Grains stage a nice rally on Wednesday with fund short covering and corrective buying but also some fundamental news was supportive.
Bryan Doherty, Total Farm Marketing, says, “Technically the corn market pushed down to support levels below the 50-day moving average and seemed to run out of sellers and the same thing in soybeans.”
He says farmer selling has dried up as well as prices have retreated from last Thursday’s report day highs. “There’s just isn’t a lot of appetite to sell here. We’re hearing from a lot of farmers this week that they’re just not interested in selling unless basis did some heavy lifting or the market rebounded.”
Doherty thinks the roughly 400-million-bushel disappearance in corn in last week’s USDA Quarterly Stocks Report is also positive.
However, he says the grain markets will now need some sort of catalyst to get funds to continue to cover their short positions, most likely in the form of weather concerns. “All of the uncertainty of the new crop is ahead of the marketplace,” he adds.
The pullback in the U.S. dollar index and higher crude oil and energy prices were also supportive. Crude oil is reacting to rising tensions in the Middle East and tightening inventory and so it is adding some risk premium. “You’ve got an energy complex that continues to move higher, and we think that is long term supportive,” he says.
News that Russian authorities have halted grain exports on ships belonging to Aston, one of the biggest local grain trading houses, in an effort to expand a quality probe propped up prices.
More HPAI cases, now in an Ohio dairy, also caused more fund long liquidation in cattle. Doherty says the fear is that meat demand is going to falter and so that could create an environment where funds sell every rally. However, as time passes, he says the panic may subside and if consumers stick with beef the market will rebound.
While not as volatile, the milk markets have slowly ground lower in the wake of HPAI news. Doherty says the market reaction has been confusing because the potential for lost milk production should push the market higher, but it hasn’t. “The cheese market continues to languish, it’s as though the market doesn’t really know what to do with this,” he says.
