to those long positions and the selling has been worse in corn and wheat than in beans,” he says.
Soybeans Seeing Better Demand
McBride says soybeans have seen better demand with a flash sale of 4.4 million bushels of soybeans reported to unknown destinations Wednesday morning. Plus, China has bought nearly 20 million tons of the 25 million that they’re supposed to buy according to McBride.
“Now, that’s a combination of direct Chinese purchases and unknown purchases, which unknown purchases are generally going to be at least 75% of China buying those soybeans.”
Real Shock
However, the soybean market is still digesting the shock of the Brazilian presidential elections and the plunge in the real to the U.S. dollar, making the U.S. less competitive on soybeans in the world
market.
“Yeah, and that’s a tough situation. This is our prime time. I mean, we’re actually getting closer to the end of our prime time to be selling soybeans to the rest of the world. And at this point, Brazil has a price advantage on us. We had a very razor thin price advantage going into last weekend. And then that drop off on the real really killed that,” he explains.
Funds Liquidating Long in Soy Complex
The funds were over 200,000 contracts long in both soybeans and soybean meal on the last CFTC report and they have been shedding that length.
How much more liquidation is anticipated? He says the liquidation is not that bad yet but he does question where some of the other demand for the soybeans and meal is going to come from.
“But I think the funds probably do bring us back to more of a neutral position. They don’t necessarily have a reason to go raging short at this point, but they certainly don’t need to be up near those record high or record long positions that they were at.”
Higher Soybean Yields?
Is the soybean market also trying to price in higher yields? McBride thinks so.
“We talk to customers all over the place and just like the corn, there’s going to be places that are phenomenal beans and there’s going to be places that are really struggling. But I think the message I’ve heard from more producers than not is that it’s better than what they thought say a month, month and a half ago,” he states.
So he thinks national yield is closer to 54 bushels per acre and that could keep a lid on prices without a problem in South America.
Brazil Weather
So far El Nino has not been a big problem for the soybean planting in Brazil but it could eventually lead to some production issues according to McBride.
“They’re planting into a very good weather pattern right now. They’re ahead of the five-year pace. Actually, Argentina as well on their corn. They’re just now getting started on their beans.”
December and January will be important in determining crop size. Cooperative weather could mean a crop of 180 to 185 million tons for Brazil this year compared to as low as 160 to 163 million tons if the El Nino comes in strong.
Corn and Soybeans Try to Hold Support
Soybeans closed below the 100-day moving average yesterday and are trying to bounce from the $12.50 area on the January.
Otherwise the market goes back to the summer lows and the 200-day moving average is below that.
“At the current ending stocks, around this 300-ish million bushels, we’re probably priced around $12.00 to $12.25.”
Corn Funds Demand Below $4.50?
December corn also fell below $4.50 on Tuesday which has been a good area where demand has surfaces and McBride says that will be the key to bottoming the corn market.
“It’s two plus years of corn demand just being phenomenal, not having to worry about it. It was like you could set your watch to the USDA increasing export demand, and now all of a sudden we can’t find it.”
He says getting China buying would be the fastest way to turn the market around as part of the U.S. China deal but so far that hasn’t happened yet.
Mexico is not keeping up either with less cattle to feed there with the border reopened.
Plus, the higher dollar and higher freight charges are working against U.S. exports.
Next Support in Corn?
If corn can’t hold in this area the next support is closer to $4.40 and then the contract lows around $4.25.
McBride says that is too low for current fundamentals, “Given the ending stocks that we’re at, this 1.8,
1.9 level, I think you’re probably better to be priced around $4.75 to $4.80.”
Wheat An Anchor
Corn is not getting any help from the wheat market, which continues to make new lows for the move.
McBride says wheat traders continue to trade the possibility that peace talks in early November could lead to an end of the war between Russia and Ukraine and there is a humanitarian ceasefire going on that Melania Trump is involved with.
“The biggest problem has been for four and a half years, the war has never equated to additional export demand for US wheat.”
As a result wheat has retraced nearly $2 from the highs in early September.
Cattle Mixed
Live cattle futures were lower again Wednesday morning seeing a healthy correction or profit taking after hitting new highs for the move on Monday.
“It’s been a good run up. You filled a gap on the chart the other day. So take a little bit off, but I think maybe we’re reloading for the next move up,” he explains.
Feeder cattle look stronger technically and are getting a push from the recent pull back in corn and higher cash prices with the index up another $2.12 on Tuesday.
“Technically there’s a head and shoulders bottom that projects us to go higher. Maybe getting a good portion of the losses from July back, that would be a good sign.”
Plus, supply is expected to be lower in 2027 again. The Trump administration is working to increase beef imports but only about a third of the 300,000 ton quota has come in in the first month.
Hogs Carve Out Contract Lows
Lean hog futures were hitting new contract lows and six-year lows on Wednesday. Cash and cutouts are also at multi-year lows making it difficult for the market to stage a recovery.
How much lower will prices go?
“This market when it trends it trends hard and it trends for a long time and that’s where we’re at. The cash market it continues to lose 75 cents to a $1 almost every single day and that puts a lot of pressure into the to the futures. I mean the futures projection is for December to push maybe another $4 to $7 lower but the cash is moving faster than that. So that could continue to push more pressure into that market,” he adds.
This comes as the funds are already short and there has been push back from the consumer on pork and chicken due to high gas prices.
