Grains were mostly lower early Tuesday except for fractional gains in soybeans. Cattle and hogs were solidly higher.
Soybeans Hold Awaiting China Sales
Soybeans started off slightly lower on corrective selling but quickly found buying interest says Randy Martinson of Martinson Ag. He says the funds are buying on the breaks on the hopes of more China business and are trying to price in the additional 8 MMT of old crop soybeans President Trump says the Chinese are going to buy. However, to keep moving higher the market will need confirmation of that China business.
Market Needs China Confirmation
There were no flash export sales to China on Tuesday morning and Martinson says there may not be much business this week as China is on their Lunar New Year holiday which lasts until March 3. “So it’s unlikely we’re going to get official confirmations from China of them buying. We might get some sales from unknown destinations, but right now it does look like China’s going to be away from the market for the next two weeks.”
Soybeans Flirting With Resistance
Soybeans are flirting with chart resistance at last week’s highs and so the China business is probably the trigger to get over those levels. Martinson is hopeful some other countries will buy to keep the momentum going but with U.S. prices over a $1 over Brazil the U.S. may be too expensive at these prices. The difference may be those countries that have lower tariffs.
Brazil Harvest Slow
Plus, Martinson says Brazil’s harvest has been slowed and they are talking about some quality issues where it has been too wet. “I think that’s helping to keep some of our sales moving. I think as we get deeper into their harvest and they get through some a little bit better weather, that will change. But for right now, I think we’re still staying somewhat competitive in most countries.
Funds Adding to Length in Soybeans
The funds are adding to their length in soybeans and as of last Tuesday had bought over 94,000 contracts, which is a record week of buying. They are now long over 123,000 contracts in soybeans. So they have bought into the idea of the additional 8 MMT and that China may buy it before the big summit between Trump and Xi in China. However, Martinson says timing is key because if China doesn’t buy until after the Brazilian harvest, soybean prices may currently be too high.
USDA Ag Outlook Forum Watched
So will the grain markets also be gearing up for the USDA Ag Outlook Forum this week? Martinson says any reaction will be focused on acreage. “The market doesn’t look at these numbers. You know, it’s an economics view of what’s going to happen. And it’s more for baseline projections for, you know, government funding that this meeting takes place. But the 26 numbers are going to be looked at because they’re fairly accurate to what, you know, they’re thinking producers are going to be looking at doing. The big number is going to be acres. You know, where will soybean acres fall? Where will corn acres fall? And that, I think, is going to be the big, what everybody looks at. And then where we put trend line yields, where they come into play. Those are going to be the two, I think, biggest attention grabbers for the report”
Corn Lower Tuesday
Corn is lower on Tuesday following wheat but also seeing some corrective selling as the market got up into some chart resistance late last week. Plus, there may be some farmer selling ahead of first notice day at the end of the month. “We do have a lot of March basis fixed contracts that are coming due here at the end of the month. And I do think there is some movement against that, especially since we traded up to that $4.35 resistance line in the March contract. I think that created a lot of farmer selling.” Plus, the weather has been better for cash grain movement.
Could China Buy Corn?
Corn has been stuck in a sideways range but there is growing talk of China needing corn due to a poor quality crop and their corn prices have moved up to levels not seen since July. So Martinson says that is a possibility. “You know, that seems to be the rumor that’s hitting the marketplace right And, you know, it’s kind of being backed up by fact that they bought 45 cargos of sorghum from the U .S. They’ve increased their purchases of Australian barley. So they’ve been seeing a large increase in feed stuffs from of other sources. So we’ve had a lot of unknown purchases of corn for exports. That could be China. We don’t know quite yet.”
Wheat Falls
Wheat futures were also lower on a higher dollar and corrective selling. But Martinson says an upgrade to the Russian crop by 3 MMT was also a factor. In addition India is going to allow wheat exports. “Maybe that’s a little bit of a pressuring factor in India. The deal that we’re supposed to have with them is not going to include any wheat, is it? It’s not going to include any wheat. Actually, to appease the producers in India, India made an agreement to export 2 .5 million metric ton of wheat. So it actually is going to put more wheat onto the export market, which is a little bit negative. So, yeah, that agreement with India kind of is not going to be quite as beneficial as we were hoping.”
Cattle Soar
Cattle futures saw some profit taking on Friday ahead of a long holiday weekend but are back up on Tuesday with higher cash says Martinson. Southern cash was $246to $249, but mostly $248. Northern trade was $376 to mostly $382 dressed, up $4. Live sales at $245 to $246. The five area weighted average was $245.62, up $4.49 from the previous week.
“We did see live cattle finish the week with some good gains, feeder cattle finished the week, you know, steady. So, I mean, it was nice to see a little bit more incentive go over to the feedlot side or to the fat cattle side. We are seeing the market off to the races. And I think they’re going to try to make a test for those old contract highs before they’re satisfied in this market.”
Hogs Recover
Lean hog futures were also higher with cattle and seeing some short covering after seven lower sessions and lower weekly closes. The market was overdone and due for a bounce. “I think we’re following cattle right now. I think there’s some sympathy move as far as the cattle going up. I think hogs are going up. Technically, they’ve also seen a pretty good pullback. So I think that’s also adding a little bit of push into their market.”
