Grains were higher early Tuesday, cattle lower, hogs mixed.
Grains Hit New Contract Highs
Grain markets were hitting new contract highs across the complex on Tuesday morning.
The grains were building off the technical momentum from the higher monthly closes in August, with price gains not seen since July 2012.
The question is can the market keep the momentum going?
Jamie Gieseke with Paradigm Futures says the grain charts are bullish, especially for corn. “Short term, the market two Sundays ago gapped open higher above a longer term trend line that originates back in January. It gapped up above it we haven’t gone back and retested it yet. We do suspect that the market will come back down and test it here at some point but which today if it you know if it came back down it’s probably in that $5.15 area.”
However, with crude oil higher and sharply higher soybeans, corn is getting spillover support. Corn was resilient on Monday as it was the end of the month and the market could not stay down even with some profit taking.
Bean in the Teens on Drop in Crop Ratings
Soybeans gapped higher overnight with the 2% drop in crop ratings to 58% good to excellent. Areas of the Western Corn Belt saw a substantial drop in crop ratings with Minnesota down 8% from last week, Kansas was 6% lower, South Dakota was down 1%.
“I won’t argue with the drop in bean conditions out here. August really hasn’t done a whole lot of good for crop production here in the north and in the west. You’ve got to go south and east, east of Des Moines, and run that way before people start to be pleased with their August weather. But yeah, the northwest has been suffering here all month,” he says.
China Buying as Brazil Bean Moving Higher
Howe he says another good reason why beans are moving higher is just that Brazil prices moved higher Monday while U.S. prices were flat.
“That market down there is rallying just as hard as ours is which keeps keeps the exports flowing our way,” he says.
Plus China was in the market for another 5.0 million bu. of new crop soybean business, so demand is underpinning the market.
Bean Oil Rallies on SRE Decision
Soybean oil also gapped higher overnight with EPA releasing its SRE decision after the close.
EPA approved SRE’s totaling 1.76 billion RINs and then offset those by promising to reallocate 770 million RINs to the 2026 and 2027 RVOs. So there is some certainty for the market.
Gieseke says the decision is priced in now and he want to see bean oil get back above 80 cents.
“It ripped the Band-Aid off and now the market can move forward. I mean, we’ve been talking about this since last September, last August. We’re waiting to see what the EPA would do with reallocations they decided to do the 100 reallocation from what was proposed to what was decided yesterday. So, I think the market can just primarily move forward and again soybean oil is up big but relatively speaking we’re just not expecting a huge move out of it. Maybe one more minor new high on soybean oil but again it’s the move has been made already.”
Beans in the Teens, Now What?
November soybeans were above $13 on Tuesday morning so where do they project to now?
Gieseke says, “It’s not a grandiose claim at the moment here, but $13.30 is probably your first level of resistance. Not to say that that’s the top, but very short term, that’s kind of what we’re looking at.”
Black Sea Export Disruptions Continue
The corn and wheat market were also getting some support from the Black Sea fighting with Russia attacking Ukraine’s port of Odesa and Ukraine striking various export and energy infrastructure targets.
“And I think the key is just how long is this going to last? No one can actually say how long it will. does it last long enough that it starts to hurt supply if if this gets resolved here with Turkey moving in. Turkey was part of the first deal as well but you know if they find resolution then it’s it’s not as much of a bullish catalyst as if it lasted into fall seeding,” he adds.
Corn Trading Smaller Crop
Crop ratings were unchanged on Mondays from USDA at 57% good to excellent but the corn market has been pricing in a smaller crop with this rally. How much smaller?
Gieseke says, “Going into the August WASDE, we were thinking 177 to 181. I mean, again, August weather has not actually been conducive for crop production here in the north and west. So, I mean, we are going to trim it down probably something closer to like 175 to 176 right now. The damage that’s done the last 20 days won’t show up here in the September WASDE. It’ll likely be October WASDE. We continue to see declines here.”
The weather also looks hot and dry for the next couple of weeks which is not the best for finishing the crop.
He says the crop is getting pushed at 62% dented versus 56% last year, which is not good.
Corn Chart Projection
With a higher monthly close and spot corn on the weekly continuation chart getting above $5 where do the charts project to now?
Gieseke says, “I mean, really $5.08 was the key. A monthly close above $5 kind of continues to usher in a series of higher highs, higher lows on that monthly continuation charts. We’re talking like multi-year type trends. It kind of pulls back into focus some of these longer term projections.”
On a chart those projections are closer to $6.80 longer term but he says it may take a year to get there. However, he points to the rally in soybean oil as a bellwether.
“Soybean oil was kind of that first initial ag to break out higher, made a high, came back down just like every other commodity. But then at the end of 2025, beginning of 2026, soybean oil was actually, again, that first ag commodity to really ramp up. And it actually hit that same target on the corresponding chart as the one I just mentioned on corn. So we do have some proof that these ag commodities are moving in that direction,” he says.
Iran War Driving Up Energy Prices
Another catalyst for the rally in the grain markets has been the sustained war in Iran and rising energy prices.
He says, “These wars are the triggers. But ultimately, now today we got crude oil back above $88, breaking past highs. We’re breaking past these downward trend lines.”
Diesel prices are seeing the biggest squeeze especially heading into peak demand time at harvest. He is recommending farmers get diesel booked as prices could get worse.
“We’re actually hearing from retailers that they’re sending out notices you’ve got to have a two- to three-day lead time on diesel deliveries because everyone’s tanks are low. Typically, this time of year, everyone’s just getting topped off heading into harvest, but they’re actually saying that they’re empty,” he adds.
Cattle Market Back Lower
Cattle futures had a mild end of month short covering bounce on Monday but are seeing a lack of follow through on Tuesday.
The market continues to struggle to find a bottom and Gieseke says it may stay that way until the corn market corrects.
“A 25 cent correction on corn, not much, but that would probably help cattle.”
October live cattle need to hold the previous low on the charts and to confirm a bottom will need to rally up toe $225 to $228 according to Gieseke.
“I would just say the old low is kind of a no-brainer at this point. So $209,” he explains, “And to confirm a bottom the October will need to rally up to $225 to $228.”
The futures also need the cash market to bottom and get rid of some of the back to back negative headlines.
