Grain markets ended higher on Wednesday as well as cattle with only hogs lower on the day.
Grain Markets Surge on Money Flow
Grains markets ended higher across the complex, driven mostly by money flow according to Dave Chatterton with Strategic Farm Marketing. He says the ICE U.S. Dollar Index earlier this week dropped to a four-year low when President Trump said he was comfortable with the depreciation of the U.S. dollar because it is good for U.S. businesses. That attracted some fund and speculative buying to the grain markets he says. “That’s a very big change from the previous policy, but it seemed to catch the attention of the trade here and we saw that translated into a number of commodities on Wednesday, not just the grain complex, but notable fund buying in the grains with, you know, very little underlying change in the fundamentals. So, it’s nice to see that money flow pick up.”
Bessent, speaking in an interview with CNBC Wednesday, said “the U.S. always has a strong dollar policy.” He also said the U.S. was “absolutely not” intervening in the Japanese currency market, rejecting speculation that had been building since Friday. He says comments by U.S. Treasury Secretary Scott Bessent saying the Trump administration supports a stronger U.S. currency helped provide some stabilization.
Will the Funds Continue to Buy?
The grains saw the start of a chart breakout with March soybean futures closing above the 200-day moving average and March corn ended above the 100-day moving average. So will this attract an additional fund buying? Chatterton says, “The is the million dollar question.”
FOMC Meeting Concludes With No Rate Change
The FOMC meeting concluded on Wednesday with no change in interest rates. Chatterton says while that was expected the market was watching for any sign of change in Fed Chairman Powell’s stance. Powell says inflation remains somewhat elevated but the overall tone seems to suggest a longer pause verses easing rates.
Did Biofuels News Help Push the Grain Markets?
President Trump also threw his support behind year-round E15 while speaking in Iowa on Tuesday and said he had directed Senate Majority Leader John Thune and House Speaker Mike Johnson to come up with compromise legislation and get the bill passed in Congress so he could immediately sign it. While being able to sell E15 across the U.S. during the summer months would be helpful, Chatterton says this is not a mandate, it is voluntary. “A mandatory E15 push might be worth 2.5 billion bu., a less voluntary push probably something more in the 200 to 350 million bu.-per-year range,” he explains.
Meanwhile, hope of more certainty for biofuels policy is supportive for soybeans and bean oil according to Chatterton. The Office of Management and Budget has finalized the 45Z proposal and opened it for comment. The details could be released any day now. Plus, EPA has finished the comment period on the Renewable Volume Obligations and should provide blending volumes by late February to early March.
Weather Concerns?
Hot and dry conditions continue in areas of Central and Southern Argentina and far Southern Brazil. So is the corn or soybean market adding any risk premium as a result? Chatterton says, “There’s not much weather premium in this market because it’s being outweighed by the strength of the crop in the rest of Brazil.” While there have been some private forecasts lowering the Argentina crops those have been more than offset by the Brazilian production estimates which continue to rise. The latest from Safras y Mercado put the Brazil soybean crop at a record 183.8 MMT.
Meanwhile, another Arctic blast is predicted for winter wheat areas in the U.S. lending to some concerns about winter kill in areas that did not receive snow cover. Chatterton says the areas are small and so it won’t have much of a market impact and added that its difficult to assess damage to the crop until it breaks dormancy. So, he is chalking up the rally in wheat on Wednesday to fund short covering and U.S. wheat prices are running at a $130 per ton premium to the rest of the world which will make the U.S. no longer competitive.
Cattle Rebound Ahead of Report, Cash News
Live cattle futures saw some early pressure and profit taking but still have been unable to take out the January highs on the charts basis April. However, the March feeder cattle broke above resistance and made new highs for the move. Chatterton says the market is positioning ahead of the USDA Cattle Inventory report and this week’s cash trade. Cash news has been light and may wait until after the report but with higher bids this week there is hope for higher cash sales. The cold weather has also been supportive for the market as it is lowering performance and trimming the record heavy carcass weights. Still, he thinks the live cattle market will need a bullish report that does not indicate herd rebuilding to break out of the current trading range.
Lean Hogs See Profit Taking
Lean hog futures set back on profit taking after hitting new contract highs in the April and many other months on Tuesday. He says the funds have been long in the hog market and likely needed to take a break from buying. The cash trade has been advancing though so the rally may be able to resume.
