Grain markets closed mostly higher Monday, with livestock lower.
Mark Schultz with Northstar Commodity says strong demand continues to support the row crops, but especially corn.
USDA announced more flash export sales of 10.6 million bushels of corn to Mexico and unknown Monday morning and 4.85 million of soybeans also to unknown.
Plus export inspections were strong for soybeans at 79.3 million bushels, corn was at 30.7 million.
“Year to date our export sales for corn are the third best we’ve seen now in the last 10 years and its 300 million bushels above this time a year ago. So, the business keeps coming and I expect another good weekly export report for both corn and soybeans again this week,” he says.
However, both futures markets continue see a pattern of strong buying overnight and early in the session only to close well off the highs.
Both markets are rangebound and can’t get above chart resistance levels even with bullish export news.
So what is capping the rallies?
Schultz says the uncertainty about this week’s election has been one headwind.
Another is the improved rain and fast planting pace in Brazil which is now at 54% and has shot ahead of last year.
Additionally, the market is still trying to chew through large supplies with a 2 billion bushel corn and 550 million bushels soybean carryover.
So, he thinks the market will need a surprise in Friday’s WASDE through either lower that expected yield or higher demand to trigger a bigger rally.
Wheat reluctantly followed the row crops with help from a weaker dollar but weekend rains in Hard Red Winter wheat areas limited gains.
Cattle futures continued to consolidate so is this a healthy correction or topping action?
According to Schultz it is normal for cash, futures and cutouts to see seasonal weakness this time of year.
Cash has been bucking the seasonal trend and even last week’s steady cash trade at mostly $190 was supportive and should limit losses going forward.
“Last year at this time from November 1 to December 1 you dropped $22 on futures, in just 30 days and that was quite the fallout,” he adds.
Managed money traders are long around 100,000 contracts and so far have been defending their long position on breaks.
Lean hog futures made more contract highs in the back months and then make a bearish reversal lower.
“It’s only the second time you’ve closed lower in the last 14 trading days on pigs, it’s been very orderly. However, on the technicals its been up the last 13 weeks,” he explains.
Is that market topping or will funds keep defending their record long position?
Schultz says the funds are long over 100,000 contracts and so the market will need to keep getting bullish news to stay up at these levels.
