Grain and livestock futures ended mostly lower on Friday.
Grains End in the Red Friday
Grain markets failed to extend Thursday’s gains after hitting chart resistance but Shawn Hackett of Hackett Financial Advisors, says the record yield estimates for corn and soybeans heading into the Aug. 12 WASDE also kept a lid on the market.
“There’s too much fear going into the Tuesday WASDE report. You can get some technical bounces on the short -term basis like we saw on Thursday, but to get follow -through you need either clear and present danger on weather which we really don’t have or you need the USDA to say that these very high yield estimates that some outfits have been putting out are not correct,” he says.
Will August be the High Water Mark for Yields?
Hackett says he expects the August WASDE to be the highest yield figure for a couple of reasons.
First, the increase in corn acres came from fringe states.
“When you plant the second highest number of acres we’ve ever planted, that means a lot of fringe acres are getting in the ground and those acres even if the weather is good are going to not yield those big time yields that you can get in Iowa and Illinois and such.
Secondd, he says ve done some analysis of other years with high night time temperatures to see how it correlates with yield.
“We’ve confirmed a warm an historic warm night July of 70 degrees or higher 15 days or more and it looks like we’re gonna get another round of warm nights here in August which is also a strong indication that the statistical yield by the USDA in August tends to overestimate what actually happens when those agronomic data starts getting factor into yields,” he adds.
The best comparison is 2010 and in that year USDA over estimated the yield by a large percentage.
Could the August WASDE Bottom the Corn Market?
Hackett thinks its possible because the trade has been leaning so bearish.
He believes the market is trading a 185 bushel corn yield but the average trade guess pre-report is just over 184 bushels.
“So if USDA gives us anything below that figure could net a positive reaction, anything above that level could be negative,” he says.
That could serve to bottom the market before harvest like it did last year when the low was forged on August 28.
Soybeans Fear Yield But Also Lack of China Demand
Average trade guesses for soybeans yield are around 53 bushels which would also be a record but that crop could still see weather issues in August that could trim production.
Hackett says the pressure in the soybean market has come from slow demand and China being absent from the soybean export picture.
President Trump said Friday he expected the tariff truce between the U.S. and China would be extended 90-days past the Aug. 12 deadline but Hackett says what the market really needs is a trade deal.
“The market is in a show me mentality and wants to see sales,” he says.
Wheat Struggles Despite Solid Export Demand
Wheat was also lower on Friday and is just a few cents off this week’s contract lows.
While demand has been strong on the export front, Hackett says the market is still trying to digest the better than expected hard red winter wheat yields.
The other headwind for the market has been the weakness in corn.
Have Cattle Topped?
The cattle futures had an ugly day on Friday with sharply lower live cattle prices and limit down closes in all the feeder cattle futures contracts of $9.25.
Hackett says that signals to him the top may be in.
A light trade developed late Friday afternoon (after the USDA cut-off time for the afternoon reports) with Northern dressed deals done at mostly $380, $4 lower than last week’s weighted average basis Nebraska, $240 live in Iowa. Southern live sales were at mostly $235, steady to .50 higher than last week’s weighted averages.
