Grains ended lower on Tuesday with livestock higher.
Grains See Fund Selling
John Heinberg of Total Farm Marketing says funds sold across the grain complex pushing corn to new contract lows again.
Favorable weather and historically high crop ratings for corn at 73% good to excellent, unchanged for the last three weeks, pressed the market.
However, StoneX also released a 188.1 bushel yield estimate for corn which was 7 bushels above trend line and that has the market anticipating USDA will raise yields in the Aug. 12 WASDE.
“I mean, I don’t think anybody believes that that number is actually going to be out there as we get through the marketing year and get into January when we get those final yield numbers. But again, highly rated crop, very comparable to 2016. There we saw that yield kind of peak out around that 4% to 5% window. You throw 4% on a 181
yield. That puts us up at 188 in terms of just the simple math,” he explains.
Heinberg thinks USDA is more likely to raise corn yield to 184 to 185 bushels and that scenario would already be priced into the market but there is still downside risk.
Will December Corn Fall Below $4?
The next support area for December corn is $4 and Heinberg thinks corn could fall farther than that anticipating the record crop.
“We took September corn off, at least right after first notice day, a low of $3.60. That put December around that $3.80, $3.85 window last year. That happened on the 27th of August. Really kind of watching that window, because that first notice day window can put a lot of pressure on those old crop supplies, especially since a lot, you got decent amount that’s going to move this year,” he says.
The market is anticipating a flood of old crop corn to move to market before harvest and the seasonals are lower in August. .
Soybeans Reverse Lower
Soybeans gave up early gains with StoneX also raising soybean yields to 53.6 bushels, which is also a record and up over a bushel from trend line.
Heinberg says after a correction on Monday the soybean market also ran into chart resistance and failed.
“You know, we reached out on November beans, tried to get to the $10 window. We kind of failed there very quickly today,” he says.
Soybean Market Concerned About China Demand
Another problem with the soybean market is demand as China has not bought any soybeans from the U.S. for September-October and new crop exports are the worst in 20 years.
So how low could soybean prices fall to find demand, especially from China?
Heinberg says, “So right now this market is going to continue to push prices lower, so we can get some of that demand to trigger in. I’m targeting maybe November beans down to about the $9.60 window here. And it just feels like the momentum is at least pointing that way. -
Wheat Also Hits Contract Lows
Wheat futures also made new contract lows with some spillover from corn and the higher dollar.
Heinberg says there is still hedge pressure in the global market with harvest in full swing in the Northern Hemisphere.
Cattle Soar to Record Highs
Nearby cattle futures hit more contract and all-time highs as live cattle are chasing last week’s record cash trade at $243.17.
Futures are at a steep discount and wholesale beef prices were also up $4.50 at noon which may be an indication of Labor Day demand.
“Currently the bulls are in still in control,” he says.
Lean Hog Futures Also Higher
Funds also bought in the lean hog futures on spillover strength from cattle and with the discount the August futures are holding to the index.
