Grain and livestock futures closed mostly higher except for wheat.
Darren Frye, Water Street Solutions, says it was an impressive close especially for soybeans which were down 18 cents overnight in reaction to former President Trump’s election win and the possibility of increased tariffs on China and other export customers and another trade war.
However, the grains were also able to shake off a sharply higher dollar.
It may be tied to hopes export business will pick up before January 20.
“It could be the fact that we have an export window now until January until Trump takes office and there will be a lot more buying up until then. It could be that the commercials are seeing that exports aren’t going to be that bad. We kind of thought they were going to be zero if he got elected but with their economy isn’t in as good a shape as four years ago and maybe they can’t take his harassment or tariffs. Maybe they have to play nicer,. Maybe they’re going to do some business with us,” he says.
Or Frye says the market may sense that exports won’t be as bad as feared, as these low price levels have stimulated demand.
The key will be for the grain markets to see follow through buying on the strong closes.
“That’s the million dollar question. I mean the charts really look good going home Wednesday. You saw a huge range in soybeans a huge shadow on the candle stick chart. You saw corn close through some key resistance areas. Closing above the $4.24 to $4.25 areas was really important on December corn so we should get some follow through but as always time will tell,” he adds.
Frye was surprised by the strength and new highs in the stock market in reaction to the election.
“I expected the market to be higher but not 1,500 points on the DOW and 500 on the NASDAQ. I mean everything was up small caps, large caps, mid caps. Bit coin was up over $6000 a coin,” he says.
The rally in the financial markets spilled over to help support the livestock futures as well, despite the higher dollar and the trade and tariff fears.
Trump has also talked about raising tariffs on Mexican imports if the president does not provide help with the immigration and border issues.
Mexico is a top customer for U.S. pork and especially hams and so tariffs could hurt the export dependent hog market.
The big week continues with the FOMC decision on Thursday and the WASDE on Friday.
Frye says the bond market is pricing in a .25 point cut in interest rates but the last time Jerome Powell spoke he was a bit hawkish and with the run up in the stock market that may signal inflation is going to reignite.
“So it will be interesting to see what the Fed does with that,” he says.
As far as Friday’s WASDE, Frye isn’t looking for much change in yield, production or ending stocks for corn or soybeans.
“I think they got things pretty close to the mark. Many people were wrapping up harvest, they had a lot of the plots in the October report,” he says.
”
