Grain markets ended lower on Tuesday in part due to profit taking after the rally on Monday. However, Ted Seifried, Zaner Ag Hedge, says May corn and soybeans both ran up into chart resistance at the 20-day moving average and failed.
An uptick in farmer selling also added pressure to corn and soybean prices. “There’s still a lot of unpriced old crop corn and soybeans that is remaining to be sold out there,” says Seifried.
The trade is also cautious heading into the WASDE Report on Thursday. Seifried says the market participants are concerned that USDA will continue to disappoint with conservative cuts in Brazil corn and soybean production. “USDA has been very reluctant to reduce the Brazilian production numbers even though we know they’ve had weather issues in some of the main production areas. I have a theory that on that. The reason may be that USDA has had to go back and raise soybean production for Brazil the last two year and I don’t think they want to have to do that again,” he says.
Seifried is also concerned if USDA lowers Brazilian soybean production down to the trade guess of 152 million metric tons, the agency may also lower Brazil’s soybean exports, and thus China’s soybean imports. “It’s called demand displacement,” he says. In that case, the world carryout may not see much disruption and come in around 115 mmt to 116 mmt. This could be bearish because it would come at a time when United States soybean exports are lagging by nearly 20% from last year. “The U.S. had continued to miss out on the exports we’d been hoping we would see,” he adds.
The wheat market was also a drag on corn and soybeans. May Chicago wheat hit another new contract low with more technical selling and following Paris milling wheat which has been making fresh lows as well.
The cattle market saw a recovery after the lower day on Monday. However, the market did not retest Monday’s chart resistance areas. At this point it may not without higher cash confirmation as the futures are at a premium. Seifried says the cattle market is essentially carving out a sideways trading range. “We had a big correction off the lows and while the fundamentals are still bullish, but we may just stay rangebound,” he says.
Lean hog futures ended lower with some profit taking after also hitting chart resistance. However, the cash market rally has started to slow down, and cutout values are also starting to slide, which may mean the market needs to take a breather.
