Grains were sharply higher early Wednesday with hogs also higher, cattle sharply lower.
Grains Rally Adding War Premium
The grain markets were higher early Wednesday with wheat leading the price gains and adding war premium.
Vince Boddicker of Farmers Trading Company says hard red winter wheat made new contract highs and new highs for the year.
He says the Iran War is driving up the cost of energy and leading to inflation concerns but Boddicker is urging caution because at some point it becomes old news.
Boddicker says, “We may have infrastructure did enough could it take months or years to rebuild it it could but it seems like if we get to a
certain point in here and somebody thinks it’s done it’ll be done no matter how long it takes to get there.”
The Black Sea war has also been lingering for four years but the recent escalation is targeting grain and export infrastructure. So, the key will be how long the conflict lasts and how much does it disrupt exports of wheat?
“It’s little surprising to me that we’re doing what we’re doing because of it. I realize that Russia’s, that’s a big export port coming out of there, but the rest of the world still has wheat. But I think the market might be finally realizing that those world wheat stocks are a little tighter than everybody would like to think they are,” he adds.
How High Will the Wheat Market Run?
September hard red winter wheat made new contract highs and even soft red made new highs for the move.
So how high will prices rally?
Boddicker says KC wheat needs to break above the old high by at least 4 1/4 cents to know it is not a fake out. So, if it closes above $7.62, $7.63 in the September contract he thinks it has a shot of going to $7.80 or $7.95.
Soft red winter wheat is the class of wheat grown in the Black Sea so he says it surprises him that KC wheat is leading the gains and not Chicago futures.
Spring wheat is also getting a push from the heat impacting the Northern Plains and Canada crop.
The crop tour is going on in North Dakota and the first day yields were disappointing at only 45.9 bu. per acre compared to 45.9 bu. last year.
So that market may also need to add premium.
“But real question is how much investor money do you get? How far can you push it? Not sure. First target, I would guess, is going to be your contract high. Then you got to see, can we take it out or can’t we?” he explains.
Corn Makes Rally Highs with Wheat and Weather
Corn futures were also rallying on the coattails of wheat and making new highs for the move.
However, corn is also putting in some weather premium with the heat in the Northwestern Corn Belt trimming yield.
“I think you get Northwestern Iowa and west is is it’s it’s nasty and everything actually didn’t look terrible in South Dakota until about last Thursday afternoon and then it has really deteriorated since that point,” he says.
He says there are some good areas, but in the drought areas the crop is quickly losing yield.
“The ones that were marginal really went downhill in a hurry with 100 degree temperatures in some areas. I looked at some fields on Sunday and Monday that if it doesn’t get rain in the next week, they’re probably totally gone,” he adds.
Rare Rally in Corn
Boddicker says it is rare to rally the corn market in late July and he is suggesting farmers price old crop corn.
“If you’ve got old crop in the bin, somewhere around that $4.72 to $4.77 area you might want to be moving most of it out of there unless you’re in a really dry area and you need it for feed or something just because you are running out of time.”
For new crop he says the market usually puts in a high in May or June or July and then backs off.
“But I’d still watch the market. And many times when you put a decent high in early to mid-May and you get a decent break into that June crop report, you can get a pretty good pop out of there. Most of the time, it’s a weather concern or something else that we came up with and some big number discrepancies from USDA and what they’re expecting. And this year, I think, is really a demand story more than any number story from USDA.”
September corn took out the 100-day moving average but has not made new highs for the year, and December corn got about $4.80 but can it take out $5 or the yearly high of $5.07?
Boddicker is optimistic, “I think it can. Just by looking at other things we see, I don’t think you have to get in any huge hurry to sell new crop Dec. Unless you’re one of those guys that says I have to sell a majority of this at harvest time. I think we’re at 30% sold on the crop and we’re content with that. But, you know, if you need to sell 50% to 70% of that crop at harvest time, as you get in this $4.92 to $5.05 area, you may want to make some more sales in there. I think our next target area is $5.24.”
Soybeans Rally
Soybeans made new highs for the year on Monday and are challenging that area on Wednesday with help from the wheat rally.
Boddicker says soybeans are trading improved demand from China and weather as the forecast for the Northwest Corn Belt looks hot and dry to start August.
“Right now, it does not look good. And I think you’ll keep that premium in until you get some one pretty big forecast changes or you get some unexpected rains that come through,” he adds.
He is skeptical of China getting worried enough about weather to buy additional soybeans from the U.S. because they still have Brazil and Argentina to source from and have made big investments in their shipping and loading areas.
Are $13 Soybeans in the Cards?
So if weather stays hot and dry are $13 soybeans possible?
Boddicker thinks so, “We look at November’s at $12.35. How long does it take us to put 65 cents on beans...20 minutes? Doesn’t mean it stays there, but if I were in the Western Corn Belt and I needed to move beans at harvest time, my next target would probably be somewhere around $13.25 or so in that general area.”
In the East producers may want to get a little more aggressive.
Cattle Can’t Hold
The cattle market finally saw a bounce on Monday but there has been a lack of follow through buying
Why can’t the market bottom?
Boddicker says, “You’ve psychologically topped that market you got money flow out of there. The investor has made huge exits which you don’t need not that.”
He says funds will need a reason to reenter the market and are fighting the move by the Trump administration to lower beef prices.
The packer was also buying the futures market on the way up to help offset the cash position, according to Boddicker, and now the packer is doing the same thing coming down.
The futures took out last week’s lows as well Wednesday, which is a poor technical signal for the market.
Cash and cutouts have also been falling and need to stabilize to hold the market together. “The beef last year I think we got down right around $350 in here. But, you know, cash wasn’t where it was at either. But hopefully somewhere in the next few dollars, the cattle market can catch its breath,” he states.
Then he looks for a bounce of $6 to $10 on the fats and $15 or so on the feeders.
Can Hogs Keep Moving Higher?
Lean hogs have slowly ground higher and the charts are looking much better, but are entering another areas of resistance.
“We are approaching that 100 and 200 day moving average on that August. We’re getting overbought so any place in here it can stop but it got beat up good and I think it’s just working its way back but it is no runaway,” he explains.
Still, it is holding together well considering the sell off in the cattle.
