Grains were lower early Thursday, cattle higher, and hogs mixed.
Grains See Further Profit Taking
Grain markets were lower on Wednesday seeing profit taking after hitting key chart resistance, farmers hedging and with cooler, wetter extended weather forecast for the Midwest.
Further pressure was seen on Thursday as a result, according to Randy Martinson with Martinson Ag.
Corn Hits Resistance With Change in Weather
He says corn pulled back after hitting key technical resistance near the 50% retracement around $4.65 on December futures.
“Everybody’s been talking about that 50% retracement level for corn, which would have put that for December right around that $4.65 level. We hit that exactly and then saw the market turn. So I think there was a lot of hedge selling that kind of helped push the market down in the afternoon as well.”
Plus, $4.67 was right around that 200 day moving average area, which was also stiff resistance and could have resulted in a possible key reversal lower or an outside day lower, which are both bearish.
Still, Martinson downplayed the impact as it comes in the middle of a weather market.
“If this weather forecast holds and we continue to see the hot and dry forecast for the next seven to 10 days, I think that’ll charge the market back up again. A lot of the corn is going to be in pollination next week, and they’ve got a chance to see some damage done to it.”
Report Positioning
The market is also seeing some positioning ahead of Friday’s WASDE report.
For the report, Martinson expects corn yield to remain at 183 bushels per acre, with possible demand-side changes: higher exports, slightly lower ethanol use, and an increase in feed and residual after lower-than-expected quarterly stocks.
He says, “You know, with exports, I think we have to see exports increased. I’m thinking it should be about 250 million bushels, but I don’t think USDA will be that aggressive. And then we might see ethanol demand lowered a little bit.”
Tension Rise Between the U.S. and Spain
Tension also flared between the U.S. and Spain Wednesday with President Trump threatening to ban Spain from our export market.
However, Martinson says it doesn’t have a big impact because they are not a huge import customer for U.S. corn.
Soybeans Fade China Business, Hit Resistance at $12
Soybeans faded the confirmed Chinese purchases of 17.3 million bu. on Wednesday and another 5.0 million bu. on Thursday.
Martinson says this demand news was already priced into the market. “I think the trade was hoping for a little bit bigger sales but with an over 50 cent rally the Chinese business was baked in,” he states.
Still, continued flash sales to China could help offset a potentially negative soybean balance sheet in the WASDE report and may be needed to push futures back above the psychological $12 level.
Rumors circulated on Wednesday of another six cargoes of soybeans being purchased by Cofco and Martinson thinks China could continue buying rather than waiting until harvest or leading up to the September 24 meeting with President Xi.
“I would actually expect them to continue to keep buying right now. I mean, besides that big run up on Monday, you know, we’ve gotten down to prices where we’re somewhat, closer to being competitive with Brazil. The rumor is that they’re looking at lifting a 10% tariff from both the U.S. and China on our import goods. If that happens, of course, the tariff gets applied at the time of shipment. So if we lift that here in the short term, I think China continues to keep buying.”
Wheat Grinds Lower Ahead of WASDE
Wheat futures also fell with corn on Wednesday and hit chart resistance, so it is seeing follow through technical selling.
However, Martinson expects a positive WASDE report for wheat due to the reduction in winter wheat acres by 900,000, in the Acreage Report.
“That could potentially lower production by roughly 40 million bushels,” he says.
Global wheat and corn production may also continue to shrink due to drought concerns, especially in the European Union.
“Oh, that’s been the trend. I mean, definitely for wheat. I mean, every country is backing off. You look at the trouble that the European Union is having with drought and how their crop ratings are dropping and their potential production is declining for both wheat and corn as well. So, yeah, I would expect that we’re going to continue to see the world numbers for both wheat and corn shrink,” he says.
Cattle Selling Exhausted?
Cattle futures were higher early Thursday after seeing a reversal in feeder cattle futures on Wednesday to close higher and back above the 100-day moving average.
Meanwhile, live cattle futures ended off of session lows.
Martinson believes the recent selloff may be exhausted because futures remain at a large discount to cash and demand is still strong.
He expects a possible retest of old highs, though higher crude oil, pressure on the stock market, and renewed interest-rate concerns could limit upside.
“I do think we are going to see another run for the highs. I don’t know if we’ll be able to get to new contract highs, but I think we should test the old highs, mainly because of strong cash trade and strong demand,” he explains.
Seasonal weakness in boxed beef and cash cattle is a risk, but Labor Day demand may help support the market into early September.
