Soybeans and corn were higher early Monday, wheat started lower then bounced. Cattle and hogs were lower.
July Soybeans Break Out
Soybean futures had made some fresh highs for the move early Monday with July trying to break out of its sideways trading range.
John Heinberg with Total Farm Marketing says it is a function of record crush and hopes for China business ramping up to the mid-May meeting between the two countries, which trade teams are still preparing for despite the ongoing Iran conflict.
“You got the technical breakout. So we’re seeing some money flow triggering that. You still got this really good demand on the crush side here domestically in that regard. So I think that’s supportive of the market as well. But then obviously, too until that meeting happens on the 14th to 15th and this market might be building some anticipation that China could step into the market, either old crop, new crop, pick up some beans in that regard. So I think that’s some of what’s happening here,” he says.
Record Soy Crush Pace
Crush margins continue to be strong with the recent contract highs in bean oil and surging global demand regarding biofuels but he says soybean meal is keeping pace.
“You’re looking at some of these crush margins at their best levels in history, or at least in modern history in terms of support for that crush industry,” he says.
USDA’s crush report for March pegged soybean crush at 227.4 million bushels which was below expectations, but it was still a record.
“I’m hearing some different talk about some regional tightness. So, I guess the question now is where the beans are. Are they hanging on to
them? What’s left? What’s it going to take to get them out? So watching the basis levels and what’s happening regionally with these crushers is going to be a big part of this market here in the short term. And I’ve said it before, if margins are good, crushers will pay whatever they want to per bushel of beans, just as long as they’ve got the crush margin taken care of and profitability coming,” he says.
Import South American Soybeans?
At what point though will processors start buying cheaper South American soybeans?
Heinberg says, “I think we’re actually pretty close to that point. And that’s the next thing I’m kind of waiting for is that headline. You know, you’re looking at Brazilian beans, maybe $1, $1.30 bushel underneath the United States right now on the export markets. And the biggest problems in South America, obviously, is the monster crop that Brazil had. The Chinese demand has not been there and so there there’s processors or elevators sitting on piles of beans right now and they’re getting to a window here where they may just have to put those
beans on the market just to get some cash flow moving it could be a very interesting situation for some of those Brazil elevators down there if the beans don’t start getting moving because they were counting on that Chinese demand to pick up those beans. When China picking up those U.S. beans late in the winter, first part of the year, I think it’s really kind of curbed into that expectation from those Brazilian elevators down there.”
November Soybeans Make Fresh Highs
November soybeans also made new highs for the move on Friday and again Monday morning.
Can November get above $12? Heinberg says that is the next target and may be pushed by China if they buy the 25 MMT the president has suggested.
Heinberg says, “Maybe China does not pick up old crop beans, but they go ahead and forget they talk about buying 25 MMT of soybeans for the next year. So, maybe they start looking into that window here as well. I think that’s something that continues to support the market.”
The cold wet weather may be causing some planting delays as well which may give beans that little bit of a push.
Corn Follows Soybeans, Capped by Wheat
Corn futures made new highs for the move overnight but were slightly lower early Monday with the pullback in wheat capping the rally as well as some farmer selling he says.
“We’ve seen a lot of really good money flow into the core market. In fact, we picked up, what, 80,000 contracts almost as of Tuesday last week,
and obviously it didn’t stop on Wednesday, Thursday, and Friday,” he says.
However, the market was supported by the rally in soybeans.
$5 December Corn
December corn broke above $5 on Friday very briefly as farmer selling stepped in and is back above that level on Monday.
“I think people that missed the first chance at it are now jumping on the second chance. So I think that’s part of it. Historically, $5 corn is a pretty good point to definitely get some things going,” he says.
While producers have sold some corn at $5, he thinks a close above that level could open the door to $5.20 to $5.25.
The corn market is also watching planting pace and if any acres get shifted away from corn but the market will get its first indication of 2026-27 supply and demand in the May WASDE.
The market is also awaiting the March 13 vote on E15 in Congress and the corn market continues to be supported by high gas and crude oil prices.
Lastly, the Brazilian second corn crop has been under stress and bears watching, despite some forecasts for rain coming up.
China Buying Corn?
And just like soybeans the corn market is watching and waiting for the mid-May meeting in China with hopes for corn business.
Market chatter indicates China has been looking for some U.S. corn and that may be another reason why the funds may have been aggressive buyers recently.
Or Heinberg says China could be looking at buying ethanol, which would also be a boost for corn.
Wheat Topping?
The wheat market is seeing some pressure on Monday with rains in the forecast for some of the hard red winter wheat areas.
He thinks the market may have topped out in the short term, even though the funds have added to their length in wheat.
“The funds are record-long spring wheat right now because of the dryness in the Northern Plains. And we’ll have to see how those things all kind of play out. But at least wheat market may be finding a bit of a ceiling here. And if that happens, that’ll keep the market a little bit limited, even though the demand continues to be very good,” he says.
The Kansas Wheat Tour is coming up the week of May 11 but the market has priced much of that production loss in already he adds.
Money Flow Into Grains
The risk of the war with Iran and high energy prices and inflation concerns have all brought money into the grains and that could keep prices supported going forward says Heinberg.
“Crude oil over $100 I think it keeps some general support overall in the marketplace at this time frame. You know, maybe that’s some of the rally we’ve had too, is just the fact that corn needed to catch up to where crude is. You know, obviously there’s headline risk like we’ve seen
today, you know, possible hit on U.S. naval vessels. 15 minutes later, it was, you know, the U.S. said that did not happen. But in that time window, corn flashed to the highs of the day. Crude oil was up over $105 a barrel. You know, so that volatility continues to stay headline to
headline,” he says.
Cattle Futures Seeing Topping Action?
Live and feeder cattle futures are lower early Monday. Both markets hit record highs on Friday before staging reversals and possibly doing some chart damage. However, is this topping action?
Heinberg says the market may need a pullback, but a top is too early to call because fundamentally little has changed as far as supplies.
“The numbers just aren’t out there even look at the feeder market trading $4 under the index today,” he says.
He says the market has also been led by last week’s record cash and that is still king.
Packers bought a good amount of cattle last week so cash could be on the quiet side this week.
“But, you know, we are getting into that window where grilling demand is going to kick in here,” he adds.
Lean Hogs Close to Bottoming?
Lean hog futures have been down the last three sessions seemingly in response to the first cases of pseudorabies since 2004.
While it isn’t a food safety concern and there are vaccines for the disease the uncertainty seemed to weigh on futures plus there was some technical selling triggered.
Heinberg thinks the market is close to support levels.
“If you draw a line underneath the low going back to November, we’re right at that area. Actually, we traded under it a little bit on Friday and
recovered. Today, we back-tested that line again. So we’ll see this $100, $101 window on June. It does look like it’s at least a level that maybe this market can hold, but not really seeing any great strength in it today. Some of it is money flow. The funds are down to, as of Tuesday, 57,000
long contracts on hogs. That’s a pretty big chop considering where we were a few months ago in that regard. Hopefully it’s an area can find some support. Maybe it’s disease concerns just causing that, you know, again, the computers like to trade headlines and that might be the headline they’re pushing now with the pseudorabies issues. But at the same time, it’s starting to look a little bit like we’re undervalued here in these summer hogs, but we need some turn somewhere to get a little bit of a bid underneath this market.
