Grain and livestock futures are mixed early Tuesday.
Soybeans See Profit Taking
Vince Boddicker with Farmers Trading Company says soybeans are mostly lower seeing some Turnaround Tuesday profit taking and after running into chart resistance. “When you get a big day like that it’s wonderful to see. But if the market’s any good or normal it’s going to set back and say, is there buying interest here today that we can keep this thing going and just where we’re at? And I think that’s what you’re seeing.”
Soybeans Run Into Chart Resistance....Again
Soybeans technically ran up into chart resistance again not far from last week’s $11.37 high in the January soybeans.
To get through that level may take a combination of bullish factors according to Boddicker. " If there was a big enough surprise in the WASDE it’s definitely possible. I don’t see where they’re going to change the numbers all that much. But, uh, we’ve seen USDA do wilder things, but for the most part, you would think it takes more China business than that short term than that twelve million metric tons, or you get to have a weather problem in South America. And right now that’s not on the table. Not that it can’t get there shortly, but nothing that looks threatening at the present time.”
Is the 12MMT to China Priced In?
Boddicker says after a $1.40 rally off the lows in soybeans Boddicker says the soybean market may have the most bullish China demand news is already priced in until there is confirmation of business from China.
Soybeans See USDA Report Positioning
Soybeans are also positioning ahead of Friday’s USDA crop production and WASDE reports. Boddicker says he doesn’t see much change in yields. " I don’t think at this time it’s very much. I think the beans are going to be somewhat like the corn. Can the West to make up for some of the shortfalls in the East. And I haven’t seen a lot from the East, but most of the stuff that I looked at earlier was lower than earlier thoughts, but really better than what some of the thoughts would have been in late August and early September,” he explains.
Corn Sees Slight Bounce in Pre-Report Positioning
Boddicker says corn has been a reluctant follower of the $1.40 rally in soybeans because China may not be a larger buyer of corn. Plus, he thinks there is still harvest or hedge pressure in the Western Corn Belt due to record yields.
“We’ve got a huge crop in the West, and a lot of that corn is coming to town. And I just think the market sees that. And there’s probably hedge pressure that’s holding it down,” he says.
Average trade guesses for corn yield are at 184 bushels per acre, down 2.7 bpa from September and Boddicker says that seems realistic. “You know, you looked at some of the private forecasters I think last week came out at 185.9, which wasn’t a 185.6, but wasn’t much less than it was were before. And if you take this down to 181. I think you can get some more pops out of here if that’s the case,” he says.
However, leaves corn ending stocks above 2.1 billion bushels. “And that’s a big number to get through in here. If we can get that somehow get that down to 1.6, 1.5 billion then we’re in a little different world in there. But until that point, if you just stay over 2.0 billion, it’s going to be tough, I think to get lead month much over $4.50 or $4.75" To get below 2.0 billion bushels on corn carryout Boddicker says would take another two bushels per acre yield cut.
Corn Stuck in Trading Range
Corn is currently stuck in a trading range on the December contract between $4.25 and $4.36, according to Boddicker, which will be difficult to get through. “And again, just looking at my charts that I’m up in that 200-day moving average seems to be holding it also in here, which is a big technical number. And again, much like the beans at this point, it probably takes other big news to get us through that. And again, if we can look at the crop, the size we are, especially in the west in here and still holding in four thirty area versus three fifty or three sixty where we went to last year, I think that’s a win.”
Wheat Has Bottomed But Is It Running Out of Gas?
Wheat had a strong move up on Monday but lacks follow through on Tuesday and may be running out of gas according to Boddicker. “You know I think there’s still skepticism there. And there’s still people that are short and willing to short it in here. But I think there’s a possibility we may finally have the bottom in. We’ll have to see if we hold it. If this whole grain complex is going to go someplace. I do think weed has to be the one to come off the bottom further than it has, and probably lead the charge higher.”
Wheat Needs to Lead
If grains are going to have a sustained rally Boddicker says wheat needs to lead, historically that has been the trend. “What I’ve looked at it over the years that I’ve done this, it seems like wheat is always the first one to top and lead the market lower, or the first one to bottom and lead the market higher. And until we get that done, I’m just not sure you have enough overall push or psychology to get everything else to go someplace.” Plus, wheat has had a $.60 rally off the lows so it is also running into chart resistance. “If you look at that Kansas City, that $5.50 is a tough road. If we can get through that and maybe we can do more. But, you know, we get now we got to see what we get for a pullback.”
Reopening the Government Will Help
Boddicker says with the lack of USDA news the markets have been flying blind and so getting the government open may provide some clear direction for the grain markets.
Cattle Bottoming?
While feeder cattle futures are extending gains after limit up closes on Monday the live cattle futures are not. So is the market trying to bottom? Boddicker is hopeful. “But I think only time is going to tell us in here. One day does not a market make. Last week when we came back and reconfirmed bear flags on both fats and feeders, it opened the door up to some pretty good downside. Yet we all have to hope and think that there’s enough good fundamental things out of here as far as beef demand to hold this up at where we went put lows in the other day, but I think we got to give it another week just to see if we’re doing that or not.”
Psychology Shift
Fundamentals haven’t changes in the cattle market but the psychology has and that’s why the funds have liquidated. Boddicker says they don’t like uncertainty. “Psychology which led to money flow and that’s usually what tops and bottoms the market in here.” He says the fear of bringing in beef in from Argentina and and slowing the tariffs down in Brazil has upset the market.
Have Hogs Bottomed?
Hogs saw triple digit gains Monday on the heels of the rally in cattle and with the possible government shutdown ending. But is the market trying to bottom? Boddicker is hopeful, “We have picked up some kills over the last month or two, which I think has been somewhat negative, but also the beating up of that cattle market sure didn’t help this. And we can heal the cattle in here. I think you’ve got a shot. As we discussed earlier, that’s $79 area in February hogs is important support.” He thinks it should hold as we are coming into the holiday season where with a pick up in demand for the hams.
