Soybeans were lower early Thursday with wheat higher and corn trading both sides. Livestock were also lower.
Wheat Holding Weather Premium
Wheat futures were higher on Thursday after some profit taking and a lower close the previous session.
Darin Newsom, senior market analyst with Barchart, says wheat is holding weather premium with the deteriorating crop conditions.
“Given what we’ve seen this spring where the winter crops never really went into a full dormancy, at least that’s what I’ve been told. And then we had a warmer winter and they started growing again, then get hit by a March freeze, it grows again, gets hit by an April freeze and so on. So based on all of that and the fact that the drought readings across the Plains continue to worsen, then we could say, yes, this, you know, what we’re seeing here is likely a result of building some weather premium in,” he says.
Does the market needs to add more premium?
Newsom says old crop contract do not with the ample supplies of wheat around the world.
“The reality is if we look at the future spreads, we’re not seeing the commercial side of the market react like we’ve got a supply and demand scare anywhere on the horizon for both hard red winter or soft red winter. Even though I know there’s an asterisk attached due to soft winter being subject to the CME’s lower variable storage rate of 5 cents per bushel per month. We’ve got soft red winter future spreads covering 70% to 80% calculated full commercial carry, which is bearish, which tells us there is no supply concern in relation to demand.”
He says there are also some speculators that are looking at wheat as attractive.
Technically Wheat Unable to Take Out Resistance
Wheat futures have also been unable to take out recent highs which for July HRW wheat would be $6.63.
He says the only thing to get the market above those levels is a continued deterioration of the weekly crop ratings, which could trigger algorithms into buying.
Corn Holding as Farmer Selling Slow
The corn market put in three days of higher closes and is trying to push through resistance on the charts with the help of the wheat market but also slow farmer selling as planting ramps up.
He says that has taken some pressure off the cash market and basis has firmed.
“If we look at the National Corn Index, we see that it has been firming in relation to the futures market. So we know basis has been firming. Now, I say that, and it’s an interesting situation in the national average basis market for corn in the fact that it has been firming. We have seen the cash market pick up a little bit as sales have slowed and demand still is out there. But if we look at the big picture and we look at the previous five-year low weekly closes and 10-year low weekly closes, You know, the market’s still running below those levels. So we know overall national average basis is weak. This tells us there’s still ample supplies to meet demand. It’s just immediate term. Those supplies have slowed down. Farmers are doing other things. They’ve gone out to the field,” he says.
Corn Hits Chart Resistance
Exports were also strong on Thursday at 51.8 million bu. but the market is still running up into stiff chart resistance.
Funds are holding a large net long futures position in corn so with the market up into the upper end of the trading range it may spark some selling eventually he says.
“So when we get these rallies and when we start testing those high ends of the sideways range you know it’s probably going to generate some selling for lack of any real commercial support coming in,” he says.
Soybeans and Bean Oil Look Technically Weak?
Soybeans and bean oil were lower on Thursday morning after November beans put in a double top on the charts and bean oil made new contract highs and then ended lower, scoring a key reversal.
Newsom says that technical damage doesn’t mean as much as it used to with today’s algorithm traders but is still generating new selling in the market.
“The algorithms just simply don’t look at double tops and they don’t look at key reversals and they don’t look at these sorts of things in the soybean oil market,” he says.
The strength recently in soybean oil has been tied to the diesel fuel market which was cooling a bit Thursday morning and that was also weighing on futures.
Newsom also points out the speculators were holding a record long position in bean oil. “And so this normally opens the door to some liquidation and so beans are just along for the ride because there are no other changes in fundamentals.”
Beyond profit taking the soybean market continues to trade concern about the mid-May meeting with China and the impact the ongoing war with Iran will have on the outcome. Days when the war tensions rise it weighs on soybeans.
Grains Divorcing From War or Will Inflationary Buying Kick In?
With the exception of the the bean oil and canola markets, Newsom says the rest of the grain space has seemingly tried to divorce from the war headlines and energy markets.
“I don’t think the grain sector is really watching all of the changing headlines but it gets caught up in it you know once the headlines change or are manipulated for market moving reasons,” he adds.
The next key will be when does inflation risk start to be traded in the grain markets, especially if energy prices remain elevated?
He says, “I think grains are out there. They will be an opportunity, I think, that will be looked at with some of these new traders and inflation.”
There will also be inflation tied to higher input prices and Newsom says he doesn’t think the fund traders take that into account.
“But the commercial side of these markets will certainly take it into account. So let’s say that because of input costs, we’re going to even plant fewer corn acres. We’re going to start to see that if it’s a real situation, if it’s really happening, we’re going to see that in those deferred corn future spreads. And if more acres are going over to soybeans at a time when there’s a serious doubt about global demand for U.S. soybeans, then I think we’re going to see the opposite trade starting to develop. We’re going to see more carry being built into this soybean spreads. And a lot of this, again, will have to do with U.S. inflation, input costs, and so on,” he says.
But Newsom adds that bottom line the algorithms don’t care if U.S. producers can’t make money.
“Never have, never will. It’s just not important until it actually starts to change the supply and demand situation. And we’ll first know that through basis and spreads.”
Inflation Fear Keeps Interest Rates Flat
The fear of inflation will likely also mean no change in interest rates next week at the FOMC meeting.
“Yeah, the inflation fears probably have put any idea of a rate cut on hold for the time being. And as we look at the Fed fund futures forward curve, there’s nothing expected to happen now through the balance of 2026. Shortly after the U.S. President went to war on Iran, we saw the October-November futures contracts, or the Fed Fund futures contracts, dip to a point where it was indicating a rate hike, possibly this fall. So, but that’s been erased as well as, you know, the status quo settled in. Nothing really expected to change. We’re also going to, except for the fact that we’ll have a new chair, theoretically. And reportedly after this meeting, I think Chairman Powell’s term ends in May. And so, you know, then we’ll see what direction the Fed starts to take.”
