The grain markets sunk to new lows again Thursday with relentless selling by the funds.
While grains may have been digesting the bearish USDA Ag Outlook forecasts, Darin Newsom, Senior Market Analyst for Barchart, says the markets have been signaling rising supplies for weeks. “What we saw today was simply just an extension of the trends that we’ve been in since the spring of 2022. There wasn’t anything dramatic, there wasn’t any earth shattering news in these made up numbers,” he adds.
Newsom says the funds are fully in control and for them it’s a money game. “The biggest thing that we’ve got going on right now is that funds simply have no fear of continuing to add to their net short positions,” he says.
March corn, which is going to go into delivery soon, made contract lows again taking out support at $4.20 and closed below that level. The May corn contract tested $4.30 support. Minneapolis and Kansas City wheat also made new contract lows.
Newsom thinks there’s still more downside risk in soybeans and March soybeans may be on their way to taking out the May 2023 low of $11.45 ¾ on the futures and there is also more room to go down in the cash market. “If we look at the cash index on a monthly chart. If we go back to April, it completed a head and shoulders top. When we got that close it projected a low month close of $10.25,” he explains.
So, is there anything that can bottom the grain markets? Newsom isn’t optimistic at this point. “I don’t see anything fundamentally that will stop this market from going down. I don’t see an uptick in demand that is going to change the market.”
He thinks the only hope for a trend change is a contra seasonal move in the U.S. stock indexes which usually trend lower in February and March. “But if they start extending their long term uptrends again that could move some money away from the short side of commodities as funds look for other markets that have more potential,” he adds.
The stock indices also rebounded for a second day after Tuesday’s selloff on hot inflation numbers and he is closing watching to see if the DJIA and S&P chart their normal seasonals. “If we don’t get that sell off it tells us that there is something that is fundamentally different and there is more money coming into the U.S. stock indexes than we normally see.”
Crude oil also had a nice rally and Newsom says this is the time of year the energy sector moves higher seasonally. However, he says the markets are seeing some strong commercial buying but are also staging a chart breakout. “Hopefully you have diesel fuel locked in because it looks like it could go higher here,” he says.
Cattle rallied after digesting lower cash trade of $182 in the south, down $2. However, northern trade also developed Thursday at $180, and dressed prices at $287-$288, steady to $1 lower.
