Grain and cotton markets end mostly lower Friday, livestock mostly higher.
Shawn Hackett, Hackett Financial Advisors, says soybeans tried to recover after the sell off Thursday and limit down closes in bean oil on the RVO rumor but still ended slightly lower on Friday.
He says soybeans will have a hard time recovering to retest the recent highs with the uncertainty regarding EPA’s proposed blending levels for bio-mass based diesel.
Corn was down again on Friday with wheat returning as an anchor.
Plus, weather continues to look favorable for the U.S. corn crop with even dry areas of the Western Corn Belt now receiving rain.
The December contract made a new low and both July and December ended lower for the week.
After three days of higher closes the winter wheat contracts broke the streak closing lower on profit taking heading into the weekend.
However, Hackett thinks that market has already put a low in.
“The market was anticipating a record crop in Kansas and was trading that when it went to contract lows but the tour didn’t find that. So we may have put in a pre-harvest low,” he says.
Cotton also had a horrible week,closing down 172 points on the July contact, and continues to move lower despite historically low acreage and the easing of China tariffs.
So are all these markets too cheap and trading too bearish relative to fundamentals?
Hackett thinks so because its too early in the growing season to think any of these crops is made.
Long term forecast call for heat and dryness to return during the middle and later portion of the growing season.
Plus, Hackett says there could be movement any day on trade deals with China or other countries.
“The grain and cotton markets are taking a show me attitude, meaning they want to see the trade deals before they buy back in, just like in the 2018-19 trade war with China.” he says.
Live and feeder cattle futures recovered on Friday along with higher cash trade.
That followed two wicked down days off of key reversals.
Even though the markets were higher to end the week, they scored bearish key weekly reversals which indicates to Hackett the highs may be in.
“I don’t care how bullish the fundamentals are there comes a time when markets just top. We threw a lot of positive news at the market this week from the border re-closing to Mexican cattle to higher cash, but the market still went down,” he explains.
