Grains prices ended higher on Tuesday, with hogs also firmer and cattle mostly lower.
Corn Rallies on Lower Yield Ideas
Allison Thompson with The Money Farm says corn rallied on Tuesday as the market does not believe USDA’s 186.7 bu. per acre yield estimate.
“We had bullish reaction to a bearish WASDE on Friday and a record crop. I think the markets realizing it can’t go any higher at this point,” she says.
Disease and dryness are already taking their toll on the crop with many early disappointing early yield reports.
“It comes back down to where our yield reports are going to be. And of course, we’re starting to hear some of those. And it was by no means the perfect season everywhere. There’s a lot of disease pressure out there. And we’re starting to hear more of that being confirmed as these yield reports come in. So I think the trade isn’t necessarily buying the supply side,” she says.
Is the Corn Yield Below 2024?
If the market is not trading the 186.7 bu. per acre yield in the September WASDE, that corn yield is the market trading right now?
Thompson thinks it’s definitely possible the trade is looking at a sub-180 or low 180 yield on the corn crop especially with the higher acreage at 98.7 million planted acres.
“I do think it could go lower than that. Again, I’ve kind of been pushing the fringe acre talk the whole year, you know, the added acres came from up in my area, Minnesota, North Dakota, definitely in fringe areas that don’t have the big yield that a lot of the I States have. Bigger acres does not equate to a bigger yield,” she adds.
Corn Needs to Push Through Chart Resistance
December corn closed under $4.30 and under a gap area left from July 7 at $4.32 3/4.
Thompson says this will be a difficult hurdle to breach because of the early harvest pressure that is starting to come at the market.
However, she says if that area is taken out then then next big objective to clear will be $4.35.
Soybeans Rally on Lower Yield and China Hopes?
Soybeans also saw fund and technical buying pinned on hopes for lower yield but also hopes for a China deal with some progress being made on talks between the two countries.
President Trump and Chinese President Xi are expected to talk on Friday and so the market is hopeful the discussions will lead to an announced deal that will include soybean purchases.
The market is also trading lower yield ideas with the extremely dry conditions in August and into mid-September on top of disease pressure in the areas that saw moisture.
Soybean Export Window Shifting?
Thompson is still optimistic about the U.S. selling soybeans to China as she thinks the normal export window may have shifted this year.
The reason is tied to the late crop in South America, which didn’t hit the market during the normal window.
“Their planting was late, so harvest is late, and it just gets pushed back. So this big crop is hitting the market at a time when they normally don’t see big imports from South America.”
Prior to that the U.S. had strong exports to China.
“Back in January, February, and March of 25, the U.S. actually had really good exports for soybeans to China. That’s where they were buying from, which is typically we start to see them go into the South American window. But again, with
their crop being late, it just pushed everything back,” she explains.
Wheat Leads the Rally?
Winter wheat futures were up nearly 10 cents and Thompson says actually led the rally on Tuesday.
Part of it was tied to the lower dollar, which made two and a half month lows in anticipation of an interest rate cut by the FOMC Wednesday.
Thompson says export demand has also been strong for wheat and there is news more Asian countries may be looking to purchase U.S. wheat at these prices especially with Russia increasing their export tax by threefold.
Could Lower Interest Rates Bring Money Into the Grain Markets?
Not only does the lower dollar make the U.S. more competitive in the export market, Thompson says it may bring some speculative money back into the grain complex.
“And also, this is the first kind of light we’ve seen a feed cost potentially putting in their low and trending a little higher. So we might be seeing some money move around as well, maybe some some longs from the cattle moving was into the grains,” she says.
Cattle Futures See Lack of Follow Through Buying
After a strong rally on Monday the cattle futures saw a disappointing close on the lack of follow through buying.
Thompson says the funds have been liquidating some of their long positions on last week’s lower cash and the lower boxed beef market.
Higher corn prices may have also weighed on the feeder cattle futures with ideas of higher feed prices ahead.
