Grains ended lower on Friday, livestock futures were mostly higher.
Soybeans See Tough Week
Soybeans futures ended just slightly lower on Friday but for the week were down 66 cents on the November contract.
Matt Bennett with AgMarket.Net says the market was removing weather premium with rains falling over portions of the Western Corn Belt Thursday evening and moving to east.
“Pretty large system all the models kind of got into agreement that we were going to see decent coverage throughout the Corn Belt and that’s kind of what we all woke up to is the radar was fairly active,” he says.
Not everyone received the rain that needed it but the coverage was good enough to get the market’s attention he adds.
That coincided with the end of the month and ended up with some profit taking.
“You’ve got to assume that a lot of these traders made really good money on the long side. And a lot of those profits got taken this week.”
Will Soybeans Continue to Fall with Rain?
More rain was forecast for the weekend, so if that confirms will soybeans continue to correct?
Bennett says the market has been resilient over the last several months. “One would think if you get abundant rainfall in August that you could still take out another 50 to 75 cents this week. That’s kind of what you took out. I mean, could you do it again next week? I think it’s possible. But at the same time, beans have such a story, you know, with domestic demand. Whenever you look at world stocks, I mean, we keep throwing more and more production every year and we’re not growing world stocks.”
So he isn’t sure the market will just roll over yet, but if rains keep coming in August it is pretty tough to get a bean rally.
China Tensions Rise, Amid Buying
Another factor weighing on the market was the rising tensions with China.
“I do think it weighed on earlier in the week. You know, of course, we talked about tariffs going to 20%. China said, hey, we don’t need to be doing this. You know, and essentially a lot of back and forth, a lot of frustration, I believe. And the trade was paying attention to this,” he explains.
However, the market held together Friday after a couple of flash sales of 4.85 million bu of new crop soybeans to China and 9.3 million bu. on Friday to unknown, which could be China.
“That turned it around and heard whispers of quite a few boats actually trading on Friday out of the P&W and the Gulf. So, you know, if that’s the case, then clearly they’re still buying a few soybeans. And I got to think that they’re trying to get more bought than 3 million tons going into this meeting that they’re supposed to have here later on,” he adds.
And why wouldn’t China buy with U.S. soybean on sale for the week and down nearly 75 cents from last Friday’s contract high.
Technical Support Taken Out?
So did soybeans violate technical support on Friday?
Bennett says, “I mean, you went down, you tested the 50-day there with August beans. I mean, you know, you’re looking at August beans right now, you know, in that $11.70 range. Do you go down there and you violate the 50-day, go settle below it? If you do that, you’ve got to think that this market could actually run back closer to $11 with abundant rainfall.”
He thinks longer term the beans have a good demand story with China, strong crush and higher biofuels blending mandates but with higher acreage that may provide enough cushion.
“If we can kind of shore this bean crop up a little bit and get it in better shape. In my opinion, yes, you’re going to have enough production, but this demand is phenomenal,” he points out.
Bean Oil Plummets on SRE Concerns
Soybean oil was down on Friday and September was down 621-points for the week the biggest plunge in four year.
It was tied to concern about EPA granting more Small Refinery Exemptions but can the market recover?
Bennett says what was also concerning is even when crude oil rallied over $80 this week it failed to support bean oil.
“A lot of these crushers that the last couple of years, you know, kind of backed off on crush heading into a fall time frame. They’re still out there looking for beans, you know, and why? Because crush margins are so good. So I think we’re just going to keep right on rolling whenever it comes to crush. I think longer term, you’ve got to assume bean oil is going to find some support in here somewhere,” he remarks.
Corn Falls With Wheat, Weather
Corn also was down over 23 cents for the week on concern about the SREs, the lower wheat market and weather.
“I’ve got to think that weather has as much to do with it as anything. I mean, we know that the last couple of weeks have been very much on the dry bias, if you will. A lot of this corn, I think, pollinated in pretty good shape. But of course, you need moisture for grain fill. You know, and there’s been a lot of folks saying, hey, we’re getting into a tough situation,” he says.
