Grains slid lower on Friday, with live cattle and hogs higher, feeders mixed.
Alan Brugler, A&N Economics, says grains saw profit taking after hitting chart resistance and some technical objectives.
“The price probability forecast, $4.88 was the March corn number. You spiked above that and then you pulled back as we went into the weekend. The main resistance in beans is actually a little over 11 bucks for new crop, but support around $10.50,” he explains.
There was also some uncertainty about trade and other Trump administration policies.
“Yeah, so I think you just got a little position squaring going into the weekend. There’s a lot of uncertainty about trade. There’s a lot of uncertainty about the value of the dollar. You’ve got court cases that are that are intercepting or slowing down some of the things that the new administration is trying to get accomplished,” he says.
Brugler says fundamental pressure also came from improved weather in South America with Argentina getting some needed rain and wet areas of Brazil drying out to allow harvest.
“Well, I think we’ve stabilized the crop a little bit in Argentina with those recent showers and there’s a few more in the forecast,” he says.
Wheat futures saw some consolidation after funds covered short positions on Thursday with all three classes above the 100-day moving average.
The markets are nervous about the continued tariff talk and a possible trade war with major trading partners.
Tariffs are perceived as inflationary and so Brugler says funds have been buying commodities as a hedge against inflation.
There are forecasts China will revisit the Phase 1 trade deal leading to some U.S. ag purchases but Brugler is not certain that is how this plays out.
Brugler says, “You know, I think the main story there is that Trump and Xi both kind of indicated they would talk in the next few days and that isn’t happening. They’re both kind of waiting on the other guy to make the next move. Our take on this is that they’re, both sides would like to cut a deal, but they don’t want to be perceived as weak or not defending their interests.”
Live cattle futures ended higher but were down sharply for the week with lower cash.
Feeder cattle futures were also down over $11 due to the Southern border reopening to feeder cattle imports from Mexico.
Is this just a healthy correction after record highs?
Brugler says he’s still optimistic about the bullish fundamentals of the market and thinks this is just profit taking.
“The cattle cycle hasn’t actually turned yet. If you look at the cattle inventory report from the end of January there, you know, we’re we are we’ve kind of reached sort of a bottom number perhaps in the cow herd, but you’re still not seeing a whole lot of heifer retention there.”
