Grain and livestock futures all ended higher on Wednesday.
Grains Rally Wednesday as Farmer Selling Eases
Grain futures saw a nice rally on corrective buying Wednesday. DuWayne Bosse with Bolt Marketing says the market was easier to push as volume was light due to the holiday. However, farmer selling pressure also subsided ahead of first notice day on Friday. This is when farmers need to either roll or sell their December futures or basis fixed contracts or face delivery. Much of that selling took place last week and to start this week so Bosse says the lack of sell paper also allowed a rebound in the market.
Corn and Soybeans Push Above Chart Resistance and 20-Day Moving Averages
Corn and soybean futures both pushed above short term chart resistance and closed above their respective 20-day moving average which was encouraging to Bosse. “If we come in here on Friday and see some follow through buying we could have higher weekly closes which could be attractive to fund traders are we start a new month,” he says.
Corn Market Sees Strong Demand
Corn futures also rallied with a strong ethanol production report at 1.113 million barrels per day, up 2% from last week. That’s on top of this weeks record setting corn export inspections which show an accumulated total that is 73% above last year. So strong demand is helping to support the corn market.
Soybeans Rally on China Soybean Buys
Soybeans started lower on disappointment there were no flash sales confirming rumored China export purchases. Trade talk speculated anywhere from four to 14 cargoes of soybeans were bought by China. Reuters reported 10 cargoes were booked following President Trump and Chinese President Xi’s phone call on Monday. USDA Secretary Brooke Rollins also reported China had made $300 million of soybean purchases with the framed contracts to be signed within the next two weeks.
What Will it Take to Get the Soybean Bulls Excited?
Trade estimates put China purchases at 3 MMT or 110 million bushels which was already factored into the market. So, how much more China buying will the bulls need to see to resume their buying spree in the soybean market? Bosse says, “That’s a good question. Right now these purchases have all been made with U.S. prices well above Brazil and so it has been political posturing trying to keep President Trump happy.” So, it really depends on if China will continue to buy at these higher prices.
Wheat Sees Short Covering?
Wheat futures were also higher on short covering and technical buying but Bosse says farmer selling and hedge pressure also eased with most of the positioning ahead of first notice day complete. Bosse is concerned that it could be a head fake but if soybeans can continue to rally wheat could follow.
The wheat market has also been following the developing news on the peace talks between Ukraine and Russia and the impact it could have on global wheat trade. The other influence comes from the impact that is having on the value of the dollar and crude oil. Lower crude oil is a negative for the wheat market, while the weak dollar would be supportive for exports.
Cattle Futures Soar on USDA News or Just Oversold?
Cattle futures were sharply higher on Wednesday as Bosse says the market was over sold after the bearish reaction to Tyson’s announced closure of the Lexington, Neb. plant and the lifting of the 40% tariff on Brazilian beef. However, an interview with USDA Secretary Brooke Rollins provided at least some assurance on the timing of the reopening of the border to Mexican feeder cattle. The Secretary stated the reopening would start in Arizona and be staggered. “Isn’t that what she said back in July?” remarked Bosse, who wasn’t sure that should have been that bullish to the market.
Cattle Futures Fade Sharply Lower Cash
The rally in the futures was impressive considering it came after news of sharply lower cash trade. Volume was light but was reported at mostly $330 dressed in the North, down $15 from last week’s weighted average with live sale prices at $210, down $7. In the South business was done at $215, down $7 to $9.
How Much Recovery is Expected?
Live and feeder cattle futures did hold some longer term support areas this week at $300 in the January feeder cattle and $200 in February live cattle which was positive. Bosse says with a higher close on Friday both markets could put in weekly key reversals. However, he isn’t sure the market will see a full 38% retracement of the correction from the highs because the funds are still in liquidation mode. He fears they will use that strength to exit additional longs.
Hogs See Short Covering
Lean hog futures were also higher in what looked like end of the month profit taking and short covering according to Bosse. He says the fundamentals are still bearish with falling cash trade and rising weights.
