Grain and livestock futures all ended lower on Monday.
Grains See Profit Taking After Hitting Resistance
The entire grain complex saw profit taking Monday after hitting chart resistance and after posting higher weekly closes in both corn and soybeans. Allison Thompson with The Money Farm says March corn ran into the 200-day moving average at $4.48 1/2, with January soybeans stopping out at the $11.41 area on the charts. March hard red winter wheat also hit the 100-day moving average at around $5.37. Soybeans actually posted a daily reversal put she still calls this a mild correction and doesn’t believe there was much technical damage done after $1.50 rally off the lows.
Lack of News
The general market place was lower with a risk off environment in outside markets spilling over into the commodity sector. Thompson says volume picked up after the holiday and there was a lack of fresh bullish news to push the market higher. “So the path of least resistance was lower,” she explains.
No China Soybean Sales
Specifically in the case of soybeans, there was also no confirmation of last week’s rumored soybean purchases by China in the form a flash sale from USDA. She says that left the market bulls disappointed. “I think they want to see that business confirmed in a lump sum,” she adds.
What is the Catalyst for Grains to Retest November Highs?
In the case of the soybean market, Thompson says the trade is in a “show me” state and wants to have most of the 12 MMT of China business confirmed before retesting those price levels. “We are supposed to get the finalized deal signed in the next week or so and it would be helpful to see the details on the purchase agreements between the U.S. and China,” she says. Otherwise, she says soybean futures will need a weather problem in South America.
Corn Needs a Catalyst: Could it be China?
While export inspections for corn were solid again Monday at 56 million bu. and total shipments are at 747 million bu. which is up 71% from last year. However, Thompson says the market wants to see even more demand to chew through the record crop and a 2.15 billion bu. ending stocks. She says the catalysts that could get the corn market to move higher include lower yield or a demand shock. Could that come in the form of China buying? Thompson says the country’s corn prices have been rallying with wet conditions in the major production area damaging the crop.
Corn and Soybeans Watch South America Weather
The other catalyst for both corn and soybeans could be a weather problem in South America. By the middle of December all eyes will be on the soybean crop in Brazil to see if the weather will be conducive for producers to get record production. There has been some early dryness in Southern Brazil and weekend rains were lighter than expected but it was too early to cause concern.
Wheat Falls on Exports and Global Production
Wheat futures failed at chart resistance and despite a weaker dollar. However, fundamental pressure came as a result of growing global supplies according to Thompson. Late last week the BAGE bumped Argentina wheat to 25.5 MMT, up 1.5 MMT vs USDA 22.0; 39% harvested. ABARE pegged Australia’s crop 35.6 vs earlier estimate of 33.8 MMT vs USDA 36.0 MMT. Meanwhile, she says weekly export inspections were also disappointing at only 14.1 million bu. Plus, the market is numb to headlines regarding a Black Sea peace deal.
Cattle Futures Fail
Cattle futures ended lower Monday with a lack of follow through buying after a strong finish to the week on Friday and higher weekly closes in both live and feeder cattle futures. Thompson says the market saw profit taking, plus with no fresh bullish news it took the path of least resistance and moved lower. She says funds have been liquidating their long position in the cattle markets but whether they are done or not is the question especially moving into the end of the year when they have had tremendous profits. Thompson says there is early talk of higher cash trade, however, which she thinks could be the fundamental that could pull the market back higher.
