Grain and hog markets ended higher on Friday, with cattle lower.
Grains See Technical Buying and Add Weather Premium
Don Roose, U.S. Commodities, says grain markets rallied Friday and were higher for the week.
The markets saw technical buying as traders were adding weather premium in the corn market, and to some degree soybeans.
Forecasts for a ridge of high pressure next week bringing in some heat during the critical pollination stage helped spark short covering in the corn market on top of some early production and pollination issues he says.
“Remember we made a reversal in corn on Monday and so that triggered funds, who are short over 200,000 contracts, to take profits and cover some of that position,” he explains.
Corn and Soybeans Hit Resistance at Chart Gap Areas
New crop corn and soybeans hit resistance at chart gap areas during Friday’s rally.
December corn hit a high just under the gap setting at $4.32 3/4 and November soybeans came within a penny of the gap at $10.44 1/4.
If Weather Stays Hot and Dry Could it Bottom the Market?
Roose says the markets will need a larger weather concern to push past these technical areas and so the forecast on Sunday night will be critical for determining price direction.
If corn and soybeans can stage a technical breakout could a bottom be in place?
Roose says the market will need proof of lower yields as crop ratings are setting at historically high levels for corn and soybeans at 74% and 70% good to excellent respectively.
“I think you probably have to prove that the crop is threatened or getting smaller rather than bigger. So we’ll look at the crop ratings Monday afternoon and then I think going forward, we’ll see if the weather pattern did change,” he says.
Roose says soybeans are an August crop and still have time yet to determine yield.
Farmer Selling Slow
With December corn just making new contract lows on Monday the cash corn price in the country was under $4, so Roose says the lack of farmer selling also supported the rally.
“The producer just is not interested in selling. They remember last year when March corn went in February to that $4.21 1/2 area. So, I think it’s just some of that along with the insurance guarantee put a bottom in,” he says.
Tariffs Making U.S. Unreliable Supplier and Slowing Demand
Tariffs and trade developments, especially regarding China, are also being watched by the trade but so far have been a headwind for traders and they are creating uncertainty.
Plus, Roose says the tariffs are making the U.S. an unreliable supplier and many countries are starting to develop trading relationships with other countries as a result, which could hurt demand.
Cattle Futures Close Lower Despite Strong Cash
Live cattle futures were lower on Friday despite steady to higher cash.
Cash developed in the South at mostly $230, with a few $23, steady to $1 higher. In the North dressed prices were mostly $380 up $1 and live from mostly $240 to $242.
On Friday August made all-time highs again before ending lower and scoring another key reversal.
That’s renewing concerns about whether this was routine profit taking or a market top.
“We’ve negated the key reversals several times on the charts with the help of higher cash trade and the futures discount to cash,” Roose replied.
However, packer margins are in the red with boxed beef values falling well off their highs and packers have been cutting kills to prop up margins, both regional and majors he says.
