Grains were mixed early Wednesday, with cattle lower.
Soybeans Firm After China Sales Confirmed
Soybeans futures were higher Wednesday morning after USDA confirmed China soybean purchases and with a huge rally in bean oil as the Iran cease fire is off and crude oil surged higher.
Mark Knight of Farmers Keeper Financial says flash sales of 17.3 million bu. were reported with 12.3 million bu. new and 5.0 million bu. old crop.
“It was a good size. It wasn’t monstrous, but somewhere in that 7, 8 cargo type range. About a third new crop and two thirds next year’s crop,” he says.
He says China has a lot more to buy yet this year to meet their 25 million metric ton (MMT) purchase commitment, so he was a bit disappointed with the price response.
China Soybean Buys Priced In
However, it was likely a buy the rumor sell the fact reaction with much of the China business already priced in with the rally of over 50 cents the last two days in the soybean market.
To get the market further excited it will take more business and it could come with U.S. and China officials meeting this week.
There is also talk that the 10% tariff cut on U.S. ag products could be announced on Friday, July 10.
“I think there’s supposed to be some announcements come out on on Friday. But it seems like both sides are are kind of, you know, playing nicely together. They’ve come in here and, you know, showing good faith and buying some beans this week. And, you know, it’s rumored that we’re going to drop the 10 percent tariff on Friday. Not confirmed, rumored. You know, we’ll see how that goes. But seems seems positive for sure.”
COFCO Buys Beans in the Meantime
China dropping the 10% tariff on U.S. soybeans would certainly be helpful for commercial firms to be able to buy U.S. soybeans, if they are price competitive according to Knight.
“And I think with this rally, I don’t you know, we’re still going to be not super competitive. So I think it’s going to it’s going to mostly be government purchases unless soybeans really fall apart and we get competitive with South American prices,” he adds.
Knight thinks some of those purchases could come this fall when prices are lower due to the harvest and ahead of President Xi’s visit to the U.S. on September 24.
Farmers Urged to Take Advantage of the Rally
Soybeans have rallied back near $12 and the old highs, so Knight suggests some new crop sales.
A Farmer’s Keeper survey shows only 22% of farmers have sold new crop soybeans and have some work to do.
“So I think that’s way undersold given the profitability of soybeans. So I’m just going to urge farmers out there to, hey, you got another opportunity here. make sure you reward the markets on this rally,” he adds.
Could Beans Take Out the Highs?
Soybeans have closed in on $12 and are eyeing the May 13 high of $12.14.
Knight thinks that level could be tested but won’t be taken out unless there is more China business confirmed.
Plus, from a seasonal standpoint soybeans usually have difficulty rallying in the later part of July.
“We have a strong seasonality we get past this Friday’s report and we get out the second third week of July these markets generally start to fall apart in the latter half of July. So, I don’t know if we have a ton of time left on this rally,” he says.
That is unless August weather turns dry.
Corn Falls, Hitting Resistance
The corn market was unable to follow soybeans Wednesday morning as it hit chart resistance and having priced much of the weather concerns that have supported the rally since the June 30 reports.
Knight says there have been rumors of China looking for U.S. corn bids but no evidence of buying yet, which could fuel the rally.
Funds had sold and taken too much weather premium out of the market. They have been covering short positions and with a 30 cent rally off the lows they may be comfortable for now.
“I want to be bullish. I’m a little bit bullish from these price levels here yet, but we’re kind of running out of time to, unless some serious weather confirmation comes to fruition,” he adds.
The EU weather story could continue to be supportive but Knight thinks that is also baked into the market.
“We hit some technical levels and closing that December above $4.50 certainly kind of proved at least a short-term bottom was established in that market. But we need something more to push this market higher, in my opinion.”
Wheat Also Hits Chart Resistance
The wheat market also ran into key chart resistance overnight and is consolidating on Wednesday morning.
Knight explains, “We tore it up overnight. And heck, we’re 18 cents off of the overnight highs. And we hit perfect technical levels in the overnight for wheat to be honest with you and it hit those levels and and sold off hard from there. So we’ll see,” he says.
Gearing up for WASDE Friday
So could the WASDE on Friday provide any bullish news to help support either the corn or wheat market?
For corn, Knight says USDA will change some demand numbers but corn acreage was nearly steady in the June report.
“I don’t know that I don’t expect a surprise there. I guess the quarterly stocks was a little lower than expected, so I could see some demand adjustments,” he says.
Wheat saw over 1 million less acres last week in the report so there could be a reduction in production that could support the market.
Cattle Continue to Correct
Cattle futures were lower again on Wednesday with the August live cattle contract under the 100 day moving average for a 4th day.
So is this just a healthy correction?
Knight thinks so because the fundamentals in the market haven’t changed.
“So, I would expect it to remain positive and probably bounce back from these levels. We hit in the feeders a triple top up there so it may take take a little time to get get back to those levels but it’s a market with just too many positives to just fall apart.”
