Grain and livestock futures ended mostly higher on Thursday.
Garrett Toay with AgTraderTalk says grain futures saw some technical buying off support areas on the charts led by the wheat market.
Traders were also preparing for the September WASDE.
Will USDA Cut Yields or Punt?
Average trade guesses indicated about a 3 bu. per acre cut is expected on corn yield at right around 186 bu. and for soybeans the estimates show a yield cut of less than 1 bu. at slightly higher than 53 bu. per acre.
Those estimates are based on dry weather to finish the crop as well as disease pressure in both corn and soybeans.
However, last year USDA chose to punt in the September WASDE on soybeans and they actually raised yield .5 bu. in the face of the driest August-September weather in nearly 40 years.
Toay says while he thinks yield is coming down, he’s not sure how much of it will show up in this report as USDA often makes very few changes in September.
If USDA Doesn’t Cut Yield Will the Market Sell Off?
With the market expecting yield cuts if USDA decides to kick the can down the road or maybe even increase corn or bean yields will the market sell off?
In August the market did not see massive selling pressure with the shock of the 188.8 bu. per acre corn yield.
So,Toay says its possible traders may disregard USDA’s print and focus more on early harvest reports which have been well under last year.
If USDA Cuts Yield Will They Cut Demand?
If USDA does make a rare cut to corn or soybean yields Toay says the agency may also decrease demand.
“In the case of corn, USDA raised demand in August and has room to make adjustments in the feed and residual category,” he says.
For soybeans, USDA has already lowered exports to levels very close to 2018-19, showing they have already accounted for lost demand to China according to Toay.
“USDA’s export estimate is only about 20 million bu. above 2018 and so they have already factored the lower China exports into the supply and demand sheets,” he says.
Is China Buying Soybeans?
The weekly export sales report did not show any new crop soybean sales to China, but there was a shipment of 67,500 MT.
Toay says this is old crop business and was likely switched from unknown destinations as it was the end of the marketing year.
He doesn’t think China is buying soybeans under the unknown destinations category either, which totals nearly 143 million bu. in the new crop category. .
Cattle Futures Continue Recovery
Cattle futures were higher on Thursday, a second day of the market trying to recover from a steep selloff and limit down moves in feeders on Tuesday.
Toay says the market has held the 40-day moving averages which is giving him some hope that the correction has run its course and prices can continue to recover.
However, he thinks there is some trading down of proteins from beef to cheaper pork and seasonally demand starts to fade after Labor Day for beef.
A little light trade was reported today in most areas, live deals in Kansas were done at mostly $238, $4 lower than last week’s weighted average. Northern dressed deals were at $373 to $378, mostly $375, steady with yesterday, but $8 lower than last week’s weighted averages.
Lean Hogs Make Contract Highs
The nearby lean hog futures scored new contract higs again Thursday on fund buying.
Toay also thinks the hogs have benefited from higher beef prices and the protein craze among consumers.
Cutouts have been holding around $115 and cash trade has been strong, which also has helped to support the rally.
