Grain and hog markets ended higher on Tuesday with cattle lower.
Soybeans and Soybean Oil Lead Rally
Soybeans and multi-year highs in the soybean oil market led the grain complex higher on Tuesday.
Mike Minor with Professional Ag Marketing says bean oil hit a three-year high and was following crude oil but is still pricing in the positive RVO news.
“That’s been feeding it for quite some time. And then tied along with today’s obvious crude oil move higher, it looks like Trump’s ceasefire probably won’t get extended. So a little bit of that got traded today on the soybean oil side, I would argue,” he says.
Can Soybeans Extend the Rally?
He says new crop November soybeans also had a bit of a chart breakout.
“We were building in a wedge pattern lately and we kind of broke and slingshotted out of that thing today. And I’ve been waiting for that a little while just to see if it was going to be an up or down move. And it looks like that was a pretty good up move there,” he says.
July soybeans ran into chart resistance though around the $11.91 area and will need some bullish news to continue to move higher.
But can November soybeans extend gains?
“The November contract was only $0.04 from a contract high that we’ve had recently at $11.74 today. So right back to those highs. So a little bit of selling pressure there around that level, along with the July hitting up against that key resistance point, Michelle. So we’ll see if it has some
trouble above these levels or not. Or if crude oil continues to move, we keep getting something that can feed this soybean contract. But overall, I never saw anything super substantial for moving soybeans specifically higher today he adds.
Corn Follows Soybeans or Wheat?
Corn futures were higher initially following soybeans and bean oil but in past sessions has seen spillover from higher wheat.
Minor says, “I feel like corn has been playing follow the leader, and it’s been switching back and forth between wheat, specifically with some of their big up days, and then obviously with soybeans being up 10 most of the day today, it wanted to be up a couple cents as well. So it’s tried following those along on the days wheat’s been up and that correlates somewhat when we’ve had crude oil up or our outside market fundamentals moving a little bit.”
He says the spreads have also been rallying.
“And it could just be because of some funds coming in. It could be crude oil moving up. It could be some inflation hedging. It could be a little bit about the old crop balance sheet, just trying to buy a few bushels here up front during planting,” he explains.
Corn Hits Resistance
July corn also closed up into resistance at the $4.62 level and needs an additional bullish catalyst to break higher.
“Some of the cash fundamentals on corn and soybeans in these front months has been pretty important. We’ve been able to rally these spreads, tighten them up, narrow them up a little bit on old crop. And I think that’s just lack of movement across the countryside. I think once we get through planting, we’ll have some more bear pressure on those old crop months specifically.”
He says in the Western Corn Belt, basis has been improving on soybeans as yields were fairly normal.
Planting Ahead of Normal
Planting nationally was 7% ahead of normal on soybeans and 2% ahead of normal on corn planting but the market faded it in part because Iowa is lagging on both corn and soybean planting with wet conditions.
Minor says, “You go with that eastern part of the state in Iowa, kind of Missouri for sure. It looks like the forecast is still super wet. They’ve been wet. They’ve had no real look at the fields at all. Probably eastern Iowa, Missouri, Michigan, Wisconsin, that whole stretch. Even eastern Minnesota is pretty wet yet. So when I look at those areas, very, very far behind. But it’s early. We’re sitting at the 21st of April still. My rule of thumb normally is once we get past that WASDE report in May, then we get a pretty good look at it.”
So that will be a key time frame because if the wet forecast continues through May 10 and the 6-10 days beyond that the funds will start to care.
China Meeting
That time frame also coincides with the scheduled meeting between President Xi and Trump on the 14th and 15th.
“So there’s going to be a lot going on right in that time frame in that second or third week of May that could move the market,” he adds.
Wheat Ratings Drop
Wheat futures saw some profit taking early in the day session but came back on weather and still digesting the crop ratings which were down
4% nationally to 30% good to excellent.
The reason it didn’t provide more of a push to the market is because it was largely traded on Monday but those conditions aren’t likely to improve with frost that has now damaged the crop.
“It’s become quite volatile again off multi-year lows, which made sense with the poor crop conditions down South. It’s still struggling. I mean, we’ve got wheat heading out in places a couple weeks early for what it probably should be. So not a great sign. I still think a little bit of rain could help that Southern Plains area for sure. But some spots are just going to be too late as well,” he adds.
Can Wheat Rally Further?
The wheat market has still not taken out the recent highs in SRW or HRW classes and will need a catalyst to get above those levels.
He says the wheat market is also heavily dependent on inflation and hedge funds coming in to buy and how the crop finishes in the Southern Plains.
“I still think it’s a lot of outside market fundamentals. The wheat market can get inflation hedging bought up with the crude oil market, for example. And then just talking about things like today’s U.S. dollar move, things like that will be important as well. But mainly just the weather market that we’ll have in the Southern U.S. going forward,” he explains.
Cattle Market Falls Further
Cattle futures saw early strength erode on technical selling and fund long liquidation.
Minor says this is a healthy correction off of contract and record highs but it has been triggered by fear of the border reopening to Mexican cattle.
“I think, because the meeting going on on Friday in Arizona with Brooke Rollins going to visit the border. So that leaves a lot of questions up in the air on what could happen there. And I think that’s kind of at the heart of it. We’ve had a really good rally again, so having some fun liquidation totally makes sense. Little pullback. We tried to fight back higher today, and I thought we were fighting at a pretty good close, and then it kind of had a poor close by the end of it here, technically. So looking at that 20-day just under us as support for a lot of these months.”
However, he isn’t concerned yet because of the strong fundamentals.
“Kill’s been super low lately. Packers have been trying to get margins back to a comfortable level, trying to kill few cattle as they can, get meat propped up pretty well. And it seems to be responding. It’s always worrisome when they pull kill way back and then you don’t see cutout respond. But we’ve seen choice and selects respond a little higher here recently. So I thought that was a good sign, especially going into the right time of the year as well seasonally. We should be seeing that bump anyways,” he says.
What if Support is Breached?
However, if the futures take out 20-day moving average support, he thinks how much lower will you fall?
“Well, we’ve gone up for about five, six straight years now. So we can do some pretty hard technical damage on this chart. This cattle market can take some really, really big swings, I think, off of it if it wanted to or got a good reason.”
t’s just seasonally, we start to talk about it. It’s going to be grilling season, and we all know we like steaks at the beginning of the year, hot dogs at the end. So hopefully, choice response pretty quick here after about the 1st of May. So if we do have some hard down days, I’m hoping that it won’t last much
Hogs Up a Second Day
Lean hog futures were up for a second day on short covering after a gap higher opening in the June contract.
Is this just a dead cat bounce or are there fundamentals to support the move?
Minor says, “Cut out, grinded its way higher to just over $100 again, kind of led by hams and bellies, but nothing sporadic, I thought, to really stand out to me across the board for the most part. So it seems like cash had a solid week of about a buck higher or so, so far, but there’s still
plenty of hogs around, Michelle, I think. When I look at this hog market, fundamentally, we got to be starting to get into some lower hog numbers here soon. This week and next week, still sitting at 2.4 to like 2.8 million number for the kill. And hopefully about the May 1st timeframe, we start to get a little bit lower numbers, prop that cut up a little bit higher. We’ve got the June back in a line with fundamentals, probably up front. We’ve taken most of the premium out, but we’re still a little bit optimistic, even going forward out in those future months, especially.”
