Grain and livestock futures end mixed on Wednesday as markets awaited the FOMC decision.
Darren Frye, Water Street Advisory, says the 50 basis point interest rate cut by the Fed was largely anticipated but the market is expecting additional easing by year end.
The key moving forward will be how much but he says easing the monetary policy will be friendly for the ag sector especially as it weakens the dollar.
“Its a big deal, I mean the lower dollar just means we’re more competitive on the export front and gives us a tail wind,” he adds.
He speculates the move could also bring some investment money back into the grain markets over time.
“I don’t know if they will go long but you are exactly right, they had a recessionary trade on being short the commodities and they were relying on farmers selling inventory to come out of shorts,” he explains.
However, he thinks that came early and corn and soybeans may have put in their seasonal low.
Soybeans rallied on both supply and demand factors on Wednesday and according to Frye have been very resilient.
“Early yield results on soybeans are below expectations at a time when China keeps coming into the market on a near daily basis to buy. At the same time I am hearing South American farmers are not selling,” he says.
November soybeans got above the 50-day Moving Average during the session but could not close above this key resistance.
Frye blames that on harvest pressure but he thinks the soybean market will continue to move higher.
Corn ended nearly flat, caught between higher soybeans and lower wheat and digesting some strong early yields.
However, that market looks good technically and may just be waiting for additional harvest data before continuing to push higher.
Frye is also watching South American weather because if it continues dry the next few weeks during planting the corn could rally.
Wheat continues to see profit taking after December Soft Red Winter wheat was unable to get above the $6.00 mark and with better rain chances in the Southern Plains.
Cattle futures were choppy and two-sided awaiting the Fed announcement but Frye thinks the market is also looking for cash direction after a low was forged last week.
Technically, the live cattle had a strong day Tuesday but nearby contracts failed to attract additional buying.
“I do like the upside in the cattle market with the tight supplies, if consumer demand can stay intact and the economy can stay strong,” he says.
Hog futures saw more chart based buying and the funds have continued to push the futures beyond what the fundamentals would suggest according to Frye.
