Grain markets closed lower on Monday with risk off fund selling. Garrett Toay, AgTrader Talk, says it was a perfect storm fueled in part by demand fears as property giant China Evergrande Group is being forced to liquidate by a Hong Kong court. That sparked concerns of a deepening financial crisis in China and particularly in their real estate sector.
Sliding basis levels in Brazil, nearly $2 under U.S prices, added to the pressure in soybeans. Toay says, “There has been news of a U.S. crusher in the southeast importing Brazil soybean as basis is cheap enough that the arbitrage opportunity works.” However, he says it’s also due to logistics.
March soybeans closed below long-term chart support of $12.00, the first time soybeans have been under that level since June of 2023. Toay says that now opens the door for $11.76 to be tested. “Things just feel extremely heavy here. You know those May lows at $11.45 ¼ that’s going to be the downside target here if we can’t hold this $11.76 area.”
March corn held last week’s contract low of $4.36 ¾ despite the outside market bearishness and lower soybeans and wheat. However, Toay says corn is still susceptible to more downside if soybeans continue to fall. “I would like to see some demand here; we are at price levels where we should be seeing some corn demand. If we don’t hold these areas, we’re going to grind down to the $4.25 level,” he says.
Toay says he was surprised the escalation of the Middle East conflict did not result in any war premium being added to the wheat market. Over the weekend there was a drone attack on a base in Jordan which killed three U.S. troops on Sunday. Last week wheat closed higher in all three classes so some of the sell off was tied to risk off but could have also been profit taking. He says it’s also function of too much supply.
Livestock closed mixed Monday. Live and feeder cattle saw profit taking, says Toay, following higher weekly closes, higher cash and after hitting 50% retracement levels. There could have also been some hedge pressure.
Lean hogs had a chart breakout last week and added gains on Monday but Toay says the market is running up into significant chart resistance and so he doesn’t look for much more upside in prices.
