Grains ended sharply lower with limit down closes in soybeans. Cattle were sharply higher, hogs mixed.
Soybeans, Bean Oil Limit Down
Soybeans and soybean oil both ended limit down in the old crop contracts with fund selling and liquidation.
Randy Martinson with Martinson Ag says it was tied to the fear the meeting between President Trump and President Xi scheduled for China at the end of the month will be delayed.
“Yeah, that’s really what started it all, was comments that Trump made in an interview with a newspaper that stated that because of the concerns about the Iran war and the fact that the Strait of Hormuz is closed, Trump said he might have to delay the meeting because of logistics. Well, the market didn’t take that very well, and we saw soybeans come under extreme pressure,” he explains.
Will China Not Buy the 8 MMT?
Old crop soybeans were hit the hardest because of the fear that if the Summit doesn’t happen China will not buy the 8 MMT of old crop soybeans as part of deal between the two countries according to Martinson.
“That was really the biggest part of it is now they’re expecting that they’re not going to announce that they’re going to buy more U.S. soybeans, old crop. They did reiterate in the meetings in Paris that they are going to buy the 25 million metric ton for the next three years. So that kind of helped stabilize the new crop contracts.”
Trump Wants China to Help Get Oil Through the Strait
Over the weekend President Trump also asked China to help open the Strait of Hormuz to get crude oil moving and threatened it if they didn’t help that would cancel the meeting.
“China didn’t seem to be too excited to help try to open the Strait of Hormuz. No other country is. I guess France even has also come out and said that they’re not going to help with it. So that, I think, added a little bit of pressure to the market as well.”
U.S. to Allow Iran Oil Tankers Through the Strait
The soybean market hit limit down during the noon hour on a pick up in U.S. and Brazilian farmer selling, but also when the U.S. said it was also going to allow Iran oil tankers to go through the Strait.
“We did hear the report that they were going to allow Iranian boats through, but also I think a lot of panic selling set in. Once the market hit 50 cents down, I think a lot of farmer selling stepped in, and I think that kind of pushed us back down to the limit down level,” he adds.
Was the Selling Overdone?
Martinson says the move in soybeans was overdone. “I mean, really, you know, the fundamentals haven’t changed in this and technicals look a little ugly now after seeing today’s performance. But overall, you know, we still have I mean, right now we got cheaper beans, which likely could mean China will come in and start buying our beans anyway.”
China is still looking to buy product but has some concerns about the quality of beans coming out of Brazil. “That’s why, you know, Cargill started to halt their shipments.”
Expanded Soy Limits
The entire soy complex will be under expanded limits on Tuesday. He says, “That’ll expand the soybean limits to $1.05. And I think, you know, soybean oil goes to like $5.50. So, yeah, we’ve got some bigger limits to deal with coming in Tuesday.”
Soybeans Breach Support
The soybean market did take out some pretty key support during the session closing old crop below the $11.80 level. “That opens this market up to be able to test like an $11.35 level, which is about another 20 cents down. I don’t know where the synthetics wound up, but I would bet that we’ll likely see the market open a little bit lower tonight just off of margin call selling, if nothing else.”
Soybeans Drag Down Corn and Wheat
Soybeans drug corn and wheat lower during the session otherwise Martinson says the outcome of the trade meeting over the weekend were actually friendly for the corn market.
Could China Buy Corn?
China said they were open to more U.S. ag purchases including beef, poultry and non-soybean row crops, which could include corn he says. “Actually, if China lives up to their word and say they want to import another row crop of U.S. grains, that would mean corn. So that should have been somewhat friendly to the corn market, but it couldn’t hold up.”
However, Martinson thinks China could buy corn. “I thought that before that China would come in and look at buying some corn. They’ve been buying aggressively in the sorghum market. They’ve been buying aggressively in the Australian barley market. So I figured that, you know, and the idea that their corn crop just wasn’t very good quality and that they need to buy some feed grains. So I kind of figured they would come in and look to cover some of their needs from the U.S. corn market at some point.”
Funds Defend Long Corn Position?
Funds also added to their long position last week in the corn market. As of last Tuesday, they bought 140,000 contracts and pushed their long position in the market to 193,000 plus contracts (futures and options).
Martinson thinks funds will defend that long position now and that is why corn held up better than soybeans Monday.
“The funds, you know, I think they’re seeing a little bit of value in buying corn, you know, mainly because of the idea that maybe acres are going to be down, too, because of the higher fertilizer. But I think that also helped to kind of, you know, defend or help the market here on Monday when we came under such heavy pressure.”
Can Grain Markets Recover?
So if cooler heads can prevail will the grain markets be able to recover?
Martinson is optimistic, “So I do think if, you know, we get some calmer heads, you know, corn and wheat did trade down to the bottom of their five-day trading range. That support held, and that was encouraging.”
Bull Market in Grains Still in the Cards?
After last week’s bullish weekly closes and chart breakouts it looked like the grains might finally be on the verge of a bigger bull run. So, is that still possible?
Martinson thinks so because there is still uncertainty about how many acres will get planted with higher fertilizer prices, especially corn and spring wheat.
“I think we’re going to see less spring wheat acres. I think we’re going to see less corn acres than estimated because of the higher fertilizer costs that would push them to soybeans. But some of the specialty crops are also starting to look attractive for producers. So I do think that we’re still, you know, there’s a lot of uncertainty and a lot unknown right now that I think still this market still needs to have some premium worked into it for.”
Cattle Fade JBS Plant Strike
The live and feeder cattle futures saw nice gains on Monday, fading the JBS plant strike at Greeley, CO.
Martinson says it was partly due to the higher equity markets and lower crude oil prices but also the strike had been priced into the market.
“The plant closed last week and a lot of those cattle got diverted to other slaughter plants. So the market kind of had it built in already,” he adds, “We did see the Dow Jones up a little bit and crude oil took a pretty good hit. Both of those came in to help, you know, ease the calm of the nerves as far as domestic demand.”
Hogs End Mixed
Lean hogs started higher with cattle but ended mixed. Martinson says the futures premium to the cash and fear about the China talks being delayed also weighed on the market.
