Grains ended mostly higher on Friday finally bouncing after a massive selloff that saw corn hit new contract lows and soybeans and wheat making new lows for the move.
What Triggered Friday’s Bounce in the Grains?
Randy Martinson, Martinson Ag, chalks the recovery up to short covering heading into the weekend and position squaring ahead of Monday’s USDA Acreage and Quarterly Stocks Reports.
The reports coincide with the end of the month and the end of the quarter and so there was some short profit taking by fund traders as well.
He says the grain markets technically bounced off support areas and November soybeans even scored a daily reversal.
News reports the U.S. and China had signed a framework on rare earths was lightly supportive, but once it was discovered that the deal did not include agriculture the market backed off of highs.
Martinson downplayed the reaction, “There might have been a little pop up, right? When the news started coming out because everybody gets excited when they see trade deal and China. But I think once they were able to see what it was, it kind of just drifted away and it really had no impact.”
Recovery Comes After an Ugly Week
Friday capped off an ugly week in the grains which Martinson says was the result of fund selling and liquidation ahead of first notice day for July contracts on June 30. Ahead of that date farmers must liquidate positions, roll to a deferred contract or in some cases they had to price basis fixed contracts.
The lack of a weather threat to the crop also played a role.
Old crop corn made new contract lows on Thursday with the additional weight of several private firms estimating a record safrihna corn crop in Brazil.
Meanwhile, soybeans were drug down below major moving averages following soybean meal which hit new contract lows for several days in a row. On Thursday the contract plunged in response to news that China had purchased 30,000 MT of meal from Argentina, something they haven’t done since 2019.
Market Gears Up for USDA Reports
Heading into the USDA reports on Monday, Martinson says average trade guesses on acreage are very close to the March intentions which sets up the market for some type of surprise.
The estimate for corn is at 95.4 million, up just 100,000 from March, with soybeans at 83.655 million, up 160,000 and wheat nearly unchanged at 45.4 million.
He disagrees with the trade guesses, “I’m not quite in the same camp. I think corn acres could be a little bit lower. I look for soybean acres to be a little bit higher,”
Martinson, like many analysts, says he’ll be closely watching the Quarterly Stocks on corn to see if it confirms the tight old crop ending stocks or uncovers extra bushels that would explain the melt down in the corn market.
He points out that corn exports are still running ahead of last year by 28%, but the implosion in old crop corn futures and the July/Dec spreads indicates otherwise.
Average trade guesses for corn are at 4.625 billion bu. which would be down 372 million bu. from last year, with soybean stocks close to last year at 980 million bu. and wheat up 140 million at 836 million bu.
Bottom or Just a Deadcat Bounce?
Whether or not the grain markets can continue to recover will depend on the outcome of the USDA reports and weather, which has continued to be favorable.
