Grain markets saw follow through selling on Tuesday, with livestock futures higher.
Corn Makes New Lows For the Move
Corn was lower for a second day with futures making more new lows for the move. Brian Grete with Commstock Investments says the corn market is still trying to digest the shock of the record yield, production and harvest acreage figures from USDA’s January reports. The corn market is now saddled with trying to find more demand to get rid of those extra supplies that USDA added. And we’re looking at a corn market that already had record demand in the first quarter of 25, 26.”
Will the August Lows Hold in Corn?
March corn futures came within striking distance of the Aug. 12 low at $4.10 and according to Grete that low could be retested. “Well, I think they’ll be tested. We’re seeing funds pump money into the short side of the corn market. And so a direct test is ahead, I think, of those August lows. If we take them out, then You’re talking about $4 as the next downside target. Quite honestly, I would much rather see just a flush in the market here. We get down to a price and then see buyers return. My biggest fear is that we just kind of grind sideways around the August lows, maybe a little bit above, maybe a little bit below, but around those levels and for an extended period of time, those are the hardest markets because you just don’t see any type of price recovery. Something that spikes down quickly and then recovers is much more palatable, in my opinion.”
USDA Report Hangover in Corn Focused on Acreage
While the record 186.5 bu. per acre corn yield got much of the attention on Monday, Grete says the 1.3 million acre increase in harvest acreage was the real culprit in raising yield from December to January. The 4.5 million acre increase from July through the final report in January was the largest increase in history. Where did it come from? Grete says primarily lower acreage cut for silage. He adds, “Acreage is largely what drove us to production above 17 billion bushels. Just a really big number there. The acreage isn’t going away.
Where did the increase in acreage come from? Grete says the key was harvested acres. “What we saw, one of the keys is in the June acreage report, harvested acreage percentage was 91.1%, very historically average there. In August, that moved to 91.2%. And then in the final, it moved to 92.4%. So we saw a 1.3 percentage point increase from the June acreage report to January final. And so what we saw is less acres were abandoned, less acres were harvested for silage, and more acres were harvested for grain. And so that’s really the part of the acreage story there and why we saw such an increase.”
Soybeans Follow Corn Lower, Digesting Higher Stocks
Soybeans were also lower on Tuesday on follow through selling but also following the lower corn market and still digesting the 60 million bu. added to carryout. “I think that The realization is that, hey, now we have 60 million more bushels that we need to chew through. And we have China coming to the end of its purchases of 12 million tons. Will it continue beyond that? We have those trade uncertainties that we talked about potentially with China flaring up. And then you have the record Brazilian crop that’s coming on board and soon to be an exportable position. And so there are some headwinds for the soybean market, and I think that we’re seeing that.”
Iran Tariff Spillover
The soybean market traders were also concerned with the 25% tariffs President Trump threatened on any country that does business with Iran, which brings the trade truce between the US and China into question. Grete says China is one of Iran’s largest customers and so there was fear of retaliation by China. Furthermore, with only a portion of China’s recent soybean purchases shipped there could be possible cancellations.
“When you look at the export commitments for China, so we’ve seen the outstanding sales increase, an increase pretty rapidly here recently, but we haven’t seen a whole lot of exports, and so those are lagging. And so those bushels are at risk, I think, of being canceled if we do get into a trade spat again with China.”
Will Soybeans Hold October Lows?
Currently soybeans are holding above the October lows but they may be vulnerable if corn continues to slide according to Grete. March needs to hold $10.28 or risk taking out the $10 level. “And then the funds. I mentioned that they’re long and starting to liquidate long positions. How long will that last? Do they want to move to a net short position? All those will help shape prices as we move forward here in the soybean market.”
Wheat Digesting Disappointing Acreage and Global Stocks
Wheat futures were also lower pulled down by corn and still digesting disappointment from the higher than expected winter wheat acreage in the Monday’s report as well as higher global ending stocks. Grete says the 33 million acre winter wheat seedings were nearly 700,000 acres above expectations. Global ending stocks were also up 3.4 MMT from December at 278.25 MMT which was also negative for the market.
“So winter wheat seedings came in virtually unchanged just down a fraction from year ago and the expectation there was that they would be down more. So we found almost an extra 600 thousand acres beyond what the expectation was. And so that kind of offset some of the concern with dryness in the plains and with the HRW crop and those types of things as we move through the rest of winter and into spring. And then the global situation. Year over
year, we’re up more than 18 million tons on the wheat ending stocks.”
Markets Await Tariff Ruling
Wednesday the Supreme Court is expected to rule on the legality of the IEEPA tariffs. The polymarkets are predicting the tariffs will be struck down and if they are Grete says it could be negative for the markets due to the uncertainty it will create.
Cattle Futures End Higher as Feeders Lead
Cattle futures were higher again on Tuesday with feeders continuing to show leadership in the complex, while live cattle have yet to take out last week’s highs in nearby contracts like the February. Feeder cattle futures are chasing the cash trade and trading at a discount to the index which continues to see futures grind into new highs for the move. Will feeders eventually pull the live cattle above last week’s highs and resistance areas? Grete says live cattle are waiting to see if cash will be higher again this week. He thinks fed cash will be up from last week despite announced packer kill cuts but could stall out next week ahead of the USDA Cattle on Feed Report.
Lean Hogs Grind Higher
Lean hog futures ended slightly higher but are being held back by the premium the futures are holding to the cash index. Grete says that index has been slowly sliding lower and that may be a headwind for the hog futures moving forward.
