Grain and cattle futures are lower early Thursday with hogs slightly higher.
Corn and Soybeans Continue to Consolidate
Brady Huck with Advance Trading says corn and soybeans continue to see profit taking and consolidation after the recent run off the August lows.
Corn and Soybeans Need to Hold Support
December corn failed at resistance on Wednesday and took out Wednesday’s lows overnight, so he says the contract needs to hold the 50-day moving average at $4.14 1/2 to keep the near term uptrend intact.
November soybeans need to hold the 200-day moving average at $10.26 1/2 but there are several other moving averages clustered between $10.25 and $10.30.
Corn and Soybeans Determining Crop Size
The market realizes the top end of the yield curve has already been established in corn and soybeans and while the crop is shrinking it is still going to be a big crop.
Private firms are releasing yield estimates ahead of the September WASDE next Friday and many have been close to USDA’s August figures which is also weighing on the markets.
Allendale’s yield estimates were at 187.5 bu. per acre on corn and 53.3 bu. on soybeans and StoneX releases their projections Thursday.
“The market seems to be discounting the effects of disease, drought and even frost chances on yield. So, we may have to wait until the combines roll to get a real accurate picture,” he says.
There is likely some early hedge and harvest pressure starting to take place as well he says.
Soybean Demand a Lingering Concern
Soybeans are also lower for a third day on trade concerns.
There has been no movement on a trade deal with China and the lack of new crop soybean export business to China continues to overhang the market.
Wheat Continues to be an Anchor
Huck says wheat continues to be an anchor on the grain complex as well.
Southern Plains and Black Sea wheat areas have been receiving some timely rains for planting and that is part of the story according to Huck.
Hard red winter wheat is right at contract low prices and while that isn’t buying any wheat acres for cropping purposes he thinks those fields are likely being planted to winter wheat for grazing cattle.
Export demand has been strong for especially HRW wheat but Huck says the U.S. is still not competitive globally from a price standpoint with cheaper Russian wheat dominating the market.
Cattle Prices Due for a Deeper Correction?
Cattle futures are further consolidating on Thursday and Huck says the feeder cattle futures are anticipating a large drop in the cash index.
The most recent data has the Feeder Cattle Cash Index at $365.52, up $1.05, but he says the new calculation will likely result in a $4 to $5 drop.
Feeders have been the price leaders and so a cooling of that market may in turn slow down the live cattle futures.
Boxed beef cutouts have continued strong with Choice values at $416.01, up $2.59 on yesterday’s close.
That means packers are in the black on margins and should be able to support the cash market even as kills ramp up after this holiday week.
Cash trade was light on Wednesday in the South at $242 live, steady with last week. However, he thinks Southern feedlots will hold out for higher money.
Northern dressed trade was also light at $383 to $385 and $242.
