Grains are seeing significant pressure early Friday on farmer selling and profit taking after hitting chart resistance on Thursday at key moving averages.
Rain chances are also better in the 7-14 day period for dry areas of Brazil and the U.S. production areas could get precipitation from the northern corn belt down to the Southern Plains. Darin Newsom, Barchart Senior Market Analyst, says the “rain makes grain” mentality has hit the markets as some areas of the corn belt and wheat belt will receive some much needed precipitation.
Going into the end of the month and the end of the first quarter there is also anticipation about whether or not the funds will take profits on their short positions in the grains. Newsom says they have already been doing some of that this week but the rally continues to be capped by farmer selling. However, if the funds continue to short cover in the grains it could produce a larger rally.
Cattle are lower again Friday morning after scoring reversals again Thursday for the third time in the last few weeks after news of record cash trade. However, does it mean anything in this type of tight supply market? Newsom says these daily reversals have been negated and its the monthly and longer term charts that are more meaningful and show the uptrend is still intact. “As long as consumer demand stays strong that should be supportive and we are getting into the best demand timeframe of the year,” he says.
Gold made new highs again this week and has corrected while the stock market made new highs yesterday as well. Newsom says its largely a function of the Fed news this week that interest rates will start going down with three rate cuts into the end of the year. He says that could have implications for the ag sector and keep money heading to those markets at the expense of ag futures.
