Grains close mixed with soybeans extending gains after Monday’s reversal on short covering heading into the WASDE. Shawn Hackett, Hackett Financial Advisors, says funds are short in the soybean complex and decided to take some profits in case Conab or USDA makes any major adjustments in South American production. “I think it’s likely USDA and Conab will cut soybean production for Brazil with continued private estimates lowering the crop size,” he says.
Wheat also saw corrective buying with a lower dollar. Again, Hackett says funds are covering short positions on the currency play. However, he’s looking forward at the forecast for another polar vortex that could cause severe winterkill to the crop following a warmup in many of the Hard Red Winter wheat states. “That could finally be the catalyst that gets the funds to blow out of their short position in the wheat markets.”
Corn failed to follow higher soybeans, wheat or crude oil. March corn closed below long-term support of $4.40 but at least held the recent contract low. Hackett is confident the low will hold as it’s too early in the season for the market to fall. “We’re just starting to plant the safrinha corn crop in Brazil and we’re not likely to get any adjustments to production in the WASDE or from Conab. So, it’s hard to get excited about the corn market while we’re still planting down there,” he says.
Cotton was higher on Tuesday and continues to rally close to 90-cents on tight supplies and bidding up for acres. “We’ve had some very poor production and some good demand but this upper 80s on the charts is going to be formidable resistance.”
Cattle made new highs for the move on strong fundamentals and fund buying. “The report that we got out last week show that numbers keep falling, we’re not herd rebuilding. So that was a reminder for the funds, who had gotten bearish, that maybe they needed to reown.” However, now that a 50% correction has taken place, he thinks the rally will slow.
Lean hogs down for the 5th day on continued profit taking and Hackett thinks there is a bigger downside correction in the works.
