Corn, soybeans and cattle were higher Monday, wheat and nearby hogs lower.
Soybeans Make New Highs for the Move on Weather
Soybeans gapped higher Sunday night and made new highs for the move again on Monday.
Mark Schultz with Northstar Commodity says there were several factors driving it.
Weather topped the list. Even though it may be early and risk of significant crop damage is low, the warmer drier extended forecast grabbed the attention of the trade.
“Heat returns next week. The Western Corn Belt is the area that’s starting to move into the warmer, drier pattern. So that’s the area to watch. The Eastern Corn Belt looks to be fine right now. They have too much water. So you’re not going to get those acres back into
production but whatever else is not under water is going to be looking pretty good,” he says.
China Business
The other factor was China stepped in for another 9.7 million bu. of new crop soybeans and unknown destinations added another 4.0 million bu.
Schultz says, “You got the Chinese business going on and they’re going to be continuously buying beans here, and they got more beans to buy. So that’s also another good sign.”
At the same time Secretary of State Marco Rubio confirmed that Chinese President Xi would be visiting the U.S. in September, squashing speculation the meeting might be canceled after President Trump accused the Chinese of tampering with the 2020 election in the U.S.
This calmed the fears that the tit for tat could result in China pulling out of their ag purchase agreement.
“The bean market has acted far better than I could have expected with a record crop in South America and what looks to be a very good crop coming here in the U.S. But one thing that’s always a big difference, if China is a buyer, the difference is that when they
buy, they buy large quantities at one time. That’s what’s giving you the support,” he adds.
War Premium Added
The final push came from the market adding war premium with escalating tensions and fighting between not only the U.S. and Iran, but it’s also Ukraine against Russia.
“That is more ships and or grain ports where the bombing is taking place. And that is giving the boost to the market.”
Do Soybeans Make New Contract Highs?
Soybeans made new highs for the move and took out the May high of $12.14 in the November contract with the next target the contract high of $12.41 made in December of 2022.
Schultz thinks the market will test that level. “I wouldn’t be surprised that they do that, maybe not right away, but I would say if we come back next week and this forecast weather does indeed shift to a warmer, drier outlook, I would say it’s got a pretty good chance of
taking out the $12.41 level on the November beans. Then after that, I would say it opens the door to move up to $13.25.
Corn Makes New Highs for the Move
Corn also made new highs for the move with some help from soybeans and adding some weather premium and maybe even war premium.
Schultz says the funds moved from a huge long position to net short in June.
“They’re probably about flat right now. So they don’t have a lot of length in the market so that’s the good part. I think wheat helped corn last week and this week beans gave corn a bit of a boost,” he explains.
There are still farmers selling old crop corn which will cap the rallies and needs to be priced in but it is being offset by strong exports.
Technically Running Into Resistance
The December corn market also broke above $4.70 and Schultz says if the market can get two closes above this level the rally has some legs.
“Then I think we move up into the $4.85 to $4.95 target. I think today was supportive to the charts and I would have liked to have seen the wheat market hold up a little bit better.”
He adds that if the crop starts seeing a deterioration in the ratings, followed by a hot dry forecast there will be a 3% to 5% decline next week, which will keep the market moving higher.
EU Crop Shrinking
The EU corn crop also continues to see heat and drought and deteriorating crop ratings. So, the production is likely going down further.
“I’m still in that camp right now that I think it’s somewhere between 5 to 8 million metric tons. I could get pulled here if the crop ends up a little worse than I think in the eastern half of Europe, where it hasn’t been hot but it has been drier than normal,” he says.
So, he is watching that because they are in a critical time as the corn goes through pollination.
Wheat Sees Profit Taking
The wheat market saw some profit taking after a nearly $1.30 rally in the hard red winter wheat.
However, Schultz says if the wheat market is any good it will only correct one or two days and then be back trading higher.
Monday futures ran up into some chart resistance?
“Oh, yeah, we ran to chart resistance here. We pushed this market almost right back up to the previous highs on the Kansas City wheat. So it doesn’t surprise me that we had a pullback today in here. I think now if you’re going to move to the next plateau on wheat, you’re going to have to see it take out today’s or last week’s highs. But a close above last week’s highs will start giving you a push. of another 40 to 60 cents higher on wheat,” he adds.
The Black Sea export disruptions are not all priced in but to move significantly higher the market will need to see some export business.
“We’ve had poor export sales three or four of the last five weeks. So getting into that 14,15 maybe even 18 million bushels on a weekly basis. That’s what you want to see to get some push there.”
Cattle Market Bounces
After a record 15 down days in the nearby live cattle, the market finally saw a bounce. Is this market trying to bottom?
Schultz thinks so.
“I’ve had timing for coming in 34 weeks from the November low to last week was 34 weeks and 21 days down on the markets would be tomorrow. Those would both be some, again, Fibonacci numbers that I look at. So there’s certainly an outside possibility. Also, it is the amount of loss in the futures market, which is, and same is true of feeder cattle, which is quite comparable to the other setbacks that we’ve had as far as price. So I do think that’s there.”
He also remarks that the boxed beef prices have tumbled along with cash but it is stimulating retail demand.
“If you look at a boxed beef chart, there is good support at $360 to $363, and I think we ran it down to $366 in here. So I think we’re also getting close on a boxed beef chart at the holdup.”
Plus numbers are still tight and the heat is trimming the weights.
Lean Hogs Correct
Nearby lean hogs saw a correction after running up into chart resistance.
However, Schultz has been encouraged with the cash and cutouts moving up to their best levels of the year or new eight month highs last week.
“That’s a good sign maybe we’re finally starting to see some demand maybe pick up. Pork prices globally have been pretty depressed but they do look like they’re showing signs of turning the corner,” he says.
Plus slaughter number are starting to fall and so are weights. So he is hopeful that will get the funds to cover more of their massive short position.
