Grain markets ended higher Monday on short covering and corrective buying.
Shawn Hackett, Hackett Financial Advisors, says it’s a dead cat bounce and nothing more than the market correcting its oversold status. He says he hasn’t seen a technical confirmation of a trend change.
So, what is he looking for on the charts? “Basis the July contracts I need to see a weekly close in corn above $4.50, for soybeans $12.00 and for Chicago wheat above $6.00. Until then I am suspect that the rally can hold.” Plus, he believes farmers and fund traders will sell on strength making rallies difficult to sustain.
News reports of China buying corn, sorghum and barley were also psychologically supportive, but Hackett says they are buying corn from Ukraine, and he doesn’t see them buying from the U.S. Plus, he says China’s prices are not indicating they need to buy for reserves. “Until I see corn, soybeans and especially meal prices rising in China I don’t think we have evidence of further buying,” he says.
Funds did decrease their short position in corn by about 40,000 contracts last week so Hackett says they may be done selling but they added to their short position in soybeans are now record short. But do they want to be short is all the grains going into the U.S. planting season? It is unusual according to Hackett but he doesn’t see any news bullish enough yet to get them to buy those positions back, yet.
China is also buying Brazil soybeans with their harvest progressing. Hackett thinks USDA and Conab will confirm a smaller Brazil soybean and corn crop in their reports this week, but the cuts may not be big enough to spur China to buy from the U.S.
Hackett says; however, other end users are finding value in U.S. corn and soybean prices. The evidence is improved export inspections on Monday and 4.3 million bushels of export business to Taiwan and another flash sale of 126,000 metric tons of meal to unknown destinations split between old and new crop.
Wheat may be the exception as Russia and Ukraine prices have continued to pull Paris milling wheat lower. Before reversing on Monday May Chicago wheat hit new contract lows again. Hackett says until European wheat prices find a solid bottom it will just serve as an anchor on U.S. wheat prices and in turn row crops.
May cotton saw profit taking and farmer selling again Monday after crossing the $1.00-mark last week on tight supplies and fund buying. Meanwhile, new crop December closed higher. Hackett thinks with December futures closing in on 85-cents it is likely attracting some acres.
Cattle futures were lower with profit taking in live cattle after a slightly higher week and some spillover from lower feeder cattle futures. Higher corn and meal prices may have been a factor but Hackett thinks Choice boxed beef prices are getting too high at around $306 and that may be causing some consumer caution.
