Grain and hog markets are lower early Friday, with cattle higher.
Darin Newsom, Senior market analyst for Barchart, Inc. says grains are working on a lower weekly close this week with the early pressure Friday.
Funds See No Reason to Buy Grains
Newsom says the grain markets lack a bullish story with the weather nearly ideal for corn and soybean production and the prospects for near to record crops.
Plus, funds or speculators continue to look over at the stock market which is near all-time highs and see that as a better investment opportunity.
That means money flow is going away from the grain markets as a whole.
But Demand for Corn Has Been Strong
Weekly corn exports were strong on Thursday and for the year are nearly 28% ahead of last year.
Meanwhile, the last two days have produced flash sales on corn to the tune of nearly 23 million bushels, which have garnered a muted response from traders.
While demand has been strong, he says it isn’t enough to chew through the large supplies coming at the market in a meaningful way.
Trade Talk Fails to Excite
This week’s announcements from the Trump administration regarding trade frameworks with Japan, South Korea and the like have also failed to excite the grain markets.
Newsom says, “That’s because there are no real trade deals.”
Newsom is referring to the fact that these frameworks will take weeks to flesh out and do not have to be ratified by Congress so there is no teeth to them.
Additionally, he says there have been few details on ag purchases and even when there are they are the totals are no more than the business that the U.S. is already doing with these countries.
What Could Turn the Bearish Trend in the Grain Markets?
Newsom says without a major production issue he doesn’t see much that could change the trend of the grain markets except a problem with the upcoming South American crops.
Right now the corn market doesn’t acknowledge the pollination issues being talked about in several states or they aren’t large enough to make a market impact.
“There are no pollination issues according to the market. Look at how the corn market has reacted and what the spreads are doing. They are telling us that market participants are not concerned about running out of corn,” he explains.
Soybean Market Taking “Wait and See” Approach
For soybeans, the jury is still out on the size of the crop which is determined in August so for now the market is trading a big crop.
However, he says the slow pace of exports is a concern as well as the lack of China business but the spreads are indicating the market isn’t worried about running out of beans with the large South American crops still available.
Weekly exports were lackluster on Thursday and a flash sale of 5.24 million bu. of new crop soybeans sold to Mexico also failed to excite the soybean traders.
