Grains end mostly lower on Wednesday, with livestock higher and all-time highs in live cattle futures.
Ted Seifried with Zaner Ag Hedge says corn and soybeans saw a profit taking setback after making new highs for the move and hitting significant price objectives.
May and July corn ran up into the $5 level which was tough long term resistance and with the market overbought there was some technical selling.
Soybeans also ran into chart resistance around the 200- day moving average and failed, which also triggered profit taking in that complex.
However, he isn’t convinced the reversals point to a top in the markets.
Adding to the reversals was a slightly more favorable midday weather forecast in Argentina, which added some better rain chances and a drier forecast in Central Brazil allowing for soybean harvest to pick up.
Seifried says the market also reacted to the confirmation that China was rejecting soybeans from five different Brazilian companies over phytosanitary issues.
It was viewed as a clue that soybean basis is softening in China.
“Is this China just playing games like they have in the past because they have overbooked and their economy is slowing or their crush margins have narrowed. Or was this an indication they were trying to cancel Brazil beans to make room for more business with the U.S. due to some trade deal between Xi and Trump? I think it was probably the first choice,” he says.
Also bearish for the soy complex was President Trump saying his administration is discussing a 10% tariff on Chinese imports because fentanyl is being sent to the U.S. via Mexico and Canada.
Farmer selling was also very likely after the big rally he says.
Live cattle futures hit all time highs with February closing above the $200 mark.
Technically, he says that suggests another leg higher but follow through buying will be key for sustaining the move and cash needs to continue to stay strong.
This week light cash has developed at $201 and $320 essentially steady with last week but the futures had some catching up to do with the cash market.
Feeder cattle futures also surged with January making an all-time high.
Talk that the border remains closed to Mexican feeder cattle imports due to New World Screwworm shot the market higher.
However, Seifried says cash will have to continue to advance with strong consumer demand.
