Grain and livestock futures ended mostly higher on Wednesday.
Wheat Takes the Lead
Rich Nelson with Allendale says wheat led the charge higher inserting war and weather premium but also seeing some short covering.
“There’s quality concerns with the hard and soft red crops, maybe a little light concern here with the current spring crop as well. You can argue a little Middle East premium. Keep in mind Egypt, which is one of the neighbors to this conflict is the world’s largest wheat importer. So there are some questions there,” he explains.
The market closed above some key resistance levels and could continue to trigger technical buying and fund short covering when trading resumes on Friday maybe 20 to 40 cents depending on the class of wheat.
Corn Reluctantly Follows Wheat but is Undervalued
Corn saw light short covering and position squaring ahead of the holiday but was a reluctant follower of the wheat market.
“And this corn market is one of the laggards right now. We’re still on a downtrend for corn. We really haven’t shown yet much enthusiasm to get past those new lows this week as well,” he says.
Nelson says July corn has been under pressure on fund liquidation despite strong demand and as a result some are suggesting higher corn inventory in the Quarterly Stocks Report on June 30.
He argues that’s already priced in.
“So in our viewpoint, this market is pricing in an extra 300 million bu. or so on top of USDA’s numbers for ending stocks unnecessarily. So bottom line is yes, maybe the market wants a spark, to get a rally started, but from our standpoint this market on the corn side is undervalued,” he states.
With a 1.365 billion bu. old crop and 1.75 billion bu. new crop carryout historically the corn market should be at $5.60 on July corn and $5.20 on December.
Soybeans Pause After RVO Rally
Soybeans and bean oil closed near steady in a quiet consolidation day after rallying over 40 cents since EPA’s surprise of higher RVOs for biomass based diesel.
However, Nelson isn’t sure the market is fully done pricing in the higher blending levels.
“We would suggest maybe this $10.80 to $11.00 range for November soybean futures,” he explains.
At the same time, he questions how high the market can run on that demand news alone if China doesn’t come back to the market by harvest time.
Cattle Recover
Cattle futures saw mild recovery after the sharp selloff on Tuesday, with a more risk on appetite in the outside markets and easing geopolitical concerns.
Boxed beef prices continued higher at noon but a light dressed trade has been reported in parts of Nebraska at $376, $4 lower than last week’s weighted averages. With some live sale prices in Iowa at $376.
Still, Nelson believes the market will be well supported due to the large discount the futures are holding to cash.
Lean Hogs Make New Contract Highs
Lean hog futures also moved higher and into contract highs with the push from higher cash and cutouts.
Cutouts are right around the $120 mark and the Lean Hog Index is also up at nearly two year highs which is supportive.
As well, Nelson says the market got a boost from China re-listing 23 U.S. pork plants for export.
