Grain markets are higher early Wednesday, with livestock mostly lower.
Corn Tries to Recover
Allison Thompson withThe Money Farm says some of recovery in corn is a technical bounce off of new contract lows in both old and new crop contracts on Tuesday.
She thinks the corn market has also been getting ahead of itself and is too bearish on yield.
With favorable weather and the strong crop conditions at 73% good to excellent the market may be pushing yield above USDA’s 181 bpa trend line number.
She points out that the USDA Acreage Report actually showed around 125,000 less corn acres and the loss was in some of the bigger production states like Illinois, which was down 100,000 from the March intentions.
The increases came in fringe states like North Dakota and South Dakota, which was up 100,000 acres but these are traditionally places that have a tough time achieving above trendline yields.
Soybeans Follow Bean Oil
Soybeans are following bean oil again Wednesday morning still trying to price in the potential for increased demand for bean oil as a feed stock for biofuels.
It’s tied to the tax incentives that will be included in the 45Z program as part of the budget reconciliation bill and the exclusion to only North American feed stock.
Thompson says bean oil is also getting a push from USDA’s Fats & Oils report for May which showed a record 203.7 million bu. of soybeans crushed. Plus, bean oil stocks were the lowest for the month of May since 2015.
However, she says soybeans have some work to do technically after the damage done last week on the charts and need to close first about the 100-day moving average of $10.30.
Wheat Extends Gains
Wheat is higher for a second day on short covering but Thompson says the market is also adding some weather premium.
Storms that hit the Dakotas and Minnesota recently have take out some of the hard red spring wheat crop and there are also quality issues surfacing with the hard red winter wheat crop due to excessive moisture.
Thompson also attributes the strength to the 3-year lows in the U.S. dollar index which is making U.S. wheat more competitive.
“I will be watching the weekly exports closely to see if this is stimulating demand,” she says.
Thompson also explained that spring wheat acres are at a 55 year low as confirmed in the Acreage Report, at 10.1 million acres.
Change in Hard Red Spring Wheat Contracts
The CME Group has added their own spring wheat contract which is causing confusion for those trading and using the board for risk management.
Thompson says the contract specifications are different than the MIAX exchange spring wheat contracts as well.
The MIAX is a higher quality wheat spec, while the CME contract is lower quality which is causing confusion.
Overall, she says the change is not favorable for producers, especially with the market already so illiquid.
