Grains end mixed Tuesday with livestock mostly higher.
Kevin Duling, KD Investors, says grains started the day strong pushed by fund and technical buying, South America weather concerns, China’s stimulus package and disappointing early yields tied to late season dryness.
However, the markets gave up most of the early rally, with corn and wheat ending lower and soybeans only holding slight gains.
Duling attributes it to hedge pressure and farmer selling on the rally, which is to be expected.
He says it wasn’t the best close for corn as the December contract made a new one month high and then ran into chart resistance and reversed.
Soybeans ended slightly higher after also running into chart resistance and according to Duling are starting to look a little tired, but didn’t do any technical damage.
“We’ve had a decent move off the lows and in soybeans today we hit the $10.50 mark and that brought out some selling. The Brazilian weather that everybody’s talking about I think at the end of the day that’s more of a corn issue than a soybean issue,” he explains.
Duling doesn’t think corn and soybeans will set back much before resuming the strength as setbacks have uncovered some good demand.
Plus, he says the funds are looking for a home for their money and grains are undervalued.
Wheat also had a poor technical close, reversing after early strength but Duling is excited about that market.
He says lower prices are punishing producers but it is stimulating demand for U.S. wheat, along with a long list of global production concerns, especially the drought in the Black Sea.
“White wheat sales are almost twice of last year, Hard Red Spring wheat is a third better, Hard Red Winter is almost double of last year’s pace,” he says.
Duling adds that with lower interest rates that is bringing some money into the grains and commodity sector and he expects that to continue to be supportive.
Cattle futures end mostly higher making more new highs for the move.
While the market looks good technically and has been pushed by higher cash, Duling is a bit cautious due to the seasonal increase in supplies.
