Grains were mixed to lower on Thursday with cattle lower.
Grains Drift on Lack of News, Weather Threat
Grain markets started mixed Thursday and then started drifting lower with a lack of news to provide direction.
Allison Thompson with The Money Farm says corn and soybeans took out weather premium the last couple of sessions with more favorable weather and in reaction to private yield forecasts.
She thinks most of the news is worked into the market or at least its close.
“I think we’re getting to be in the timeframe where we could see a bounce on the grains. I think production is obviously going to be the big
question we’re going to be facing for a couple months until we get into harvest.”
A Repeat of 2025?
She says the market is in the same type of pattern as last year.
“We saw grains kind of fall down, put lows in early August. And then once that was through and we got through that August USDA report, we did see the market kind of come back and we actually rallied going into harvest last year. And I think the worst case scenario, especially as far as production goes, I mean, we’ve already seen it.”
She says the season started with big production estimates so any movement down with the weather over the last month put those yields into question.
Private Estimates Too Ambitious?
Several private firms are out with their yield estimates heading into the Aug. 12 WASDE and there is pretty good agreement for trend line yield on soybeans and above trend line on corn.
Thompson thinks they are too high. “There’s obviously good areas and bad areas. I’m sitting in a very dry area up here in the Red River Valley, and we’ve been extremely dry. But I also know there’s other areas of the U.S. that are experiencing dryness, too. I mean, you can go into Western North Dakota and even in Northwest Iowa are still sitting pretty dry. So I think I think arguably I think some. Some of the top is taken off from trend line yields.
So she thinks yield estimates could come down going into harvest.
What Will USDA Do?
The key is what will USDA do? Thompson points out the agency has been cautious on making friendly estimates too early.
“So we could end up waiting until we get into the January report before we actually see some of those yields come down.”
So the market may quietly chop the next few days until the report especially with the lack of any new bullish news.
“It’s been very quiet on the news front. And we’ve kind of separated ourselves from the Middle East conflict. I mean, wheat’s still kind of
hanging on here, basically just because of the Russia-Ukraine thing and what’s going to happen with supply there.”
Soybeans Fade China Biz
Soybeans did get some news with a flash sale of 4.5 million bushels of new crop business to China. However, it failed to rally the market as there was talk Wednesday of 12 to 15 cargoes being bought by China.
Thompson says this has failed to get the market to rally because the market is overwhelmed by the more favorable weather.
“Well, I think the weather news is obviously the bigger ticket item here. I mean, August is the key month for soybeans and we’re not
seeing the same pressure, heat-wise, and things like that that we saw in July on the bean side. So I think it’s more of a production pullback on that end. I mean, we’re just really not sure where production is going to hit. I mean, it could be higher. We could still get a big yield.”
Demand has been consistent from China, which is good but now the market is trying to figure out if those will offset each other before it breaks one way or the other Thompson adds.
Corn and Soybeans Hold Support
In the meantime, corn and soybeans area holding good support. Nov soybeans have held the 100 day moving average and corn has held Monday’s lows.
“We’ve gone down and tested them. So far, we’re holding early week lows. I think that’s going to be key. And also, like even in the market today, I mean, we pulled back to those areas, retested those lows yesterday, and we saw China come in. So we are seeing buying happen on these pullbacks. And ultimately, that is supportive. And the funds are still. long. I mean, even last week, despite the pullback as of last Tuesday, they were still long and adding to position. So I think if as long as we see the funds continue to add to their longs or stay along the market on these pullbacks is going to be key.”
Wheat Fades Black Sea Export Troubles
The fighting has escalated the last few days between Russia and Ukraine effectively keeping grain movement out of the Black Sea region at a halt. However, the market has not been responding to the news.
Thompson says it’s become old news to an extent, at least price wise.
“You know, Russia has lowered their prices because of this. But they’re also adding on costs because of insurance, freight. Obviously, it’s kind of a hot area right now. So they have gotten expensive on the world market. So yes, our futures should see a spark in demand. So we have gone up, but we’re seeing it pull back because we can only go so far and still remain competitive on the global market,” she explains.
The other problem is the U.S. is not picking up export business as a result and only saw a 10.9 million bu. weekly export total Thursday morning.
Thompson says historically in the global market this is the time when sales start to pick up as harvest wraps up, so the market is waiting to see if export sales start to pace as normal.
Spring Wheat Harvest Proceeds
Spring wheat is seeing simple harvest pressure, which is coming early because of the dryness.
Early results have shown lower yields but higher quality including protein, but there is variability.
“I’ve been hearing yields all over the board from 20 bushels an acre to 70 bushels an acre. So it’ll be interesting to see where they average out. Proteins have been high, but that’s kind of as expected when we had the dry conditions here that we’re probably going to have some higher protein,” but she says it is still early with more reports to come.
Cattle Stall
The cattle futures got above the 200-day moving averages the last couple of days with the help of higher cash and the move to new highs in the stock market.
However, Thursday futures were stalling out hitting the next level of chart resistance according to Thompson.
“We were printing near three-week highs on some of the contracts yesterday. So I think it’s just a good, I think it’s just technical. In all reality, we’re starting to see the fundamentals kind of come back into the picture, which ultimately do remain supportive. So it should help the market continue to go.”
But she thinks the pause is healthy and with the economic reports this week not feeding the inflation and higher interest rate bulls that is also boding well for consumer confidence in the economy, which should support beef demand.
