Grain markets are higher again Thursday morning. Cattle started higher and then turned mixed with hogs mostly higher.
Grains Make New Highs for the Move on Money Flow
Grain futures are higher to start Thursday seeing follow through buying with wheat even pushing to new highs for the move. Alan Brugler with A&E Economics, Inc. says the buying interest by the managed money or funds is tied to money flow into the grains. He says with the dollar index at four-year lows and precious metals at all time highs there are some money managers that are looking at the grains as under valued.
Lower Dollar Also Stimulates Export Business
The lower dollar and the price break in grains after the January WASDE report have also stimulated good end-user demand Brugler notes. He says last week was an outstanding week for exports, especially corn and while export sales were below last week they were still solid. For the week ended Jan. 22, corn exports came in at 65 million bu. with soybeans at 30.1 million bu. and China had solid soybean export shipments. Soy products were also strong with soybean meal sales at 464,300 MT and soybean oil at 22,100 MT. Wheat exports were also solid at 20.5 million bu.
Will the Funds Keep Buying and Change the Trend in Grains?
The question now is with corn, soybeans and wheat on the verge of chart breakouts will the funds continue to buy? Brugler says he’s watching key chart points in grains. For example, in the March corn a close above the 40-day moving average of $4.38 will be needed to keep the momentum intact. March soybeans cleared the 200-day moving average, but the next obstacle will be the 100-day at $10.82 1/2 for a closing price and for November soybeans the market has confirmed a double bottom but again is running into chart resistance.
Wheat Seeing Short Covering
Brugler says the wheat market is seeing short covering as funds were short more than 125,000 contract in the three classes combined (futures only). March soft red winter wheat is above the 100-day moving average but is also approaching resistance at the 200-day at $5.56. A close above that level is needed to get the funds to exit more of that short position.
Weather or Biofuels News?
So are the grain markets putting in any weather premium especially with concerns about Argentina’s hot and dry conditions? Brugler says the Brazilian crop estimates continue to climb and that will offset any losses in Argentina so he doesn’t think the market is that concerned yet. And he doesn’t think the wheat markte is adding weather premium based on the cold temperatures recently or in the extended forecast.
Biofuels news has been more supportive lately regarding E15, the RVOs and 45Z guidance being released but Brugler says those are longer term demand stories for the market.
Cattle Make News Highs for the Move Then Pause
Both live and feeder cattle futures opened higher and scored new highs for the move but then paused and the live cattle even saw some consolidation. Brugler says the market is waiting for cash and the semi-annual cattle inventory report from USDA on Friday before moving much higher. However, he thinks the market will eventually retest the October all-time highs.
Lean Hogs Mostly Higher, See Great Exports
Lean hog futures were back up on Thursday after seeing some profit taking on Wednesday. The futures have been continuing to be bought on breaks and April through the deferred contracts have repeatedly made new contract highs. Brugler says its a combination of fund buying, talk of disease and strong demand. Weekly pork exports were strong at 56,000 MT and China was in for nearly 16,000 MT of those sales. The rising cash index has been helping as well and was up another $.79 to $85.22.
