Grains were mixed early Tuesday with corn and wheat lower and soybeans slightly higher. Cattle saw early pressure, with hogs mostly higher.
Corn, Wheat See Fund Selling
After a higher overnight session corn and wheat futures were lower on Tuesday morning seeing continued fund selling pressure.
Mike Minor of Professional Ag Marketing says traders are selling with the weather continuing to look non-threatening and the peace deal with Iran weighing on the energy markets.
“It’s been basically if there’s a bearish thing we can throw at this market, we found it. And the weather, we’ve rained a lot. The dollar’s gone up and crude oil’s gone down.”
December corn has taken out the old support area at $4.40 support as well which has added to the speculative selling pressure with a lack of news for the bulls.
Corn Crop Ratings Steady
Crop ratings for corn Monday afternoon were at 68% good to excellent, unchanged from last week and just 2% below last year.
Iowa saw a 2% drop in ratings, Illinois was down 6% in large part because it is too wet. Still, the market isn’t taking note of the potential that could have on lowering yields.
“Well, rain makes grain historically for the markets and especially in the I states. And that’s what they’ve been getting.”
He says while there are areas that are too wet in the East, the West is drier. Nebraska finally got some rains according to Minor, but it came with really high wind and a hard hail. So there have been some problems in pockets throughout the Corn Belt but not enough to get funds interested in buying.
“Historically, when rain means grain, it takes a very long time for the market to finally latch on to that. And it’s probably after June. in end of July you start to talk about it.”
once we start to have harvest reports or get close then you start to trade it a little bit more. So, I don’t view it as a let’s stop going down in the middle of June or July and start trading higher because it got too wet I’m viewing it more as a thing of once
Soybean Try to Bounce, Ratings Steady
Soybeans were slightly higher Tuesday seeing a short covering bounce with higher meal.
Crop ratings were also unchanged from last week at 66% good to excellent but at par with last year.
Still key areas of the Corn Belt saw a drop, including a 4% drop in Minnesota, North Dakota, and South Dakota, 3% in Illinois and Iowa. Those areas are too wet and that could cause problems down the road.
Minor says, “Soybeans don’t like wet feet and in normally what we’ll see is when corn starts to sell off it takes soybeans a little bit longer to sell off it usually follows after the corn falls first.”
Still soybeans are an August crop and won’t see much impact on yield until then.
Iran Peace Deal Impact
The Memorandum of Understanding or peace deal struck with Iran has caused the market to take much of the war premium out of the energy and grain markets.
However, Vice President J.D. Vance says they are encouraging Iran to use some of the unfrozen assets to buy U.S. grains. But its not a big market mover.
“When you start talking about their money being unfrozen. They historically have about 4.8% of the global imports on corn. They’re a smaller market historically but at this point it does not sound like the U.S. and Iran have not agreed to a specific amount they have to buy. It’s probably not a huge deal, but it is $100 billion, so it could add up that way.
But I am not expecting any major significant buying,” he adds.
China the Deal the Market is Waiting For
Minor says the big buying the market is waiting for is from China, especially if they buy corn.
“Last week, we saw China step in and buy U.S. soybeans and the market went up about a day and a half and pulled it back right away. It was a small amount, but I thought maybe that would have gave the market a little bit more hope or anticipate maybe corn as well. If it would have been corn, I think it would have been a much different trade, much bigger deal. Even in the same type of volumes, it would have meant a lot to that marketplace,” he explains.
The soybean market though was also disappointed with the 4.9 million bu. confirmation of new crop soybeans to China because it was a much smaller amount than was rumored by the trade.
“That’s 0.5% of what they agreed to buy next year. It’s only five out of like 900 and some million bushels. So it’s a small, small amount. So if they are going to live up to 25 million metric tons, they’re going to have to start buying here pretty soon and getting some sales on the books. In the last few years, they’ve been pretty slow to come through and buy some. So we’ll see,” he says.
Funds Still Selling
The Commitment of Traders Report out on Monday did show funds continued to liquidate positions in corn, soybeans and products.
“Once they start this time of the year, when they start to liquidate those longs on corn or soybeans or wheat or even any of the other ag products, it’s very hard to get those longs back in the market. So they’re going to have to decide, do we keep selling, keep the pressure up or not? But from this point lower, basically nobody’s long at this price or lower. You’re going to be taking that as a hit at this point. So if you continue lower, it’s going to be taking a net short position for the managed money,” he adds.
The funds have also given up in the crude oil market, but they do have room in the soybean complex to liquidate longs, maybe another 45,000 contracts or so.
Cattle Market Sees Profit Taking
Cattle futures made new highs for the move on Monday on higher cash at $258 to $260 as well as a bullish Cattle on Feed report placement numbers.
However, the market ended off highs after running into chart resistance and are chopping around on Tuesday morning below those chart points says Minor.
“We’re pretty close to it. Pretty much all the way across the board, whether you talk about the cash market near highs, whether you talk about the futures on fat or feed feeders,
those are approaching old highs. We’re right there,” he says.
Last week’s cash trade was strong as packers were short bought and buying at higher money all the way through Saturday and even bought a few at $260 Monday in Iowa.
“They got into Saturday and they were spending some money on some expensive cash cattle. So they’re still losing a lot of money. So they’re trying really hard to not pay more than they have to, but the numbers just really aren’t there.”
On the demand side, Choice beef cutouts have been flat under $400. The Select is lower than last year and has gone down counter seasonally.
“So that’s something I want to watch, which is the lower middle class consumers. Are they still spending money on beef or are they finding things like chicken or pork?”
Hogs Try to Bounce With Demand Problems
Lean hog futures continue to try to bounce but have difficulty putting two higher closes together.
The funds are short the market by nearly 21,000 contracts which could prompt some short covering but demand continues to be a headwind according to Minor.
He says slaughter numbers are nearly flat with last year but weights have been high.
“It’s a demand problem. Cutouts still really struggling. Hams just took a big leg lower and the weekly import info shows Mexico was pretty low. If took a dip then you know Mexican hog prices are really low,” he explains.
But hog prices are low all over the globe and that is a drag on the market.
