Grain markets ended steady to higher on Thursday, with live cattle mixed, feeders higher and lean hogs mostly lower.
Grains Bounce Ahead of WASDE
DuWayne Bosse of Bolt Marketing says the bounce in the grain markets was mostly short covering heading into Friday’s WASDE Report.
The markets have seen heavy fund selling for most of the week pushing corn into new contract lows on favorable weather and growing yield ideas, plus trade and tariff concerns.
President Trump warned Brazil he will impose a 50% tariff on all Brazilian exports to the U.S., beginning Aug. 1 unless President Lula da Silva halts what Trump deemed a “witch hunt” trial against former President Jair Bolsonaro. Lula said the new tariffs would be met with reciprocal measures.
This comes on top of additional countries receiving letters about increased tariffs on Aug. 1, including the Philippines. Tariff letters on Monday went out to 14 countries including Japan and South Korea which face 25% tariffs.
Funds took some profits Thursday and evened up their positions ahead of the USDA report although the average trade guesses don’t indicate the market is expecting any big changes in the balance sheets.
Traders Look for Corn Ending Stocks in WASDE
Bosse says despite improving ratings, its too early for USDA to raise corn yield, but the trade is expecting a slight cut in ending stocks.
He thinks USDA may be conservative on their corn demand estimate even though an increase is warranted.
“USDA should increase demand. We had great exports this morning on corn and total exports are running nearly 30% ahead of last year. However, USDA doesn’t like to make big changes in demand this time of year,” he says.
If USDA doesn’t provide anything bullish his fear is the market will go back to trading ideal weather and higher yields.
Is Wheat Bottoming?
Wheat futures were also higher on short covering and solid weekly exports of nearly 21 million bu.
However, Bosse thinks the market may be trying to bottom with winter wheat harvest now past the 50% mark and after testing contract lows in September hard red winter wheat this week.
Trade estimates show very little change in production and ending stocks from June.
However, a bullish surprise could be possible in the form of a production cut after USDA lowered harvested acres on winter wheat 880,000 in the June Acreage Report.
Soybeans Recover After Disappointment on China Deal
Soybeans made new lows for the move before finally recovered mid-session on short covering.
However, Bosse says the market has had a rough week on tariff fears and disappointment about the lack of a deal with China.
“We gapped lower on Sunday night, some of it was weather, but also the market was expecting to get details of a China trade deal when the President was in Iowa,” he says.
Poor Close Cattle After Bullish Border News
Live and feeder cattle futures made all-time highs again early in the session with news USDA was once again shutting the border to Mexican livestock imports as another case of New World screwworm was detected just 370 miles from the U.S. border.
Additionally, President Trump is proposing 50% tariffs on Brazilian imports on Aug. 1 which will slow beef coming into the U.S. which is price positive.
While feeder cattle ended higher, nearby live cattle ended lower on profit taking and posted bearish key reversals, ending with an outside day down after hitting a contract high earlier in the session.
The action concerns Bosse but he’s not ready to call a top, especially if cash trade develops at steady to higher money this week.
Lean Hogs Mostly Lower
Lean hog futures ended mostly lower on the day with the Lean Hog Index down once again and funds exiting some of their record long position.
