Grains were higher on Wednesday seeing a dead cat bounce. Lean hogs closed strong while cattle eased back.
Grains Bounce Wednesday
Grain futures ended higher on Wednesday as the market is finally seeing a prices stabilize after the bearish shock from the January USDA Report news. So, it all of the bearish news of the report factored into prices? Don Roose with U.S. Commodities says it may be for now as corn made new lows for the move but March held the contract low hit on Aug.12 of $4.10 and is trading above it. “Corn just got too oversold too quick. The producer is not interesting in selling and the end user is buying down at those values. So what you’re really seeing is the bull spreads are working in corn and it tells you you’re at short term value.”
Roose says the bull spreads are also working in the soybeans after the report news has been dialed in. “Not that you’ve got a positive report. It was excess supplies across the board on the crop report that we had on Monday. Bigger ending stocks on corn, wheat and soybeans. So you’ve got an anchor around you on rallies,” he explains.
Corn and Soybeans Establish New Trading Ranges
Corn futures on Monday broke out of the sideways chart pattern it had been in for months and closed lower so now the market is establishing a new trading range according to Roose. “What we think is we were basically on March Corn sitting at $4.35 to $4.55 area to the upside. And what we think we’ve done is we’ve sank down to the new trading range is let’s see if we can hit those lows of August at $4.10, but the upside looks limited to $4.35,” he says.
For soybeans the March contract is holding above the October lows but is also trading in a new range. “Something above this $10.30 on March probably there is some buying interest and user buying. But on the other side, on the upside, this $10.60 plus area is a pretty tough number to get over at the same time on March soybeans.”
Outside Markets Support Grains
The rally in crude oil back over the $60 mark with concerns about the geopolitical tensions in Iran, plus record high precious metal markets were also supportive for the grain markets. Specifically for corn, a record week of ethanol production at 1.196 million barrel also helped. Roose says, “You know I think what we had is the outside markets were commodity friendly. Like you’re saying the dollar was lower and in the late 1970s and 1980s we looked at the metal market very close for direction in the market. And of course the metal market’s on fire sharply higher again today. I think that helped. The lower dollar helped the energy a little bit. Petro grains helped.”
Best Hope for a Rally?
So is there any hope for a rally in corn? Roose says it will likely take some sort of problem in the second corn crop in Brazil but they are just starting to plant that crop as the soybeans are harvested. Argentina corn is still in the state where it can be hurt but so far the crop estimates are strong. So without a problem in South America, it will take lower corn acreage in the March 31 Prospective Plantings Report and a production concern in the U.S. to serve as a catalyst for the corn market.
Soybeans Pop on China Buying?
Soybeans also got some buying interest tied to confirmation of Chinese business as USDA reported a flash sale of 12.3 million bu. Wednesday morning. Roose says China is getting close to their 12 MMT purchase commitment which is around 440 million bu. However, he thinks after that they stop buying. . “Brazil soybeans call it 60 to 80 cents cheaper than we are. So, certainly they’re going to switch to a South America as quick as they can. My guess is that probably from February on, we go to zero almost on sales, and then we look at the summer months, and see what we have there for demand from South America or from China,” he adds.
Soybean Oil A Key Moving Foward
Soybean oil has also rallied off its lows and was up again on Wednesday as it follows crude oil. However, Roose says it is also building some hope that biofuels policy will be favorable. “There is some hope that maybe we’re going to get some answers on this biofuels program. That would be supportive sooner rather than later, particularly for biodiesel,” he remarks.
Wheat Slightly Higher Finding Fair Value
Wheat futures were slightly higher on Wednesday following corn and soybeans and with a lower dollar. However, Roose also says wheat is at a price level that is fair market value and that is why wheat held up better on the bearish report news than corn or soybeans. “When you get a negative report and you don’t make new lows. I think you have to say you’re at fair market value. So I think it’s not that we don’t have an excess supply of wheat. It’s not that we don’t have too many acres of wheat. I think it’s the fact that at this price level, it is what it is. And, something above $5 on March wheat is a fair market value.” He points out the low a few weeks ago was $5.01 and on the report March soft red winter wheat only got down to $5.07.
With Low Prices Will Acreage Go Unplanted?
The grain markets were already at multi-year lows before the report so now with the bearish supply picture and even lower prices will there be producers that decide not to plant some acres in 2026? “You probably before the report were taking about more corn and less beans due to rotation, like corn down four million bean acres up four million. Now you have to talk five million acres less corn and five million more acres of soybeans.” he says. He says there may be some acres that don’t get planted. But he thinks that’s a big if right now.
Profit Taking in Cattle?
Live and feeder cattle futures saw some lower prices with profit taking setting in after futures ran into chart resistance. “Well you know this cattle market is just kind of stalled out here. You know we’ve had these big retracement levels of 72% to 73% of the big $46 break in February live cattle. We’ve stalled out since the first of the year around this $237 area on February, cattle. I think we’re really waiting to see if we have a cyclical top on this market?” Roose says the market the key will be if the markets want to fill the chart gap areas and retest the highs.
He says the feedlots been forcing the packer to pay up on cattle and they’re losing about $200 a head so he isn’t sure the packer will push the cash market higher from here this time of year. However, he admits if the fed cash trade is higher the futures may have a shot at the old highs.
Summer Lean Hog Futures Make Contract Highs
Lean hog futures were higher Wednesday with summer months making new contract highs and are well above $100. Roose says there is technical buying that is helping to push the market but the summer months are seeing the effect of disease. “The disease issues that we have for those months. Numbers may be down. Just been a lot of issues out here.” Meanwhile, he says the nearby contracts are mature and running into chart resistance and may be stalling out.
