Grain and livestock futures all ended higher Monday
Grains Rally With Talk of Government Reopening
Sam Hudson with Corn Belt Marketing says grains saw fund and speculative buying sparked in part by talk of the government possibly reopening this week. That provided a risk on environment for the bulls who have been flying blind with the lack of market data from USDA. “I mean, you can almost argue that for corn that, you know, we can see some more positive numbers or shed some light on what we know is already strong demand,” he says.
Grains Gear Up for USDA Reports
USDA will release the November crop production and WASDE reports on Friday and Hudson says the grain markets were also gearing up for that data release. NASS officials say they are using the normal methodology for these reports but that still brings up some questions about credibility according to Hudson. “Are we going to get October data or November? And that doesn’t matter. It does matter as far as how much objective data you have and what you can prove there?”
He says for corn the expectation is for a confirmation of lower yields and he is in the camp of 180 to 181 bushels, but is not sure if the agency will be that aggressive until the January report.
For soybeans he thinks the trade could be somewhat disappointed. While yield could be adjusted slightly he thinks USDA may kick export demand down the road because the deal with China isn’t even signed yet. He says if USDA does figure in the whole 12 MMT purchase commitments to China that may still not be enough to result in a wildly bullish ending stocks figure.
Soybean Market Still Awaits China Business
Still, Hudson says the soybean market psychology has shifted to one that is trying to price in China business. “The market’s kind of shifted to this being an impossibility to a possibility. And one thing we’ve noticed is even despite all of this rise in price, we’ve continued to see basis levels, especially river basis levels, continue to narrow up and firm. Even some crush markets have had to do that to find ownership. And if that’s the case, you know, these end users and commercials may still need to reach out just to find those beans if they feel like they need to get coverage. Maybe you need to get prices to a level where we finally break basis and we haven’t quite seen that yet, at least in this region of Illinois.”
Hudson says the deferred soybean futures have more upside potential based on the 25 MMT in the China trade framework. “It’s a lot easier to argue the number for next year, 25 million metric tons can actually still take place. And so I expect the back months, you know, November 26, hopefully to continue to tow the line. And maybe you can get that contract up to $11.50 while we figure out the front end and see what cash market’s doing in the meantime.”
China Absent from Soybean Export Inspections
Yet, the weekly export inspections for soybeans were reported at 40 million bushels and now total 327 million bushels so far for the marketing year, which is down 42% from a year ago. And Hudson says unfortunately China was absent from the inspections report for soybeans and other grains. “No, nowhere yet. Maybe a couple more weeks before we can even see evidence of that. You know, keep in mind a lot of this has still just transpired in the last 10 to 14 days. So it takes a little time to get some ducks in a row.” He says there is still time to get the sales made and shipped but the window is closing before Brazil’s new crop is available. One possible explanation for the slower soybeans shipments may just be the shear size of the corn export program.
Export Inspections Strong for Corn
Weekly export inspections were strong for corn at 56.1 million bushels and the running total is now 540 million bushels, which is up 66% from a year ago. “We see corn inspections, I think, at an 18-year high for this week.”
Hudson says this could mean an upward adjustment from USDA in the report on Friday. He says demand is strong but there is also more corn being shipped right now to beat the sinking water levels on the Mississippi and because of the lack of an export program for soybeans through the Pacific Northwest. “I think it’s definitely part of both. You know, we were going into this fall with some pretty low river levels again, and we’ve been struggling with that really for the last five years. You know, the fact that we didn’t have any soybean exports, We were still seeing barge freight historically high, but didn’t see the same level of movement for soybeans,” he further explains.
Wheat Sees Short Covering
Wheat futures rebounded on Monday after both hard red and soft red winter wheat futures posted lower weekly closes. He says wheat was following corn and soybeans but also saw continued fund short covering. “We had a lot of rumors about wheat going to China, but we haven’t had a lot confirmed. And so if we can start doing that, I think you’ll chase the rest of them out of their shorts, whether or not we need to go back to, you know, back over $5.75 or back to $6.00. I guess I don’t really see that because we’ve got plenty of it sitting around.”
Cattle Futures End Limit Up
Live and feeder cattle futures ended limit up on Monday. Hudson thinks it was a combination of short covering as February and April live cattle held the 200-day moving average support areas. Plus, there was some risk on buying with the hope of the government reopening and the announced Department of Justice probe of beef processors. He says the shift in focus to lowering beef prices through lower boxed beef prices at the wholesale and retails levels take the pressure off the cattle futures.
Lean Hogs Also Rally
Lean hog futures also ended higher with some spillover support from the limit up moves in the cattle market but the news of the government reopening also gave the market a boost. Hudson says after getting technically beat up the cattle futures were oversold and in need of a corrective bounce and posted a nice reversal on the daily charts. So, he hopes the market can build on that.
