Grain and hog futures are lower on Tuesday, with cattle extending gains.
Darin Newsom, Senior Market Analyst with Barchart, says grains are seeing follow through fund selling pressure with tariff fears ramping up and the uncertainty is at the same time pushing up the gold market.
The March 4 date is closing in for 25% tariffs on imports from Mexico and Canada and President Trump reiterating those tariffs will be indeed going in place.
Chinese tariff and trade war concerns are also growing with a new fee on Chinese vessels coming into U.S. ports and the 10% additional tariff on Chinese imports.
Funds are also selling due to weak technical signals left from Monday’s poor closes and on end of the month positioning and profit taking.
This is especially true in the corn market where funds hold and extremely long position.
He says, “The fact that funds added but 44 ,000, 46 ,000, whatever contracts it was to their net long futures position in corn as of a week ago today is a bit bothersome because again, we’ve seen basis weakening, we’ve seen the carry in the future spreads and the old crop spreads strengthening. So we knew that fundamentals were not pushing this market at least at that point.”
Newsom says the May-July spreads in the corn are building carry and showing the market is comfortable with the status of Brazilian safrihna corn planting.
“If you calculate the level of full commercial carry, you know, it’s been covering more here the last couple of weeks, a couple of Fridays ago, it covered 11 % at Monday’s close. It was 20, out to 23 % already. So it’s still bullish. And what this tells us is there is a growing confidence in Brazilian Safrina crop production,” he explains.
Basis levels have also been weakening in the grains, in particular corn as it neared the $5 level and induced some farmer selling.
“There’s been a lot of supplies coming on hand from U .S. producers left over from last year’s harvest, the 2024 harvest, so it’s been coming online as well coming into the supply line and so that’s been putting pressure on the March -May spread,” according to Newsom.
Newsom says the recent rally in corn also attracted additional acres, while causing farmers to plan for fewer acres of soybeans.
Wheat futures continue to slide removing premium from warmer temperatures in the Southern Plains and Black Sea, although Newsom argues there wasn’t much weather premium in the markets to start with.
He says the spreads are also indicating weak demand.
Cattle futures are extending gains from Monday with lower corn prices and boxed beef cutouts have finally bounced.
