Grain and livestock futures both closed mixed on Monday.
Soybeans rallied along with both soybean meal and bean oil and traded above contract lows.
John Payne, Advance Trading, says soybeans were adding weather premium with the warm and dry forecasts.
However, he thinks soybeans were also seeing buying interest from end users that are seeing value at these prices and crush margins have improved.
“You just have buyers that are interested in locking in margin. Crush margins are really good. The Chinese are buyers at this time of year so you’re not going to see that story disappoint too much and then you don’t have the carry in the market like you do with wheat and corn,” he says.
However, he admits that exports on soybeans are running behind normal and last year and he’s not sure the U.S. can get caught up.
Corn, Soft Red Winter wheat and Hard Red Spring wheat futures saw liquidation ahead of first notice day on Friday, and all scored new contract lows in the process.
“We have a lot of old crop supply in farmers hands that needs to be priced or rolled,” he explains.
Payne thinks corn may rally to $4 at some point and it is most likely come when farmers decide they aren’t going to sell anymore.
For wheat, he thinks once the market gets past the long liquidation tied to the delivery period it can start bottoming.
“If you look at the play from 2020 when the market was inundated with supply, it bottomed the day of delivery, first notice day August 31,” he adds.
He also points out that the wheat yields have been above expectations and so the market has seen additional hedge pressure.
Live and feeder cattle futures had a higher day which was a bit of a surprise with the bearish placements number in the USDA Cattle on Feed Report.
“Margins are good and you have $300 beef and when you have that buyers are going to come in to lock in that margin,” he explains.
So, is the cattle market starting to bottom?
He says LRP pricing has taken some of the downside risk out of the market.
However, Payne says the supply situation also continues to be bullish with tight herd numbers and he expects that will help that market find solid footing.
Hogs consolidated after a chart breakout and higher weekly close last week.
However, Payne says the market should be well supported with the futures discount to the Lean Hog Index and the cutouts.
He thinks the market is also following the higher Chinese pork market.
