Soybeans see speculative selling and fall to new lows for the move with talk of China cancellations and more favorable weather in Argentina.
Mark Schultz, Northstar Commodity, says the funds have been relentless and keep pushing the short side of the market. “Yes, that has been the pattern. We’ve had technical key reversals up and Tuesday went absolutely nowhere.” He says at least the March contract held the retest area around last week’s lows just above $11.79 but that chart area is key and needs to hold. “I will tell you if we start closing below those levels, I would say the next downside target on beans might be another $1.00 to $1.50 lower as there aren’t many support areas in between to stop it.” So, the $11.45 ¾ contract low from June 2023 is vulnerable.
“We aren’t going to win the battle on demand,” Schultz says. As market chatter circulated that China washed out of some U.S. soybeans and switched to Argentina. Schultz says this is part of a larger trend of expanding acreage in South America and without a major weather problem there is no way to slow the trend down. “We potentially have 800 million bushels more production coming out of South America than a year ago.”
Lower soybeans and fund selling also push corn to new contract lows, plus the fast safrinha corn planting in Brazil and improved Argentina weather weighed on the market. Schultz says, “What is a little bit disturbing is we are harvesting Brazil soybeans at a much faster pace which is allowing the safrinha corn or more of the corn to get planted in the optimum window. They’d like to have most of this corn planted between the last week in February to the first week in March to get some good yields.”
With March corn making new contract lows he says there is the potential to drop prices down to $4.10 per bushel. However, Schultz says the funds are holding a short position of 1.35 billion bushels which is near record short and with the right catalyst they could be forced to buy back those contracts potentially producing a rally.
The wheat market continues to hold up better than corn and soybeans says Schultz. Wheat reversed a lower opening and contract lows in Minneapolis wheat on short covering, the weaker dollar and caution regarding the U.S. and European crop. “They are concerned about a mid to late March or early April cold snap after breaking wheat breaks dormancy,” he says.
Cattle see profit taking after a big rally Tuesday and awaiting cash news. Schultz says the futures got too far ahead of the cash and need confirmation before moving advancing further. However, he is optimistic about another $2 to $3 of upside. “I’m kind of looking for those April cattle to go to $188, possibly to $190 in here.”
Lean hog futures opened higher but ended mixed with lower cutouts at noon weighing on nearby contracts. Schultz says the April, May and June look strong technically long term after scoring key reversals, and so he sees this as a short-term correction before the highs are retested.
