Soybeans plunge on Wednesday, with corn slightly higher and wheat mixed. Livestock end mostly higher.
Soybeans Sink on Demand Concerns
Soybean futures ended 13 to 14 cents lower on Thursday, making new lows for the move. November soybeans also closed below the $10 mark.
Alan Brugler, A&N Economics, says soybeans sank on demand concerns with large global supplies and China continuing to buy from South America.
The lack of any progress on a trade deal with China was also disappointing and leaves the market with fears the U.S. will miss its prime export market window on soybeans.
Brugler isn’t as concerned that China has not bought any U.S. new crop soybeans.
“That just means that the demand will shift and other countries will buy U.S. soybeans if South America sells more beans to China,” he explains.
Lower soy product values were also a drag on the market with meal dropping to new contract lows and holding support just above the 2016 low.
How Much Lower do Soybeans Project?
Brugler says a head and shoulder pattern on the November soybean chart projects soybeans nearly 40-cents lower at $9.62.
“However, we don’t have to fall that low today,” he says.
Corn Sees Dead Cat Bounce
Corn was up 1 to 2 cents on a short covering bounce according to Brugler.
He says the market was oversold and due for a correction after the beating to start the week and new contract lows in September corn on Tuesday.
However, he says recovery will be difficult to sustain with record corn yield ideas circulating in the market.
Wheat Ends Mixed
Wheat futures were mixed with hard red winter wheat bouncing off new contract lows.
Seasonally the winter wheat market bottoms by now but Brugler says wheat has been suffering from too much global competition with harvest season in much of the Northern Hemisphere.
“You’ve got Russian selling it just over cost of production or many cases below cost of production trying to maintain their share. You’ve got some grain coming out of Ukraine,”
Plus, he says the stronger U.S. dollar has been a headwind.
Fed Leaves Interest Rates Unchanged
The Fed left interest rates unchanged again at the July meeting and Brugler says there is still speculation about a cut in rates by fall.
He says the Fed is closely watching the tariff implementation on Aug. 1 with thoughts the general rate will fall at around 15% to 20% which will eventually have an impact on raising inflation.
How High Will Cattle Rally Inflation Adjusted?
Cattle futures repeated record highs again on Wednesday with no slow down in sight.
Brugler says from an inflation adjusted basis live cattle futures got within cents of the 2014 highs which may be a stopping point.
However, he says without a break in consumer demand the market may continue to trend higher.
