Grains ended lower on Tuesday with livestock higher.
Corn and Soybeans Ease on Profit Taking
Grains were lower on Tuesday seeing some profit taking after corn and soybeans made some new highs for the move on Monday.
Greg McBride of Allendale, says the market also saw some farmer selling and hedge pressure.
“Especially with the July contract going up and meeting that same high that it made back in March. It looks like an opportunity for these producers to get some of the last gas sales on old crop. You saw most of the negativity was up front, those May and July contracts.
December corn and soybeans also retested recent highs before hitting chart resistance.
He says, “The beans were up at just about their highs. The old crop beans, their old highs, are within 15 to 25 cents of it. So there’s some concerns about maybe getting up to the nosebleed section, especially at this time of the year when the markets do tend to put tops in. Anywhere from May to early June.”
Crude Oil Anchors Losses
The lower crude oil market also weighed on corn and soybeans and even wheat according to McBride.
“We see the market step back on Tuesday with the crude but we’re playing this back and forth game. So I think you’ve got to be careful about where some of the strength or weakness is coming from,” he points out.
He says money has been flowing into the grains due to the energy component but without a fundamental push it can easily reverse.
Fast Planting Pace
Another factor weighing on corn and soybeans was the fast planting pace at 38% nationally on corn, 4% ahead of average. Soybean planting was also at 33%, which is 10% ahead of the five year average.
Although the trend has been growing the last few years plant soybeans early this pace does support production. “Usually being ahead of pace does mean that we’re going to see a trend or above on on yields barring any major weather issues,” he says.
Plus, he says in areas that were struggling just a few days of favorable weather can result in some major progress.
“I think the guys in northern Illinois, northern Indiana, where they’re a little bit slower, we’ll see that pick up here over the next couple of weeks too,” he adds.
Soybeans Well Supported Ahead of China Meeting
McBride thinks that especially soybeans will be supported on any breaks heading into next week’s trade summit in China.
“I think that’s part of the reason that we’ve seen the bounce recently. You go back to October when we saw this similar lead up to the meeting between Trump and Xi. I don’t know that we get anything out of this for soybeans. It’ll probably turn into something more for agricultural in general purchases, but it’s definitely something the market’s going to be watching for,” he says.
He’s in the camp that the extra 8 MMT of old crop soybeans mentioned by President Trump is unlikely but if it is that would shock the market.
“We haven’t heard anything about that since early February. So if that comes out, that will be a market mover, especially for those soybeans,” he says.
Buy the Rumor, Sell the Fact
Even if the China buys the 25 MMT of new crop soybeans the market may sell off anyway according to McBride.
“The 25 million metric tons for this year, for 27 and 28, I think you’ve got to have that priced in already,” he explains.
Now it’s one of those things where we are status quo. You’ve got to see some sort of a weather issue or you’ve got to see. I know everybody wants to
Wheat Consolidation Continues
Wheat futures continued to consolidate off the recent two year highs taking out risk premium, including weather premium with rain in the forecast for drought areas says McBride.
“Well, the wheat’s an interesting one because it’s so friendly depending on where you’re at. The Southwestern belt is dry. There’s a lot of acres that are going to be up for abandonment. There’s a lot of areas now, right, as we talk, that this week, this tonight, or on Tuesday night into Wednesday, you may be seeing some frost, some freezes, even some snow in some of those areas. So there’s some concerns about this crop out there,” he says.
However, the market is also driven by the crude oil market. “So you see the weakness in the crude on Tuesday and the wheat followed it. What happens if we go up another $4 or $5 in crude Wednesday or Thursday does the wheat take off to the high side again?”
Wheat Holds Support
Wheat futures did hold support on the charts to keep the uptrend intact and the funds defending their long position.
He says, “For right now, and you’ve seen the Minneapolis position for the funds has gone to a record long. KC is long. Chicago is just slightly long at this point when it comes to the managed money positions. That’s not a situation that you take lightly. They don’t tend to stick into those
long positions for wheat. But when they start to build and they build like they have, especially in the KC in the Minneapolis on either drought or smaller crop because of less acres, that could be a situation that maybe sticks around for a little bit. And maybe what we’re doing really is resetting the overall dominant range to a little bit higher in that wheat market.”
Funds have not been this long in wheat since June of 2022.
May WASDE Confirm Smaller Crop?
Will the May WASDE confirm the smaller winter wheat crop or will the market get that news from the Kansas Wheat Quality Council Wheat Tour next week?
McBride says, “Yeah, I think it’s the wheat tour will probably have a better look at it. You’ve still got some areas that are coming out of dormancy. I don’t know how much the USDA is going to want to step out on their WASDE report, but I think that the wheat tour is going to tell us a lot as we go through it.”
The rate of abandonment may be the key which can be a wild card. “I hear a lot of producers talking about abandonment in January, February, but then it comes out that they end up with a crop that’s 30 to 50 bushels. I do think just based off of some of the customers that I’ve talked to, there is going to be more abandonment than other years. It’s hard to gauge at this point right now. I know there’s a lot of insurance guys out there checking fields to see what’s available to them.”
Cattle Market Recovers Tuesday
Live and feeder cattle futures staged a recovery on Tuesday after holding key support areas on Monday’s set back and with lower corn prices.
However, McBride says there was also some early cash trade at higher money of $255 to $257, which is unusual this early in the week.
“So you had a strong cash trade last week. We were up $8 or $9 from the previous week. You started getting this early week cash trade on Monday and then some on Tuesday is an interesting look because we don’t see that very often. So to have steady to even up to two dollars higher does push this market a little bit,” he explains.
Plus, boxed beef was higher on Tuesday. So, he thinks Monday’s action was tied to news of the DOJ probe of meat packers.
“This is a market that’s in an uptrend and has been in a long-term uptrend. So lately, these sell-offs, especially when it’s $5, $6, $7 in the feeders, has been a buying opportunity for speculators especially,” he adds.
So higher cash could negate Friday’s key reversal.
DOJ Probe
With an announcement expected Friday on more action against the meat packing industry to get beef prices down that could spook the market again.
However McBride says this is not the first investigation and no changes have ever resulted from it.
“It’s one of those things, it needs to go further. They need to find something or they need to do something about it. But just having a probe, I don’t think that does anything for us substantially,” he adds.
Hog Market Bounces
The hog market finally bounced off of four month lows with the help of the rally in cattle and as futures held support.
McBride says, “We took out support from like a week ago, two weeks ago on Monday. We took that low out on Tuesday. The reversal here looks good. I’m hoping what we’ve seen is we’ve finally seen a little bit of a fight for for seasonals in that market. You know, we talk about seasonals and all these other markets, but as you go into spring, you start to see the procurement for for summer grilling season. That’ll be the one to really watch when it comes to the to the pork side of things. Can we get some sort of a retest of, you know. just getting back up to kind of 50% retracement. That puts you around like $106, $105, something like that in those June, July, August contracts.”
