Grains were lower early Tuesday, cattle mixed.
Grains Fall on Weather
Grain markets could not extend Monday’s gains and strong chart action including the reversal in December corn.
Mark Knight with Farmer’s Keeper Financial says the grains were seeing profit taking early Tuesday after hitting chart resistance.
However, the big story headlines were again war and weather.
Grains were removing war premium and the dip in crude oil down to the mid-$70s, with talk of peace negotiations continuing with Iran.
However, Knight says weather was the biggest weight on the market.
“From the grain standpoint, the weather has just lightened up. We do have some heat coming, but we’ve got some timely rains coming as well, and we are just sucking weather premium out today.”
Crop Ratings Below Last Year
The selloff comes despite disappointing crop ratings at only 61% on corn nationally, down 2% from last week and down 12% from last year. The biggest drop came in North Dakota which saw corn ratings fall 13% to 37% good to excellent.
North Dakota was one of the areas that was largely missed by the rain system late last week.
Knight thinks the Western Corn Belt is pulling down the East in regards to yield.
“Last year, the West had a really great year, a really great crop. Historically, especially from a corn standpoint, they’re normally a big draw on yield for the nation. And it looks like that’s going to be the case again. The Dakotas have really missed a lot of rains. They’ve had a ton of heat. And I’m not sure there’s a lot of yield potential coming back to those types of areas. Nebraska, Kansas, similar situations,” he explains.
However, the East looks better with ratings in line with last year.
Corn Yield Falling?
Still with ratings for corn well under last year can the U.S. achieve a 183 bu. trend line yield?
Knight says, “There’s definitely been some damage done. From here, it’s going to be interesting. We’ve got the first big yield report is going to be next week.”
USDA will use satellite data, crop ratings and farmer surveys he says.
“Everything I’ve seen, most of this report will be satellite driven. And so the 183 number that we’re kind of working on from a trend line yield is really ballpark of what most of the satellite companies are kind of coming up with at this point,” he adds.
And when compared to last year’s 186.5 bu. per acre record corn yield, the 183 may be doable.
“I would kind of put that that would be my top end right now with the crop ratings weaker. I don’t think we’re in a better situation by any means,” he adds.
Soybean Yield?
What about soybean yield? The crop ratings nationally stand at 63% good to excellent, which is somewhat closer to being in line with the five-year average, but still down 6% from last year.
So will the 53 bu. per acre trend line yield be possible?
He says, “I think that trend line is going to be very top if we finish perfectly. So, you know, I would tend to tilt a little bit lower than that for sure.”
Demand Robust for Soybeans
Soybean growers planted more acres but with demand picking up that is easily offset.
“China’s been in here buying. So at some point down, I mean, I don’t know that there’s a ton of risk down below these markets. China’s been stepping in pretty regularly the last week or week and a half, and crush is really strong,” he says.
So he thinks the market will be well supported on the breaks as China will come in to purchase cheaper U.S. beans.
uh so yes today feels feels bad but uh you know the weather the
Technical Support
Knight says soybeans have good technical support in the November contract at $11.70 to $11.75.
“I’d love to see that area hold beyond that you’re probably looking down to the mid-$1150s and then the lows that we just hit, call it around $11.30.”
December corn bounced off the 50% retracement level Monday on the December corn and scored a nice reversal. Yesterday’s low is around $4.58.
Knight says, “We’re trading right around the 200 day as well we’re above the 50 day,” he explains.
Corn just like soybeans will be well supported by stronger demand on the pullbacks he adds.
Wheat Falls Despite Black Sea Export Problems
Wheat futures were following the rest of the grain complex on Tuesday and seeing pressure from lower crude oil and the easing of war tensions with Iran.
However, the wheat export situation in the Black Sea has not improved and yet the market is fading that fact.
Knight thinks the market may have it wrong and wheat should be leading prices higher.
“I mean, if you look at what Russia and Ukraine have done to each other the last three or four weeks, I mean, the market seems to be focused today with, you know, in general with weather and maybe this Iran war kind of finishing up. But man, the Russian-Ukraine situation, they have been targeting each other’s ships and ports as of late. That creates real issues.”
Spring wheat was also down with better than expected crop conditions at 55%, which was up 2% from the previous week.
South Dakota had a 16% jump which offset a 6% drop in North Dakota.
Cattle Struggle at Resistance
The cattle market had a huge recovery off last week’s border reopening lows but ran into chart resistance on Monday and again early Tuesday.
Knight says the October live cattle and September feeder cattle both got stopped out at the 200-day moving average.
“This last week, we kind of bounced off some lows. We hit our first technical spot yesterday, bouncing off the 200-day moving average.”
However, he says the cattle markets from a long-term standpoint, because of supply-demand issues, should be well supported especially after the sizable break. However, prices are still high.
“So, there’s risk to both sides of this thing we’re not that much above where we just put in a bottom. Hopefully that holds but you know there may be some more profit taking along the way here. Funds are extremely long and you know if we go down and retest those lows again you see more more more uh more money coming out of that length.”
Cash trade was firmer last week with the five area weighted average at $233.06, up $2.58 from the previous week. However, it was on only 36,000 head of negotiated cattle.
And Knight says boxed beef needs to continue to respond to the light slaughter figures. Choice was up $5.35 on yesterday’s close.
