Grains ended lower on Monday with livestock mixed.
Mark Schultz, Northstar Commodity, says wheat led the losses taking out weather premium with rain forecasted for parts of the Black Sea region and U.S. Southern Plains.
“I would say weather was probably 100% of it at this point. We went home on Friday with a drier trend in far Eastern Europe and the Ukraine, Russia was still on the dry side and expected to stay that way and they ended up with some very good moisture and even flooding in some areas. So, it was a drought buster and it is coming in a timely fashion,” he explains.
Wheat also had a nearly 80 to 85 cent rally off the lows and Soft Red Spring wheat could not get through technical resistance on the charts at around $6.00 on December Chicago wheat, so some profit taking set in.
The lower wheat market weighed on corn but it too saw some light profit taking and consolidation after a higher week last week.
“You’re going to run into resistance on December corn $4.20 to $4.25 area,” he says.
Some early harvest pressure may have also weighed on corn as well as soybeans as the dry weather has caused the crop to dry down fast.
Soybeans tried to rally early in the session on export business as unknown destinations bought another 4.85 million bushels of soybeans.
However, the market continues to run into chart resistance and early harvest pressure.
Schultz is keeping an eye on the drought conditions in Brazil but thinks its too early for soybeans to put in South American weather premium.
The Commitment of Traders Report continues to show funds are liquidating their short position in the grain markets.
“I think the tone of the market has changed from sell the rallies to buy the dips,” he says.
Live cattle had a disappointing day as the futures set back despite higher cash last week and higher boxed beef values at noon.
“Cash is king so that is a little disappointing but we are still fine,” he says.
The December contract again had a technical rejection and, according to Schultz, need to take out the $180 level to continue to move higher.
Part of our problem is weights are 38 pounds higher than a year ago and we are seeing a big increase in imports.
Lean hog futures managed to bounce with stronger cutouts at noon and despite lower cash.
However, Schultz says that market has been choppy and sideways but seasonally numbers start to climb through October.
“Here again hog weights are 5 pounds higher than a year ago and that’s like having another 23,000 head a week to slaughter,” he says.
Those factors will be headwinds for the market.
