Grains and cattle end mixed with hogs higher.
Mark Schultz, Northstar Commodity, says corn had a poor technical close making new lows and with December closing below $4 for the first time since December 2020.
“It was concerning to see corn post new lows today taking out $4.03 on the December contract. We actually accelerated a little bit more and went down another 5 to 7 cents. So to me the market is still on the negative side and I think another lower close tomorrow probably opens the door to September corn maybe $3.50 to $3.65 and I can see the December corn down to the $3.75 to $3.80 level before we find the next level of support,” he says.
Schultz says unfortunately corn is still missing out on demand even though the U.S. has some of the cheapest corn in the world.
So how low do prices have to go to stimulate consistent demand?
According to Schultz corn prices may have to go down to $3.50 to $3.60 per bushel to get more of the export business.
“Quite frankly that might not be the worst thing to do is to take the market lower to get the buying interest to come back to the U.S. and/or get other countries to slow down on their production of corn in the future,” he adds.
The corn markets needs this demand because its trading a record yield but Schultz says it doesn’t matter if yield falls to 179 or 178 because it will not drop ending stocks below 2.0 billion bushels.
Soybeans also make new lows before closing slightly higher on end of month profit taking and short covering.
However, Schultz says $10 is vulnerable on November soybeans with favorable August weather and slow U.S. exports, especially for new crop.
“Our new crop bean sales are off to the worst start in 13 to 14 years. If you’re going to change the dynamics you’re going to have to have the Chinese come in and do some 30, 40, 50 million bushel purchases,” he says.
Without a change in either supply or demand Schultz says funds will continue to sell both corn and soybeans.
Wheat traded 2-sided and mixed but may be trying to forge a low as it has dropped to levels that make it globally competitive.
However, Schultz says there will be plenty of wheat with a bigger winter and spring wheat crop in the U.S. and the funds are selling wheat on any rally.
Live cattle were back lower awaiting cash trade but Schultz has been impressed with how strong cash has stayed seasonally and futures are at a steep discount so he thinks the downside in that market is limited.
Meanwhile feeders bounced with new lows in corn.
Lean hog futures were higher with a slightly stronger cash market and a push in cutouts well over the $100 mark.
“The cutouts have moved to new highs for the year so that’s impressive,” he remarks.
He is cautiously optimistic though on hogs. “The old saying is cheap grains mean cheap meat down the road,” he explains.
