Grain and livestock futures ended mostly lower on Tuesday.
Grains See Profit Taking
Naomi Blohm with Total Farm Marketing says grain markets saw profit taking after the higher closes on Monday and with the headwind of a higher dollar.
“Technically, we just don’t have any fresh fundamental news to justify December corn climbing above $4.25. We don’t have a reason for November beans to climb above $10.50. So we’re seeing some range trade action,” she says.
Report Positioning
The grain markets also saw position squaring ahead of the September WASDE.
Trade estimates have corn yield falling 2.8 bu. per acre to 186 bu. with soybean yields down just .4 bu at 53.2 bu. per acre.
Blohm says USDA will likely slow step any yield decreases even with the widespread disease in corn and soybeans and the dry finish to both crops in the Eastern Corn Belt, which will lower test weights.
She says it may take until the combines roll for the market to get an accurate picture of how much yield loss there really is in both crops.
What Kind of Yield Cuts Are Already Prices In?
The corn market has rallied nearly $.30 rally off the lows printed the day of the August WASDE and USDA’s shocking yield increase to 188.8 bu. per acre.
So, not only didn’t the market believe yield was that high it may have already priced in the 186 bu. pre-report trade estimate.
“So if the USDA prints 186 and if they keep carry out near 2 billion bu. well I do think it’s priced into the market,” she says.
For soybeans Blohm thinks the market has also priced in a minimal yield loss and so there will need to be a big move to surprise the market.
What Will USDA Do With Demand?
The bigger question may be what USDA does with soybean demand as new crop exports have been some of the lowest in many years and China has not bought any beans.
Blohm says she’s not sure if USDA will factor that into their demand estimate or if it will be too soon for USDA to write a trade deal off.
“I don’t know that they’re going to do any big reductions of demand because there still potentially is time for China to come to the table and buy some of our product. But of course, China might be a little bit slower to come to the table now that there’s the potential for the Supreme Court to view if President Trump’s tariffs are viewed as illegal or not. So China might be waiting to see when the Supreme Court takes a look at that situation and rules on the tariff trades being legal or illegal.”
She says corn demand could also be subject to some slight adjustments lower if USDA lowers yield but how much is yet to be determined.
Wheat Also Consolidates
Wheat was unable to extend Monday’s gains and saw profit taking with the strong dollar and lower corn and soybeans.
Blohm says she was encouraged by Monday’s bullish daily reversals in all three exchanges and is still hopeful the wheat market is trying to carve out a low.
“From a seasonal perspective, wheat futures have a tendency to start working higher at the end of September, and then they have a lot of tendency to rally into October. So, I’m wondering if the fund traders might be seeing that as well. They’ve been starting to exit some of those short positions in wheat. But we just need a story to emerge in wheat that the traders can bite on.”
Cattle Futures Collapse, With Limit Down Closes in Feeders
Live and feeder cattle futures had an ugly down day with triple digit losses in live cattle and limit down closes in feeders.
Blohm says the selling was technical in nature as prices took out the key 20-day moving averages and triggered fund long liquidation and profit taking.
“It was technical selling. So we have been in a really nice, of course, uptrend for the entire summer months, where prices have been maintaining the nice trend higher above the 5 and 10 day moving average. But today we actually broke the 6
uptrend and broke the 21 day moving average,” she says.
Whether or not there is a bigger break coming will depend on where cash trade develops later this week and if boxed beef values can continue to hold together.
A light trade was reported in parts of the North, at $378, $5 lower than last week’s weighted averages. The rest of cattle country was a at a complete standstill.
