Grains ended lower on Tuesday with livestock markets mostly higher except for the deferred lean hog contracts.
Grains Make More New Lows
Grain futures made new lows for the move again on Tuesday on a combination of harvest pressure and technical selling.
DuWayne Bosse of Bolt Marketing says the managed money traders have hit the sell button.
“When they want out, it’s best to just get out of their way, evidently. And that’s what we’re seeing. We had a bad week last week. Market was down. I thought, gosh, we’re really oversold, maybe due for a bounce. And then when you got to Sunday night and Monday, you saw the wide open forecast. There’s just no rain in the forecast for the entire Midwest. So a lot of harvest pressure coming to this market,” he says.
Even the slower than expected harvest progress on corn did little to stop the market. Harvest was 8% behind average and Iowa is lagging by 24% but that didn’t even pop the market.
Corn Market Needs to Hold Support
Dec corn needs to hold the Aug 6 low of $4.57 1/4 for support. However, Bosse says that may be difficult until the harvest gets at least 60% to 70% done.
“That’s kind of the bearish thing too, is that harvest isn’t that far along,” he remarks, “And to me, if harvest progress is slow, maybe that means there’s more bushels than we thought out there. I don’t think anyone wants to hear that, but I’m hearing that in a lot of cases, a little bit better than expected in spots.”
He is worried the funds may push the market below the August low and run some stops but he thinks the next support comes at $4.50.
“I don’t think funds have to go completely out of their longs. So, I’m looking for them to get out down to about 125,000 long positions they’re probably around 200,000 right now. So, you get down to that level and some of the support holds I’ll be less bearish,” he adds.
Soybeans Take Out $12.50
Nov soybeans took out the $12.50 support area, leaving the 100-day moving average of $12.26 3/4 as the next chart support.
The funds are still a sizable long in the soy complex, so how much more liquidation could the market see? “That’s a great question. I’ve been a little nervous and depressed that they haven’t gotten out of more positions on this pullback. So we’re always going to have that hanging over us that what if they want to liquidate? What if they want to get out of positions?”
Soybean prices have held up better than Bosse expected the last year and a half with world stocks at record high levels. So, he thinks the fundamentals will keep the funds from getting completely out of their long position.
“I think they like soybeans as a hedge on inflation. And of course, you got Super El Nino out there. So people are thinking South America is going to have a weather problem. But boy, that’s not out there right now.”
South America
So far South American weather has been better than expected allowing near to record planting pace in Brazil on soybeans.
Brazil is working on a record soybean and corn crop potentially and so that may also be pressuring the market according to Bosse.
“Usually they have to wait to get the soybeans planted because they’re waiting for rains, right? They are waiting for the rainy season. The rains came early. I felt like Mato Grosso is like 60% planted on beans. And if they get their beans planted early, Michelle, that means they can get their second crop corn planted early too.”
So he thinks the market may be taking some weather risk out with no threat to the crop and South American producers may also be selling.
Soybean Yields Strong, Extra Bushels
In addition to the delayed harvest in Iowa and Nebraska, Bosse says the better than expected soybean yields may also mean more bushels to market.
Soybean prices are over 80-cents off the highs but well over a year ago, so some producers are opting to sell right off the combine.
“Yield is better than a lot of people thought on soybeans anyway. Let’s just step back a little bit and remember what August was like. I mean, a lot of rain for the most part. And I wondered right then that rain in August usually makes for soybeans,” he says.
Bosse acknowledges that there are areas that got too much rain and that was true on his own farm. However, he says eventually the crop gets harvested and yields are better than expected. He is hearing above average bean yields across the country.
“We sure are getting that on our farm here. Still combining beans, which means, you know, they’re probably yielding better and we’re still rolling on them,” he adds.
China Biz Fails to Move the Market
The funds have also been long soybeans due to China being back in the market. China bought another 22.5 million bushels of soybeans on a flash sale Tuesday morning and there were rumors they bought another 10 to 14 cargoes. However, that isn’t even holding the market together.
He says prior to harvest those sales would have rallied the market 15 cents. “Eventually, that’ll be a bullish thing. They’re probably up to, what, 17 million metric ton of their 25 that they promised. I think the problem is, as traders, we’re not quite sure. I think USDA kind of has the 25 million metric ton penciled into their S&D tables. Others think they’re a little too low. So we’ll see.”
Wheat Takes Out 200 Day Moving Average
The wheat complex also made new lows for the move in tandem with corn and soybean and December SRW wheat closed below the 200-day moving average.
Bosse says wheat also lacks a bullish story right now and the market has become numb to the headlines regarding the Black Sea export disruptions.
“You know, man, the Russia-Ukraine war, we’ve had nights where the fighting there is worse than it’s been in the last four years. And wheat should go up, but it goes down. It doesn’t care about that story. Russian wheat export prices are actually dipping lower again this week. They seem to be getting out, but prices are really high in Europe. But we don’t get the export business and the market just doesn’t care.”
The weather has also improved in hard red winter wheat areas which is also a problem for the market as there are ideas of more acres.
$8 Billion Diesel Aid
President Trump also announced $8 billion of diesel assistance payments for farmers. How much will that help producers and will it influence their ability to store grain longer to wait for better prices?
Bosse says these payments combined with the $14 billion of ARC and PLC farm program payments will likely allow farmers to hold on, “You know, a lot of times farmers sell because they need the cash. Well, they’re going to get that sometime in November. It sounds like that, what, $8 billion there. If they have that cash and they’re bullish the market they won’t sell. So, we’re going to run out of that natural seller as quickly as harvest is over.”
After that bin doors will get shut and farmers won’t sell. So he says, “If funds want to stabilize then we could have a rally. I’ve seen basis improving some soybean locations already because harvest is over that’s pretty quick so that’s a good sign,” he adds.
Cattle Make Fresh Highs
Cattle futures made new highs for the move with help from new lows in corn.
Plus, fed cash markets were strong with a top of $228 in the south last week. Even the average, which is mostly based on northern cattle, came in at $224.19, which was up $4.05 from the previous week. The feeder cattle cash index was also up $6.47 last week, at a four week high.
“Supply is still tight. We were down a little bit early this morning because they announced they’re going to open another spot on the Mexican border. We quickly rallied back from there. Cash cattle trade was higher last week, finally, from what is announced.”
Cattle on Feed
The market is also anticipating Friday’s USDA Cattle on Feed Report will show much lower placements for a third month in a row.
Fund Buying in Cattle
Bosse says the funds are not extremely long in cattle and so they have some room to buy with the bullish technicals.
Live and feeder cattle futures had chart breakouts above resistance at the August highs and key moving averages. December live cattle even filled the gap area at $230.17 and closed above it. So, how much higher could prices rally?
“What I’m looking at is a chart that looks just phenomenal. Just bottom left, top right and funds like trends like this,” he adds.
Nearby Hogs See Short Covering
The nearby lean hog futures were highs on short covering and some light bull spreading.
However, Bosse is skeptical the market can build on it.
” I think there’s so many people trying to call the bottom in hogs and buy it, and I get it. They’re super cheap, but boy, the fundamentals there are the exact opposite. They’re quite bearish. We got to see cash and cutouts stabilize a little bit before this
market can bottom. If you look back at old charts, I’d kind of say that $64 level should be supporting Dec. But man, that’s another $3 down from here. But I’m definitely not going to bottom yet.”
He adds the cash and cutouts need to bottom first.
