Grain and hog markets ended mostly higher on Monday, with cattle lower.
Grains Bounce Off Support
Grain markets ended mostly higher as they bounced off chart support. For Dec corn it held $4.95 for Nov soybeans $12.75, which is the 40 day moving average and for Dec soft red winter wheat the 100 day moving average lies at $6.76 1/2 and for Dec hard red winter wheat it is at $7.28 1/2.
Don Roose of U.S. Commodities says the corn and soybean markets had been seeing liquidation since putting in their highs in September. “Corn did that on Sept. 2 when we put in a key reversal, we put in a key reversal on soybeans shortly after that. We’ve got a key reversal in wheat.”
Marking Time Ahead of the WASDE
Roose says the grain market is also holding or resetting ahead of the October WASDE.
USDA pegged quarterly corn stocks at 2.095 billion bu. a 173 million bu. increase from the final ending stocks in the September WASDE stocks report and offsets about a 2 bu. per acre yield loss.
“We’ve dialed in some negative news now with the 173 million bu. increase from last year’s ending stocks figure on corn, probably due to lower feed use. So I think where we’re at is we’ve kind of pushed down to support. We’ve kind of pushed down to an area that let’s wait and see the next card that comes out, and that’s going to be the crop report,” he says.
The market is waiting to see where USDA comes in on corn yield with estimates ranging from 173 bu. per acre to 182 bu. on up.
Roose says the market and the spreads are indicating the market is not concerned about a shortage of old crop corn.
“The Dec Mar corn spread is showing a carry and so it is not showing you have a real concern for the short supply that we’ve had a lot of people try to talk about. It’s really telling you that we have excess supplies that somebody’s going to have to carry them. And that’s what the market’s telling us today,” he says.
Grains Add Geopolitical Premium
Wheat was the leader of the complex adding some war or geopolitical premium as Russia hit Ukraine’s key Odessa port over the weekend.
“When you’re down at these levels, there is real concern for what’s happening with that Russia-Ukraine war. Both sides are intensifying. And actually, we’re at a much more critical situation than we are when the war first started. So pipelines being blown up and exports being cut back. So, yeah, I think most definitely added some risk premium to the market”
Saudi Arabia bought 683,000 metric tons of wheat which is good evidence that importers are concerned about prices going higher.
“So that’s a good sign, not only for our wheat, but the wheat around the world. Remember that drought that we had in Europe is a big deal because there’s not the grain there that can ship easy to other areas,” he adds.
End User Buying
Corn and soybean prices have also seen some end user buying on the break in prices. USDA reported flash sales of 5.1 million bu. of corn to Mexico and 3.8 million bu. to unknown destinations both for 2026-27.
Roose says this proves prices are at a level of value and that also means farmers are unlikely to sell at these prices.
He adds that historically soybeans usually bottom that first week of October and rally through the month of October.
Quality Issues Arise
Harvest is ramping up across the Midwest with drier weather but after heavy rain and flooding there are emerging quality issues with mold and sprouting.
Roose says soybean oil rallied on those concerns as it could affect the yield and quality of the oil.
This will also lower yield but that is unlikely to show up in the WASDE report.
“I’m not sure USDA is going to be able to catch that. I’m not sure they want to try and figure out what that means on a big scale. So I think they might punt and carry that down the road where we have a better idea in November.”
It is more likely to be played out in the cash market in the form of discounts, lower test weights and rejected loads.
“We’ve seen discounts already as high as 3% to 5% on soybeans just because of some issues that we’ve had. So not hearing so much on corn yet, but maybe the dryer takes care of a lot of that. This means that you should go to work and shop around more than you have in most other years,” he adds.
China Buying Surface Soon?
The other thing that weighted on the grain markets last week was the disappointment regarding the outcome of the U.S. China meeting.
China is on holiday through the end of the week but when they return could they start making ag purchases? Roose is skeptical they will do any purchases until after the October WASDE, at the earliest.
“Everybody’s looking for China to step in and buy some grain, you know, quickly, real fast. Well, you know, if you’re a card player, you would kind of wait and let the market just kind of sink in anticipation that they’re going to. So I think as we get closer to this October report, I think they’ll probably show their hand more than they did.”
Cattle Further Consolidate
Cattle futures were down for a second day after posting lower weekly closes last week. Roose says the market is consolidating awaiting new information.
He says it is possible the December live cattle futures could fall and try to fill the open gap around $217.50.
Roose thinks the beef market should find some strength with packers making some money, at over $100 a head.
“Our guess is that the multi-year tops are in on the cattle, but also this is one that just doesn’t fall apart because the numbers are there. Unless the demand really changes, it’s been one that’s been really the consumer likes the beef, actually over the pork and chicken, which is a little surprising with the economy the way it is. So if the demand stays here, we think that the market kind of pulls back up.”
After that the direction may be dictated by weather problems tied to El Nino, especially in the Southern Plains.
Cash Market Direction
Last week’s cash market was steady to weaker but Roose thinks cash cattle could be steady to $1 firmer this week.
Lean Hogs Confirm a Bottom?
Lean hog futures were up for a second day after putting in key weekly reversals last week in the December and back months.
Is the market confirming a bottom?
Roose says, “The seasonalities are quite negative, from now until the end of the year. But it might be counter seasonal because the demand might pick up a little bit. So, yeah, I would respect the key reversals.”
The funds are also short around 44 000 contracts and this could be the trigger to get them to cover more of that short position.
