Grains higher, livestock lower early Thursday.
Grains Higher Led by Wheat on Drought Concerns
Grains are higher early Thursday led by wheat.
DuWayne Bosse with Bolt Marketing says funds are buying and covering short positions due to expanded drought in hard red winter wheat country on Thursday’s U.S. Drought Monitor and the lower crop conditions.
“Yeah, it is definitely all about the weather. Supply and demand-wise, you don’t have a great story in wheat, but you keep watching it. It’s a hard red winter wheat you know story is what it is. There’s this wall of rain that happens on the Eastern side of the Southern Plains and on the West
where a lot of the production has been very dry and the market’s starting to realize like wow, this isn’t just a air quotes talk story anymore. Like there’s really some production losses happening. A lot of fields will go unharvested. So now the market’s job is trying to figure out how low that production is going to be. And boy, that’s a hard job for the market to figure out.”
However Kansas City or HRW wheat is sharply higher and getting close to contract highs try to make that calculation he says.
March Highs Important in Wheat
Technically the wheat market needs to take out the March highs to keep the rally going according to Bosse.
“Yeah, that would sure be nice. Otherwise, it just looks like another failed attempt at those highs. And when I look at Chicago and Minneapolis, especially Minneapolis, let me talk about that. I’m in spring wheat area up here. I feel like, guys, we don’t have a shortage of supply. Now, we are expected to have less acres this year, but rally to $6.90 for new crop Minneapolis wheat feels like an area we need to be hedging.”
Spring wheat is concerned about not getting acres planted with the uncooperative weather forecast for the Northern Plains and historically low planting intentions.
Corn Following Wheat?
Corn was strong on its own yesterday but started off lower on Thursday morning and then bounced.
Exports were at 55.2 mb by were no runaway, so is the market following the rally in wheat?
Bosse says, “I think the funds are back in buying the corn market, and I’m excited about that. After kind of a month of a downward trend in corn and me being kind of annoyed because I’m a little friendly to the market, thinking that there’s a fertilizer story, there’s less acre story, there’s bullish stories that should rally this market. There was a war going on, Michelle, that actually rallied the energies, and corn really, to me, never did participate in that, really, the way it should have. So I’m excited to see the funds finally step back in. It’s hard to know when and why they do their things, but the last two days, I’m just talking, just watching the trade action. It just felt like they were coming back in that market.”
Corn Losing Acres?
So is corn losing acres due to higher fertilizer prices and availability? Or even weather?
Bosse says that is an evolving story. “There’s a story out there, and I think that story will probably get pretty loud here that fertilizer availabilities price will probably lose some acres. And I think that’s what we trade in the short term. But I think longer term, I think those acres do get planted.”
However that is because he thinks USDA was too low on the total principal crop acres on the March 31st planting intentions report.
“I think there could be three or four million acres out there as long as prevent plant doesn’t get bad this year. So honestly, come June 30th, I’m maybe on an island saying this, but I wouldn’t be shocked if corn acres are up a little bit. But that’s down the road. That’s June 30th. Here in the short term, I think we’re going to get a story about, you know, our farmers going to plant that much corn or not.”
Soybeans Extend Gains
Soybeans opened lower on Thursday with a marking year low export figure of only 9.1 million bu. but then bounced back.
Soybeans have been trading sideways but rallied Wednesday on optimism about an end to the Iran war and optimism about the mid-May meeting in China after President Trump posted a positive note on Truth Social.
“I think yesterday the rally we had was really all about Trump’s post about how when he meets President Xi out of China next month, he’s going to give him a big fat hug because he’s so happy with us right now. We’ve opened the Strait of Hormuz. Soybeans often just took off then. Because I think they think, well, if China’s happy with us, then maybe they’ll buy those old crop bushels that we’ve been promised or talked about for so long. So I think that’s what they traded yesterday.”
Crush Margins Near Record
The other supportive factor is that crush margins are near $3 a bushel so processors are making money allowing them to bid up for soybeans especially as farmers are busy in the fields.
