Grains and cattle are higher early Tuesday.
Jon Scheve, Superior Feed Ingredients, says wheat is leading the grain complex on the 2% drop in crop ratings to 52% good to excellent.
However, he doesn’t think there is urgency to put weather premium into the wheat market as winter wheat ratings are still above 50% and temperatures in the Dakotas and Minnesota are not going to get cold enough to hurt the spring wheat crop.
Scheve thinks the move is part of the normal seasonal tendency for wheat and it looks like the market is finally trying to bottom as prices have gotten too cheap.
“When you look back, wheat was only yesterday down into the $5.20s on Chicago, sub $5.40 there on the Kansas City, and sub $6.00 on Minneapolis. I think you have to start asking yourself, how low is low? Can we really drop low $5.00 on Chicago wheat possibly?”
Add to that short covering by managed money traders or funds who are short all three classes of wheat.
The strength in wheat is helping to support the corn market which is making new highs for this move.
But again on corn Scheve points to seasonals and says 75% of the time corn hits its high before the July 4th holiday.
“Usually we should go slightly higher into at least the middle of June, if not maybe towards the end, until that July 4th weekend. And we get to see that 10-day forecast on the 4th of July, and we can see all the way to the middle of the pollination period, and we can see if there’s gonna be any problems during pollination,” he explains.
Yet, corn is also seeing some short covering by fund and technical traders who have moved to a net short position in that market after selling nearly 100,000 contracts the previous week.
However, without a weather threat the upside in the corn market may be limited.
“Planting pace is still nationally ahead of average on corn and the only area of concern is Ohio, which has about 1.5 to 2.0 million acres left to plant. However, their last planting date is June 5. Meanwhile, the dry areas of the Western Corn Belt are receiving some nice rains,” he says.
Soybeans are trying to follow corn and soybeans with help from firmer soybean meal.
However, bean oil is once again serving as an anchor for the market.
He says biofuels policy is the key for the soybean and bean oil market and it will need to see something positive on both 45Z and the RVO levels to hold current price levels.
While trade deals will be helpful he doesn’t think soybeans or other markets will really be able to rally without some actual proof of sales.
