Grain and cattle futures end mostly lower on Friday and were posted lower weekly closes and bearish weekly reversals for corn and soybeans.
Is this topping action and where do the markets go from here?
Naomi Blohm, Total Farm Marketing, says she thinks the market has taken all the weather premium out. “It feels like it’s doing a warning shot just to remind us that the crop is getting planted. It’s not perfect, it’s not perfect conditions but it feels like the traders are starting to just be thinking hey, there’s rain the crop is going to grow, farmers will get it planted.”
She says the bearish weekly reversal are something that should not be ignored but the corn and soybean crops are not fully planted yet and the weather and planting condition have not been ideal. “So, there is still reason the markets can have a recovery bounce into June. There is so much weather we need to trade yet, and we have a USDA report coming up on June 12.”
While corn has passed its final planting date in the much of the U.S. the soybean final planting date is coming up quickly as well.
Plus, Blohm points out that reports indicated the Brazil crop is much smaller than USDA is accounting for with their estimate.
The grain market had a good rally in May and also ran up into chart resistance this week making them due for a correction. “We saw corn and soybeans start the week right up into resistance levels but then we didn’t have enough fresh news to get through resistance on daily charts, so we saw the profit taking correction kick in which I think at this time is just that, a correction,” according to Blohm.
Technically, she says corn prices did close below the short-term uptrend the market has been in. “However, if we can get some friendly news to emerge early next week, we can see the market have a nice recovery bounce heading into the June 12th USDA Report.”
Blohm advises producers to take advantage of any recovery bounce in the grains to do some pricing. “And be thinking about your cash marketing and how you can protect unpriced bushels as well.”
Wheat led the weather rally on global production concerns, but she thinks most of that has been priced in, including the lower Russian production. Plus, harvest pressure will start to pick up. “We again hit some chart resistance levels and the funds said Hey maybe it’s good enough, we’re going to put some profits on the books into the end of May,”
The funds have shed some of their short position in all the grains but what is their next move? Blohm thinks it will be dictated by weather, crop rating, the USDA report and what the Fed does at their next meeting with interest rates.
The cattle market had a correction this week as well and started breaking before the lower cash developed. “We hit resistance levels on the charts after the Cattle on Feed Report and couldn’t take those out, so we retraced on that too,” she says.
