Corn, soybeans and cattle were higher early Thursday with wheat, hogs and milk easing back.
Soybeans Make New Contract Highs, $13 Next?
After 16 cent gains on Wednesday the November new crop soybeans made new contract highs, taking out the $12.41 high from December of 2022.
The market has been supported by war, weather and China demand according to Bryan Doherty of Total Farm Marketing.
He thinks the market is well on its way to $13 as it is in his words clicking on all cylinders.
“Nice, strong momentum gap higher earlier in the week on Sunday night, didn’t fill the gap traders are in the offensive. The weather is a concern as the six ten day outlook is supportive, the war is supportive, crude oil prices up sharply you’ve got support in a lot of areas and then you’ve got technical support the charts just look friendly and those who bought in will continue to buy,” he explains.
Weather, Yield Concerns
Weather in the Northwest Corn Belt is starting to spark concern with heat and dry conditions to start August.
Doherty says that could trim yields as 53 bu. per acre trend line yield for soybeans is pretty hefty.
“If you just drop that even one bushel an acre, you get to a really tight number, somewhere around 250 to 275 million bushels. That to me would smell of $13 beans.”
He adds he doesn’t want to sound overly optimistic, but the market has everything working for it right now, including momentum, perception, and the attitude has turned friendly here lately.
Soybean Demand Strong
Soybeans have little room for error with record crush pace and China in buying new crop soybeans from the U.S. The weekly export sales totaled 56.5 million bu. and China was about 40 million bushels of that total. They also bought 2.6 million bu. of old crop beans.
So, they are on their way to the 25 million metric ton goal. “They’ve stepped up their buying, but they also worded it along the way that when conditions are right. Theoretically, they can still buy beans cheaper out of South America. But I think China’s wise to continue to buy because they need both South America and the U.S. So why not buy the inventory while they can buy it? They’re not sure how this crop will yield out. So I would be a buyer if I’m China.”
And that will help the upward momentum likely keep intact for now in soybeans.
Corn Makes New Highs for the Move
Corn futures continue to make fresh highs for the move in old and new crop contracts.
The market has gotten some help from the rally to contract highs in winter wheat and war concerns but how much of the move is tied to weather?
Does the market need to put more weather premium in?
Doherty says the market is trading some weather issues but with a crop rating still at 67% good to excellent last week. That was the same as five weeks ago, 9% of the crop is rated poor to very poor. That’s a supportive factor.
“However, I compared this year to last year or two years ago at the same point when the national yield was 179.3 bushels an acre, the final yield number. And 10% of the crop was rated poor to very poor, 67% good to excellent. So very similar to two years ago. So is 183 overdoing it?” he asks.
Some private estimates with satellite imagery have higher numbers but the crop will need timely rains to finish corn and there’s some
issues too in parts of the country with pollination.
So, he doubts corn yield can reach 183 bu.
Does Corn Get to $5
However, with soybeans and winter wheat making new contract highs does corn eventually, get above $5 or not?
He says corn will follow if soybeans and wheat continue to rally, “It sure feels like that’s where it wants the angle to. I think the trade wants to take it there. The money market. manager or money managers uh they like markets that have momentum and trend and I think they’re investing in the row crop commodities,” adds.
The key will be if the funds keep adding to the long side of the market in corn.
Wheat Eases, But Black Sea War Rages
Wheat futures were slightly lower on Thursday morning on profit taking after making new contract highs in both classes of winter wheat.
However, the Black Sea war has escalated and the wheat export shipping issues are getting worse which should support the market.
“The business as usual is anything but business as usual right now.”
Weather Supportive
And then you look at our winter wheat crop. That was kind of a train wreck he says, hard red winter wheat in particular.
There’s some good soft red yields that are coming off in Minnesota, Wisconsin, Michigan. But when you look at the. spring wheat ratings dropped this week by 5%, which is big for this time of year.
New Contract Highs
Technically with HRW and SRW wheat hitting new contract highs he says the market has technical momentum building.
“You’ve got technical strength you’ve got a market that has pullbacks and the market sees money come in and buy it I don’t know if it’s reached its pinnacle yet or not. But as long as the trade feels like there’s concerns moving wheat elsewhere in the world, I think there’s a firm undertone to it.
Cattle Market Tries to Bounce
Cattle futures made new lows for the move on Wednesday with light but sharply lower cash and boxed beef.
The market is over sold and trying to bounce early Thursday maybe finding some support heading into the big USDA reports on Friday.
He says the technical picture is still ugly, so while the market is working on a hook reversal, it may not hold.
“Glancing at the October contract it has a technical picture that looks weak,” he says.
Doherty says the recovery in the futures needs to be led by the cash but early sales were $356 dressed, down $12 to $15 and live sales were at $230 to $232, down $7 to $9.
Boxed beef was also down $3.41 on the Choice at $363.50 on Wednesday and it has been falling past July 4 and the peak grilling season.
The technicals and spread action were also ugly with traders selling cattle, buying hogs, selling cattle, buying milk.
Fears of high crude oil, higher inflation and a lower stock market are also a headwind for cattle.
Report Halts Milk Rally
The Class III milk futures were up over $1 last week and started off with gains to start the week.
However, USDA’s milk production report once again found higher production says Doherty.
“It’s basically the same story, just a different month. We’re still seeing more milk cows. I think we’re at 44,000. You’re still looking at more production or efficiency in the entire cattle complex,” he says.
The dairy market had good demand early in the year with the big protein craze but it looked like prices got overvalued in the U.S. versus world prices and set back into the spring.
The good value to the end user sparked some recent buying, plus higher cheese prices and the heat pushed the August contract from $16 in May back up to $18 this week, so he’s hopeful a low is in.
“I just don’t know if I want to go out on a limb with this. I’m not sure I see the fundamental picture with these with these numbers
on the production report showing what they have. When we see a production report that shows me that the herd is stable or contracting the I will get a little more excited,” he adds.
