Soybeans ended slightly lower on Tuesday, corn higher, wheat mixed. Cattle and hogs were mostly lower.
Soybeans Fall From Near-Term Highs After China Buys
Soybeans ended slightly lower after making new highs for the move as the market had already priced in the China soybean purchases confirmed by USDA. Mike Minor says the agency reported 29 million bushels of soybean purchases Tuesday morning which brings China’s total to only around 10% of the 12 MMT commitments they’ve made. “Purchases now total about 8% to 12% of their total commitment needs that would be their so -called commitment anyways. So around 35 to 50 million bushels are accounted for now in their sales out of the 441 million bushels that they would try to account for. So it’s a start, but it could be a little bit more.” he says.
Bulls Need More Sales
To keep the rally and momentum going in the soybean market Minor says the bulls are going to need to see more proof of China sales. “You’re going to have to feed these bulls every day now going forward. Like I said, that’s only 10 % basically of their total commitment. So we have a lot of these purchases ahead of us in a very short time frame. They’ve got to make this through basically January, February, until the Brazil export program starts in February. So we’ve got to really get moving here, get some sales on the books before they start that. So I think the soybean market now really comes down to how much China buying can get done in a quick manner.” Beyond that it will take potential South American weather difficulties to build on the rally.
Timing of Sales is Shifting
The timing of the rest of China’s soybean purchases remains in question but Minor says President Trump has stated instead of the 12 MMT being bought by January 1 it could be more like spring. He says that is actually positive for the market because it is more realistic.
Minor says, “So this gave the market a little bit more hope. But the reality of the situation is China’s even came out and said, you know, if U.S. soybeans are cheaper than Brazil, I’ll buy from you. And Brazil’s export program will
get a lot cheaper and more abundant kind of through that February March time frame. So the clock’s still ticking.
How High Will Soybeans Rally With 90% of China’s Purchases Left?
Minor says while China has 90% of their purchase commitments to fulfill, the fact that the market has responded positively to only the small amount of confirmed business is a hopeful sign there could be more upside to prices. However, there is a price level that will deter buying.
“The tough part is we’re higher than Brazil prices today. So it seems like a lot of the buying has come after a bargain buy. The market set back a little bit. China comes in and buys some. And we know they like to bargain buy. So on any dips, I would expect some business to be had.”
Minor says the charts indicate there is more upside. “We probably could see some forward extensions up to around that just over $12 January time frame. So another 30, 40, 50 cents, I think, is just fine technically.”
Corn Rallies Solo
Corn futures were able to rally without the help of the soybean market on Tuesday on light technical buying and continued underlying demand.
Minor says the corn market also has a job to do to catch up with soybean prices. The soybean market has rallied nearly $1.40, while corn has only posted a $.15 rally so the corn-soybean price ration has widened out tremendously. “The spread between corn to soybeans is pretty wide. We’re at 2 .4 now for next December and November. So at this rate, we are starting to favor soybeans a little bit more for this next crop year anyways,” he explains
What Will It Take For Corn to Break Out??
Corn has been trading in a $.15 range for the last few weeks even with the big rally in soybeans and has had a tough time staying above the 200-day moving average. What will it take for corn to get above these levels?
Minor says, “One we have to see some progress in the USDA trying to lower the corn yield mainly for the I-states I still believe they’re a little too high there and they could pull that yield lower the problem is are they going to keep demand 5
where it’s at or will they try to decrease some of that because it looks like the feed and residual could be a little bit high given the current balance sheet.”
He says it will also help when the last 9% of the corn harvest wraps up. Right now the last bushels are looking for a home. “Yeah, the Northwest Corn Belt where you and I sit the piles are really piling up everywhere at this point. The PNW is probably starting to back up a little bit. So it’s just corn can’t move quite as fast as it needs to towards the end of harvest.”
Cattle Futures Set Back on Profit Taking, Outside Markets
Cattle futures saw some consolidative trade and profit taking after a couple of strong days. The futures bounced off strong support areas last Friday to close higher the last two sessions and saw a bit of a pause. However, Minor thinks the biggest influence was funds liquidating with the risk off in outside markets and concerns about the broader economy.
Hogs Also Impacted by Money Flow, Lower Cash
Lean hog futures were also lower making new lows for the move and December hit a six month low. The market saw more fund liquidation tied to risk aversion in outside markets, lower cattle as well as the lower cash trend.