“I think soybean oil, I figured that probably made a high when crude oil made a high, right? I think that market will come down. But it’s been really impressive. And something I’ve been concerned about is now we’re going to have the oil demand for soybean oil but what do we do with
all the extra meal well the answer is we have to export it.”
That demand for the products is helping hold up soybeans.
Technically Soybeans Negate Reversal
Technically the November soybeans have negated the reversal on Monday but old crop soybeans have not.
He explains, “November beans continue to look strong and they should you know a little bit of weather premium are we going to get all the crop planted you know we do that this time of year but no July is actually quite a ways from negating that key reversal. I think that reversal if that holds this week it’s going to look kind of ugly for old crop.”
Market Acts Like War is Over
President Trump says the Iran war is nearly over and there are plans for a second round of peace talks and the reopening of the Strait of Hormuz is gradually underway.
Outside markets are already acting like the war is over says Bosse.
“I think he went in there thinking this was going to be a three- or four-day war and found out it’s not. And when it comes to people, like the regime, the old regime that’s in Iran, like you never really win. They will fight till the bitter end. And I think Trump wants out because I think
he didn’t like seeing the stock market go lower and he didn’t like high fuel prices. And bang, that didn’t take long. And the stock market made new highs yesterday. So I think for the most part, it’s over.”
However, he thinks it will take a while to normalize the markets.
“Do I think crude oil is going back to $55? Absolutely not. I think we found good support just about $85 yesterday. I think we have high fuel prices all summer and that might put some pressure on some of our other markets like livestock here too. Well, just because you open the
Strait of Hormuz, you don’t get oil production back up to normal levels here for a while.”
So fuel and fertilizer prices could stay higher for longer due to the damage from the Iran war.
Cattle Correct
Live and feeder cattle futures are lower seeing continued profit taking off the new contract highs scored on Tuesday.
Some of the selloff was positioning ahead of the USDA Cattle on Feed Report.
Additionally there were some stories posted on social media that could have triggered the selloff, including a Mexican official saying the border was going to reopen. That was followed by a USDA post that said that story was false.
“There was a screw worm casev close to the border and it is funny how when Mexico gets a screw worm case it’s it’s bullish for us but as it gets closer to the border I think more people are getting nervous this is eventually going to cross the border and we’re going to have a problem. There was also some talk of getting that border reopened but as you and I have talked when they do open it, it’s not going to be a floodgate. They’re going to open it from west to east and it’ll be Arizona first. It won’t be this flood of cattle. But I think hearing some people from Mexico say that that border is going to be opening soon, maybe had a negative turn on the feeder cattle market and maybe the live cattle today.”
However, he says the market is also overbought.
Higher Cash Leads the Market Back Higher
The correction may be healthy and to be expected going into a report but if cash trade is higher again this week the market could shoot back up into contract highs he says.
“Last week was kind of interesting. The higher cash cattle trade popped the market, obviously. Future’s kind of anticipating it. But we didn’t have a lot of trade. Packers’ profit margins have gone deep in the red. And I know everyone out there goes, I don’t care if packers are losing money. Oh, you do. I mean, the more money they make, at least they try to pass it on a little bit, or at least they’re more willing to buy the cattle. This week, I don’t know if they have much of a choice. I think the inventory is really short. Everyone’s kind of talked about this production hole
we have, right? The yearlings have been fed out and killed, and we don’t quite have that new crop of calves coming in yet. So they might just have to pay up this week. But I am watching boxed beef closely, Michelle. I feel like that price, you know, about $20 off the highs, does need to get back up there to help packers keep hiring the cash price.”
New Lows on Hogs
Lean hogs are also lower with cattle and making new lows for the move again, the 8th straight day down.
The market took out some key support but will it find some stability soon?
“I’ve seen cash and cutouts starting to come back a little bit, Michelle. So I feel like we should find support here. Not to mention this cattle hog spread is just historically wide. I would think there’d be some old school spreaders that would want to jump back in on this and demand will
be good for pork this summer too. But I think it is interesting to point out that in the rest of the world, you know, we’re actually fairly high priced in pork here. So there’s just a lot of production in the world right now. So we don’t have to go higher, but I do think with our cash
market going higher, we should find support soon.”
