Grains are quietly mixed Tuesday morning, with cattle lower and hogs mostly higher.
Grains Mixed Pre-Holiday and First Notice Day
Grain markets are quietly mixed on Tuesday morning with light pre-holiday volume and first notice day coming up on Friday. Jamie Gieseke with Paradigm Futures says the weakness in the grain markets last week and to start this week has been associated with liquidation and pricing of basis fixed contracts against December futures before the delivery period starts. That means farmers likely did some selling and that resulted in hedge pressure. Most of those positions will be executed on by Wednesday so the pressure should start to subside he says.
Corn Seeing Strong Demand
The corn market has seen a firming of spreads and basis levels according to Gieseke on strong demand from ethanol plants as well as export customers. The weekly export inspections were at 64.3 million bu. on Monday and the total shipments are running 72% ahead of a year ago, so at record pace.
Global Corn Stocks Shrinking
He says global corn demand is robust and in the November WASDE global stocks were down to 281 MMT, which is well below last year’s 304 MMT which shows even with a record U.S. corn crop the lower prices have stimulated end user demand. He says the U.S. accounts for 19% of all global corn ending stocks.
Soybeans Consolidating
Soybean futures continue to consolidate off last week’s high which in the January contract was $11.69 1/4. The market had $.55 cent correction from that high to last week’s low. Gieseke says the China news is baked into the market so it will need another catalyst for the funds to step back in to push back to those highs.
South American Weather Watch
South American weather will be the next focus of the market and currently he says there have been no major problems in Brazil for the planting of the soybean or first corn crop. Despite some reports of pockets of dryness in Southern Brazil and Argentina, he thinks the crop is off to a good start.
Wheat Needs a New Catalyst
Wheat futures had a nearly $.60 rally off of five year lows but also stalled out ahead of first notice day. So what is the next catalyst needed to spark some buying interest in the wheat market and allow it to assume a leadership role in the grain complex? Here again, he says the market has been capped by large global supplies and so it will take a weather issue to spark some buying. He says with a possible peace deal between Ukraine and Russia that has also been holding back crude oil and the wheat market.
Cattle Close to a Low?
Cattle futures ended limit down in both live and feeder cattle on Monday and are under expanded limits on Tuesday after negative response to the closing of the Tyson beef plant in Lexington, Neb. scheduled for Jan. 20 and a scale back to one shift in Amarillo, Texas. However, much of that news is dialed into prices so after a lower start the cattle market started to stabilize. Gieseke thinks technically the market can hold support areas around $300 on January feeder cattle and $200 to $205 on February live cattle.
