Grain and livestock futures were mostly higher Friday except old crop corn.
Oliver Sloup, Blue Line Futures, says there was risk on buying across most of the commodity and financial markets due to more positive trade news and economic headlines.
News that China and the U.S. may be open to talks fueled buying optimism especially in markets like soybeans and hogs.
Sloup says strong payroll data and tech company earnings also worked into the positive move in equity markets on Friday which spilled over to commodities.
The U.S. economy added 177,000 non-farm payrolls in April. The unemployment rate held at 4.2%.
Soybeans closed above key moving averages including the 200-day and Sloup says if China and the U.S. can make constructive progress the market could go back and take out resistance at the April highs.
Old crop corn futures failed though as Sloup says July hit chart resistance and saw technical selling pressure and bull spread unwinding.
He explains the poor technical action, “There was a big cluster of major moving averages between $4.76, $4.81 for that July contract is the 20, 50 and 100-day moving average. And once we broke back below that, you really saw the selling accelerate and then that pocket acted as resistance and Thursday and Friday. So, the inability to get out above there I think kind of kept buyers at bay into the weekend and if we’re not able to see consecutive closes back above that pocket I wouldn’t be surprised to see some more downside pressure take us towards the lower end of March’s range which comes in in the mid $4.50s.”
He says the break down was disappointing with the solid demand for corn.
Wheat futures staged the biggest rally but Sloup says the market got overdone to the down side.
With funds so short in those markets, he says the bounce it was mostly short covering off this week’s contract lows in Chicago and Kansas wheat.
However, the grains were also supported by the weakness in the U.S. dollar.
Cattle futures made new contract highs in both the live and feeder cattle futures pushed by record cash and seeing continued fund buying.
But Sloup says with the sharp rally in cash up to $218 in the South and $223 in the North the rally was somewhat muted and leaves him a bit cautious.
Lean hog futures staged a late rally as well with positive reaction to the China trade news.
He says if the U.S. can work out something concrete with China that could bring more buying into the hogs especially with the funds only long around 50,000 contracts.
