Grains are all lower early Wednesday as well as cattle, with hogs higher.
Grains Lower Despite More China Soybean Buys
Grains are all in the red early Wednesday despite a USDA reporting a flash sale of 12.1 million bu. (330,000 MT) of soybeans sold to China for 2025-26.
Kevin Duling with KD Investors says this additional six cargoes was part of the rumored business earlier in the week and has already been priced into the market. Plus after a $1.50 rally in the soybean market it looks like the funds are taking some profits off the table. How far will the market correct? Duling says funds usually liquidate in three day waves so the market could see another day lower before some traders re-establish positions. He also believes there has been some farmer selling up at these levels to reward the market. Plus, the dollar is strong which is also adding some pressure to grains.
Bulls Need to be Fed
Duling says bull markets need to be fed daily and so the trade will be looking for additional sales to China beyond what has already been reported to move beyond Tuesday’s highs in the soybean market. The January contract hit levels not seen for 17 months.
More China Sales?
He says the 20 cargoes of soybeans that China has purchased so far were at prices well above Brazil’s current price and so he thinks the Chinese were also buying futures positions ahead of the sales to capitalize on the market rally and offset those higher cash prices. The timing of the rest of the 12 MMT or 441 million bu. of China soybean sales is up in the air but so far China has bought around 50 million bu. of soybeans, so they have a long ways to go to meet their commitments.
Corn Sets Back With Soybeans
Corn divorced itself from soybeans on Tuesday to trade higher but is not able to sustain any buying Wednesday with soybeans moving lower. He says the December contract was able to close above the 200-day moving average on Tuesday but is below that level in early trading. The market has continued to trade within a range and even with the huge rally in soybeans has been unable to break out. That may change after the harvest is done he says and with the strong export program that could be the catalyst to move corn higher.
Wheat Also Consolidates
Wheat futures have had a more than 60 cent rally off the lows following soybeans and with some help from funds covering their massive net short position, or at least a portion of it. However, wheat is seeing some profit taking and farmer selling on Wednesday according to Duling.
Is Money Moving From Livestock and Equities Into Grains?
With the recent correction in the financial markets and livestock sector it looks like funds are starting to move money from those sectors into grains as Duling says they look historically cheap at these prices. That can’t be confirmed without a Commitment of Traders Report.
Commitment of Traders Reports Coming
The CFTC released a schedule for the release of the Commitment of Traders reports that were backlogged with the government shutdown. However, the reports won’t be fully caught up until January, so Duling says they will be worthless until they are current.
The first report will be released Wednesday plus the agency published a schedule for the release of reports that were interrupted during the lapse in federal government appropriations. The reports will be published in chronological order beginning today at 2:30 p.m. CST. The report will include data from the first missed report, which would have published Oct. 3. To reduce the COT report backlog the CFTC will increase publication frequency, allowing for the backlog to be cleared by the report scheduled for Jan. 23. The schedule is consistent with prior post-government-shutdown publishing.
Cattle See More Fund Liquidation
Duling says a current report on fund positions would be helpful because there is speculation that funds have been liquidating their massive position in the cattle futures and may still be exiting on strength. He thinks the selling the last two days may be tied to that liquidation combined with fear of the administration’s plan to lower beef prices. There may also be some selling tied to money flow. While the stock market is recovering on Wednesday, the recent selloff in the equity markets may have triggered some selling in cattle.
