Grain and cattle markets are mostly lower early Wednesday with hog futures higher.
Corn and Soybeans Drift Ahead of WASDE
Craig Turner with StoneX says corn and soybeans are drifting ahead of the September WASDE.
There is general agreement USDA will provide yield cuts based on what farmers are seeing out in the field and from early yield results, the question is how much?
Turner says even if yield has been compromised USDA generally doesn’t make huge adjustments in the September report.
What Yield Numbers Would Move the Markets?
Currently, Turner says the market would need a 185 bu. per acre corn yield or lower in the report to get prices to respond.
That would put ending stocks closer to 1.6 billion bu. versus the 2.1 billion bu. estimated in August but he cautions that a cut in yield could result in a cut in demand.
For soybeans the market would need yield to fall below 52 bu. per acre to create a bullish response.
The key here is USDA could possibly lower demand, especially on exports.
Will USDA Lower Soybean Exports Without China in the Market?
Turner says USDA has already accounted for some of the lost export sales to China with their current export projection of 1.705 billion bu.
However, if China does some how avoid a deal with the U.S. and can make it to the next marketing year on Brazilian soybeans alone, that will limit soybean prices.
He thinks $11 soybeans will be difficult to achieve without China sales, while a deal and a rebound in business is probably the only thing that will help soybeans get back to $12 or $13.
What is Wheat’s Problem?
Wheat futures are also lower again Wednesday after the inability to extend Monday’s rally.
Lower corn and soybean prices and a stronger dollar are also a headwind for the market.
However, he thinks the biggest problem for the wheat market is the shift in acres to winter wheat pasture for cattle grazing.
Wheat prices are under the cost of production and that has them looking for other alternatives such as cattle.
Cattle Futures Break: How Far Will They Fall?
Cattle futures are seeing follow through selling after and ugly lower day Tuesday where feeder cattle ended limit down.
Some are pointing to the annual Jobs report showing 911,000 job losses as a catalyst but other are saying the break was mostly technical.
Live and feeder cattle futures broke through their respective 20 day moving averages and forced fund long liquidation and profit taking.
This may signal a top but how far will prices fall?
Turner says its hard to imagine without a big change in the cash market for feeders or fats that the futures could fall too far but at these high levels it could fall farther than hoped before finding support.
