Grain markets ended mostly higher on Monday, with cattle lower and hogs mixed.
Soybeans Bounce With China Sales
Soybeans were lower overnight making new lows for the move and opened the day session lower as well.
However, a flash sale of 17.9 million bu. of new crop soybeans to China and another 5.0 million bu. to unknown destinations helped the market rebound says Mike Minor with Professional Ag Marketing.
It also and confirmed Friday’s rumored sales to China, which ranged from eight to 16 cargoes.
“The soybeans have been very well supported by good demand the whole way through this growing season. We’ve had a good enough demand story with our recent export activity for new crop and crush with the capacity there that’s been added. You’re in a good situation with a pretty tight balance sheet, even with a trend line yield,” he says.
So anything subpar is going to make the balance sheet super tight, according to Minor, especially if China lives up to their expectations for purchases.
He adds that the 14 cargoes China bought now puts them at 16% or 4 million metric tons (MMT) of their targeted goal of 25.
Soybeans, Corn Bounce After Tough Week
The soybean market also saw a technical bounce after losses of 65 to 70 cents last week as traders were removing weather premium.
Good rains fell in the Western Corn Belt starting Thursday night and moved East Friday and over the weekend. Many dry areas were replenished but not all. Some parts of Southeast South Dakota, Northwest Iowa and even Northern Minnesota and North Dakota largely missed the moisture.
So the market may be at a point it has removed enough weather premium and needs to pause.
He says, “The 50-day moving average held pretty decently today on the soybeans. 61% retracement on that as well.”
Dec corn also held the 50-day moving average around $4.60 and bounced and Minor is looking at the longer-term area around $4.50 for support.
Corn, Soybean Yield Helped by Rain?
The rain was also helpful to the corn crop especially with the way hybrids are today remarks Minor.
“Pollination maybe isn’t the real story anymore. It seems like the crop goes through that fine but that weight fill it seems like a very key time frame in this early part of August and it looks like the weather forecast is pretty favorable the next two weeks.”
However, he admits part of the recovery in corn on Monday beyond technical buying was the fact there is a dry pocket in the Western Corn Belt.
WASDE Could Show High Corn Yield?
Minor also thinks the markets were gearing up for the WASDE report next week, and he’s expecting USDA to provide a big corn yield number.
“Just the weather models, what USDA follows, how it’s calculated. I think that should be a pretty big number next Wednesday,” he says.
So, that may be a headwind for the market this week.
“It’s difficult to talk yourselves into too much of a problem there on soybeans at the current point with outlook on yield, just with the weather that we’ve got on the forecast. Corn, it’s tough to know, like how many problems were there when we were setting the around and down earlier on in the season with imperfect conditions. You know, Illinois, for example, very wet early on. Then they got dry, not the best combination. So what kind of impact is that going to have?
So, farmers may not know that until they get into the harvest.
Wheat Rallies as Black Sea Exports Near Stop
The wheat market was back up on Monday as last week’s 24 to 28 cent losses were overdone says Minor.
The market did trade war headlines with Black Sea export infrastructure destroyed last week only to have Ukraine say they were looking at alternative export route.
Still Minor says the Russia-Ukraine situation makes logistics difficult for about a third of the export facilities there and tightens things up on a global scale pretty quick.
The problem is not solved, leaving questions about when the market really trades that news.
He says, “Yeah, it’s tough because global balance sheets are tight on really corn and wheat for all grains. The wheat situation’s tight. The overall picture, though, based on this situation, doesn’t change global stocks. I mean, that wheat is still there, it just depends how they’re going to get it out of there. Maybe it’s a little bit more expensive. Maybe it takes a little bit longer time frame. You know, the logistics of it become difficult.”
Wheat was able to brush off news that the Iran peace talks had restarted after President Trump called off strikes over the weekend.
Still Minor points out the poor production in the U.S., EU and in particular France.
Funds Next Move?
The Commitment of Traders report showed that funds added to their length in the entire grain complex last week but that was as of Tuesday. Since then they likely sold a portion of those positions as the market fell.
So what is the next move for the funds?
“When they add a lot of long contracts like that, if they need to, if weather goes okay and we get a bearish report next week, they could rip a lot of those away and really cause this thing to push lower. But they’re long for a reason. They see that if China does buy anything near
what they expect to this next year, it gets really tight on the balance sheet. And if there is imperfect weather, it creates a pretty tight balance sheet quick on both corn and soybeans,” he explains.
So there are several reasons for the market to rally but they just don’t have the catalyst yet.
Cattle Run Into Chart Resistance
Live and feeder cattle futures posted higher weekly closes last week and staged a nice recovery off the lows set in reaction to the border reopening news.
The market opened higher Monday but ran up into chart resistance and was taking a bit of a break waiting for the cash market to provide direction. Cash improved late last week but on very light volume.
Minor says the market also saw smaller kills with the heat but the cutout value did not respond to that situation.
“We’ve bottomed it seasonally but we had a really good August on cutout last year. So with smaller numbers here, I want to see cutouts start to respond in a positive manner. And that’ll help the funds get a little bit more back on board. They just seem a little bit more disinterested in the cattle market than they have been in the last couple of years from a buying perspective,” he adds.
Cash also needs to move higher but producers are at a disadvantage with basis.
Lean Hogs Topped Seasonally?
Lean hog futures rolled over late last week and scored lower weekly closes. So it looks like the market has topped seasonally especially as the pork cutout has also failed to rally with lower slaughter.
Minor says, “You had an artificial lower kill there a couple weeks ago you had a couple plants down last week. It was all right here’s writing on the wall we had a smaller kill We need to see cutout respond with that. And actually the exact opposite happened. We saw hams get dumped on the market and it really tanked the cutout.”
He states that is not a good seasonal sign and it took hurt the hog market, especially the front months and that was evident with bear spreading on Monday.
“Nonetheless, it’s going to be pretty difficult for some of these months like October to start to get out of their own way,” he concludes.