North and South Dakota faced 100 degree temperatures the last two weeks and there was also damage done to the crop in Nebraska, Northwest Iowa, Southwest Minnesota and into Kansas.
However, those areas got some two to three inch rains.
Corn Holding Support
Even with the lower weekly closes corn held above some key moving averages according to Bennett.
“As far as the long term goes, you held the 50-day. If you’re looking, for instance, at December corn, you know, you come down here, this $4.64
level, if you got to $4.60 or below, you’re going to violate that if you close below that level. I think that’d be problematic. You’ve got a lot of moving ranges. A lot of your moving ranges are where we’re at and just above.”
He says the market could bounce off that area at some point but that is a tall order with rain in the forecast.
Bullish Long Term Corn
Bennett is more bullish long term due to the shrinking world stocks and strong demand.
“You’ve got world stocks to use ratio, the lowest you’ve seen since 2013. You’ve got record world demand, record U.S. demand. I do think the corn story is far from over. I just can’t get real friendly heading into harvest whenever we’re getting rain,” he states.
Aug. 12 Crop Report
The other problem is the market need to get through the Aug. 12 WASDE and the fear is higher yield due to USDA’s methodology or higher acres as the FSA certified data comes in at the same time.
“We’re hearing a lot of talk about these acres might go up. And if we just backpedal the last year, I mean, talk about aggravated grower. You know, you saw acres go up in August, obviously in January, I believe in November as well. It’s pretty tough to say, hey, you know, yield has gone up. And guess what? We’re also going to give you higher acres. And that’s what we saw last year. That was no fun whatsoever.”
Even so he thinks old crop exports need to go up just based on shipments and that could be an offset.
Wheat Falls as Ukraine Talks Alternative Export Route
Wheat was down on technical selling after a poor close on Thursday but also talk Ukraine was looking at an alternative way to move wheat exports.
“When you saw hey, this wheat is going to get out of that part of the world at some point. They’re going to try to find an avenue for it. I think the market got a little more comfortable and said, hey, I don’t think we need to take this wheat market substantially higher for the time being,” he adds.
The market also took out key support levels and saw technical selling accelerate.
Still he cautions that if the Black Sea war escalates over the weekend the market could recover again Sunday night.
“I don’t think the wheat market is just going to fall completely out of bed. I mean, we do have plenty of wheat, no question about it. But I don’t think it’s going to fall out of bed until you really resolve what’s going on over there. It’s probably going to be a lot of volatility still,” according to Bennett.
Lower Weekly Closes, More Technical Selling
With lower weekly closes in all of the grains though that serves as a magnet for funds to continue to liquidate to start next week.
“I mean, it’s certainly possible,” he remarks.
Cattle Higher for the Week
Cattle futures also closed higher for the week in both the live and feeders after absorbing the negative news the border would be reopening on Aug. 24 in a phased in process.
However, the market had a nice recover from the lows. So is the bearish news digested and is the market bottoming?
Bennett says, “Whenever you look at it, last week, you know, you went down there, that $221.70 level on fats, you know, and then basically, you know, you closed $10 off of that here today. I mean, it sure looks to me like this cattle market has kind of tried to etch out a bit of a bottom for now.”
Cash trade was also better as the week progressed with some $233 and $235 trade in the North on Friday.
Which he says is a good signal the market has absorbed the most bearish news and is trying to forge a low.
“Fundamentally, you still can’t get bearish based on numbers.”
And hopefully that will being the funds back in to buy at some point.
No, but if we get the cash trade to start improving,
“Yeah, I think it’s a possibility. I mean, do you go to new highs? That’s a pretty tough call at this point. I mean, in my opinion, the funds, they’ve been long for quite some time. They’ve made a lot of money in the cattle market, you know, or they may be a little disinterested in running this thing significantly higher,” he concludes.
