Grain and livestock all end in the green on Wednesday.
Grain Markets Get a Boost From the Vietnam Trade Deal
Oliver Sloup, Blue Line Futures, says it was a combination of short covering and technical buying heading into a long holiday weekend but the announcement of a trade deal with Vietnam also provided a spark for the grains.
“I think it was probably a combination of the long weekend and trade deal with Vietnam, potentially some more trade news coming down the pipe. I know President Trump is expected to speak in Iowa on Thursday, so potentially there’s more news to come. That’s just speculation, but ahead of a long weekend, I don’t know that anybody wants to be caught short if new news does start to develop, whether it be with trade or with weather,” he says.
He says the set up started on Monday when the USDA Reports came in so close to estimates the market quickly turned its attention to weather and went looking for a story.
Corn futures just hit contract lows on Tuesday and so that market was oversold and due for a bounce and with funds pushing the short side of the market they took some profits.
However, Sloup says corn is at a critical technical juncture heading into the weekend as its running up into major overhead resistance on the charts.
“We kind of got back to some of these technical levels that are going to be big big lines in the sand to keep an eye on into next week’s trade looking at the December corn contract $4.33 to $4.35 that was old support from March, April and May. We broke down below there just a few weeks ago that’s now going to act as significant resistance so for this market to really get some legs and build on the rally that we saw on Wednesday’s trade we need to see consecutive closes out above there and potentially that’s first and short covering it if we can do that,” he explains.
Soybeans Surge With Products
Soybeans also gains of 20 to 24 cents on the heels of the rally in both soybean oil and soybean meal but after bouncing off support on Tuesday.
Sloup says November soybeans also made new lows for the move on Tuesday but held those support areas around $10.15 which he says was impressive.
After the big rally on Wednesday soybeans are running into several layers of chart resistance.
“You’ve got the 20, 50, 100, and 200 days, all coming in between $10.31 and $10.38. And that’s really kind of flat lined over the course of the last month or so, creating a bit of a short -term inflection point.”
But if the market can get above these levels it could rally to $10.65 to $10.70 he adds.
The funds are not short in the soybean market like they are in corn and wheat, so to get funds to continue to buy it may take more bullish news on the weather or trade front.
Wheat Also Sees Short Covering
Again Sloup says short covering pushed the wheat market on Wednesday as funds have been short in the wheat complex for the last three years.
“We got the 50 and the 20-day moving averages $5.52 to $5.56 and that’s September Chicago contract. Consecutive closes out above there and you’re looking at upward targets of $5.70 and potentially out above $6 from there. But again, a lot of this is going to be needed to get legs,” says Sloup.
However, to get above these levels the market will need a U.S. or global weather story.
Cattle Futures Reverse Higher
Cattle futures opened lower still reacting to the phased reopening of the border to Mexican cattle imports, but reversed after the news of the Vietnam trade deal.
Some steady to weak cash trade developed and with futures trading at a discount that may have brought some buying interest in as well.
In the North, light trade developed in Nebraska with dressed deals marked at $368 to $370, steady to $2 than last week. Delivery 7/14 or 7/21. Live sales at $230-$232, steady. In the South live sales in Kansas are at $224, with Texas at $222-$224 steady to lower than last week’s weight averages.
Despite the pop, Sloup isn’t sure the news of the border reopening is all priced into at least the feeder cattle futures yet.
Live cattle have had a higher monthly close for nine out of 10 months but he thinks the tops may be in that market as well.
Lean Hogs Bounce on Vietnam News, but is the Top in Seasonally?
Lean hog futures also reversed higher in reaction to the Vietnam trade news, as a deal could be beneficial for pork exports.
But Sloup says the market is still under the recent contract highs and the top may be in from a seasonal standpoint. Plus, futures have failed to break above resistance.
“We’ve been below the 20-day moving average since April 15, so we have resistance at $110, support at $104.37, $105,32. Those were the old highs from February to May, as well as the 50 day moving average. So we’re kind of right in the middle of a pocket there. If $105, $104 gives way, I think you could start to see some additional long liquidation from funds,” he says.
Funds had taken their net long position from about 36 ,000 on April 8 to a new record of close to 135,000 last week but Sloup says if these support areas give way the market could see weakness continue in next week’s trade.
The one caveat is deferred contracts could be supported by disease issues.
