Grains end lower, livestock higher Monday.
Arlan Suderman with StoneX says grains saw technical and risk off selling tied to the sharply lower crude oil market.
Crude plunged as Israel’s attack on Iran did not include energy or nuclear sites.
“We found out how much war risk premium was still in the crude oil market and demand out of China is soft and worries out demand and turning their economy around continue to be a concern,” he says.
However he says seasonal and harvest pressure was also a factor in the market as farmers look to tuck away the corn and soybean crop.
Weather has improved in South America with rains the last two weeks.
Central Brazil production areas including Mato Grosso received 1-2 inches of rain over the weekend and there is another 2-4 inches in the extended forecast for much of the country.
As a result planting pace in Brazil, especially on soybeans, has picked up which is adding to ideas of a record crop and that the U.S. will be a secondary export supplier.
“Our current estimate is 165 million metric tons, based on our customer surveys but we’re the lowest of the estimates out there. Most of them are from 168 to 170 million metric tons, I have seen one as high as 172 million. So, that potential is still there and every extra million metric tons that they plant is one less that we’re able to export,” he explains.
Suderman says that could mean the soybean market has not seen the lows yet.
He thinks corn is less vulnerable to downside risk because of the better demand picture, both domestically and on the export front.
“When you look at the export commitments to date corn exceeds the seasonal pace needed to reach USDA’s target by 125 million bushels, while soybeans fall short of the pace by 100 million,” he says.
He says Argentina is also cutting back on their corn acreage by around 20 percent, Brazil will get their second crop safrihna corn planted late and with a smaller crop in the Black Sea region that could mean more U.S. corn demand down the road.
The wheat market saw technical selling but Suderman says better rain chances in the Southern Plains and some rains that materialized in the Black Sea has also pressured the market.
However he says that is a developing story.
“What we need is lower production in the Black Sea and less exportable wheat on the market from Russia because that’s what sets the world wheat price. Right now we have ample supplies of wheat in this country,” he says.
Although Russia has talked about export restrictions they continue to sell wheat under their minimum price floor which overhangs the market.
Suderman does not think the markets are trying to price in higher tariffs or a trade war after the election, nor is the recent uptick in export sales a reflection of end user concern.
“If you look at the strong export pace in corn right now its largely due to business with Mexico, they did the same thing last year and it wasn’t an election year,” he says.
While soybean export pace has picked up, China’s purchases are lagging.
Suderman says discussions with Chinese buyers about that has yielded the response that they don’t want to affect the elections.
After some choppy action to start the day, live and feeder cattle futures ended higher working in the USDA Cattle on Feed numbers and helped by strong cash last week.
Suderman says he’s optimistic about the market because cash prices have continued to creep higher, even though this is seasonally when cattle can struggle.
“I don’t see anything to change that because consumers continue to buy,” he says.
