Grain and livestock end mostly lower on Wednesday, except live cattle.
Matt Bennett, AgMarket.Net says grains have been taking the path of least resistance with more fund selling.
In fact, he says that’s been the trend except for a couple of days when funds took short profits to offset losses in the equities.
New crop corn and soybeans both tested chart support and December corn closed just above $4 with November soybeans coming within a cent of the contract low before recovering to close 10 cents lower at $10.18 3/4.
The pressure in corn and soybeans is coming largely from ideas of growing yield and bigger crops in the upcoming WASDE, favorable weather and the lack of China export business.
Average report estimates show an increase in yield of 182.2 bushels on corn and 52.5 on soybeans and Bennett thinks that will be confirmed in the August 12 report especially with the high crop ratings.
“We talk to a lot of folks who say this could be our biggest crop ever. Some folks feel fairly confident in that,” he says.
Bennett says looking at what USDA has done in the past, they’re basing this on thermal imaging and surveys and currently there are very few production areas that show problems.
He adds, “USDA almost always raises yield in the August report.”
The question though is will USDA offset higher yield with lower acreage?
Bennett says he’s not sure if USDA makes those cuts in August and if they do how much acreage could be lowered.
“If you do lose some acres I don’t think it will be substantial and I highly doubt it will be enough to offset the increase in yield,” he states.
So he fears there could be more price pressure ahead for corn similar to 2014.
Soybeans are also in jeopardy of lower prices due to rising U.S. and world stocks and the lower export demand for U.S. soybeans from China.
Live cattle saw a slight technical or dead cat bounce Bennett isn’t sure the market can stage a full recovery until the stock market stabilizes.
Plus he observed that once live cattle got into the mid to high $180s investors started to back off.
“If you don’t have equity markets screaming higher you can’t go back and retest those levels. So, what kind of retracement might you see? I don’t see anything more than $5 to $7 at the most,” he says.
However, he says the positive fundamentals should be supportive, including tight numbers and the futures discount to the cash trade.
Bennett says feeder cattle have seen heavy technical damage which may limit some of the recovery.
