Grain and hog futures ended lower Tuesday with cattle pushing into new highs.
Weather, Record Yields Overwhelm the Corn Market
Matt Bennett, AgMarket.Net, says it was an ugly day in the grain markets with old crop corn making new contract lows once again with spillover pressure from wheat and a higher dollar.
Mostly favorable weather and record yield ideas continue to be priced into the corn market and it is overwhelming any bullish fundamentals including strong old crop corn demand.
Bennett says the market is trading a corn yield in the mid 180s.
“Our firm hasn’t printed a yield estimate but I personally think we are around 184 bushels on corn yield,” he says.
He admits there are some corn pollination issues but thinks the problem is not big enough to move the meter.
So as a result the funds continue to sell and have sold an estimated 20,000 contracts the last two days.
How Low Will New Crop Corn Go?
Bennett thinks December corn will likely take out the recent contract lows and will have to fall below $4 before the market prices in the record yields.
He says very few farmers have made new crop sales and so he thinks the funds are waiting for that before they start to cover some of their shorts.
China Truce Disappoints Soybean Market
Soybean markets were also lower on Tuesday on the outcome of the U.S.. China talks in Stockholm.
A tariff truce was announced between the U.S. and China but Secretary Bessent said an extension would still take President Trump’s approval.
While the parties said the talks were constructive there was also no trade framework announced which was disappointing.
Bennett says, “We essentially kicked the can down the road and there are concerns that without a deal China is not going to buy U.S. soybeans like they did at harvest last season,” he explains.
New crop export sales for soybeans are slow and China has been absent from the market and if they don’t return Bennett says soybeans will plunge sub-$10.
Crop ratings also improved by 2% to 70% good to excellent, which is 3% ahead of last year.
“If we get a couple of good rains on this crop in August we could also be looking at a big crop here and with a slow down in export demand that could hurt the market,” he says.
New contract lows in soybean meal again on Tuesday were also a drag on soybeans.
Wheat Falls to Contract Lows in Response to Strength in the Dollar
Wheat futures led the grain market losses on Tuesday with contract lows in both December hard red spring and hard red winter wheat, while December Chicago wheat had a contract low close.
A rally in the U.S. dollar triggered fund and technical selling pressure.
Bennett says the U.S. has also had a decent winter wheat crop and so those supplies continue to hang over the market, despite a pick up in export demand.
Cattle Continue the String of New Highs
Live and feeder cattle futures reversed a lower opening and continued their parabolic move into all-time/record highs again on Tuesday.
Funds are record long in the cattle futures and have been long for many months but are still buying on the breaks.
Bennett says the fundamentals suggest the market has every reason to push higher but he says when the funds finally decide to exit the door may not be big enough.
“So I would caution producers to take advantage of prices and exercise some risk management,” he adds.
Lean Hog Futures Fall on China News
Lean hog futures were another sector that reacted negatively to the trade truce with China, as Bennet says the market was hoping for better news regarding a trade deal.
While Mexico is still the top export market China takes variety meats that other customers don’t want which adds to the value of the carcass.
