Grains were higher on Thursday led by a rally in soybeans. Cattle and hogs ended lower.
Soybeans Continue to Rally as China Considering More Bean Buys
Soybean futures tacked on another 20-cents on Thursday with a new high close for the move, still trying to price in the additional 8 MMT or 294 million bu. of soybean purchases China is considering for the current marketing year. DuWayne Bosse with Bolt Marketing says the market is still trying to price it in.
“It was actually pretty impressive move yesterday because we got confirmation of more buying interest after the big, what I thought might be a one day pop after the Trump’s social tweet or whatever. You know, I don’t know if China’s actually going to buy it all or not, but sadly, it doesn’t matter what I think is evidently yesterday it sure looks like the funds decided they believe in it and they’re buying into the story.”
Old Crop or New Crop?
While the soybean buys are said to be for the 2025-26 marketing year Bosse is skeptical that China will buy soybeans right now with Brazil’s cheaper crop.
“Mostly, I’m just looking at the economics behind it. I understand there’s politics involved, and maybe China wants to keep Trump happy. You know, he’s scheduled to go there in April on a trip. But for China, it’s always been about economics. And Brazil was a dollar cheaper before this rally than our soybeans. And so if they really would buy 8 million metric ton from us, the cost would be about $400 million more than they could have bought it from Brazil. So I just, I don’t think it’s going to happen. I think what happens, Michelle, is that for a while and debate back and forth and more social media posts, we end up finding that they’re promising again to buy new crop beans from us. And maybe it’s only 20 million metric ton versus the 25 they promised before, which would be a little comical to me because then it’s actually less than they were promising a week ago.”
How Much Would it Tighten the Soybean Balance Sheet?
Soybean ending stocks are currently at 350 million bu. but what would another 294 million bu. mean for the soybean balance sheets. Bosse says, “With our ending stocks, just over 300, that would tell you, like, well, we’re going to run out of beans. We need to ration demand. Man, what a change from, you know, even two days ago.”
How Far Will the Rally Run in Soybeans?
Soybeans had a strong close above many key moving averages on Thursday but where do the charts project to now? “From a fundamental standpoint, I say this rally needs to be sold. But I also have learned through the years of doing this, don’t get in the way of the funds. This looks like a fund -driven rally, money flow, as some people would like to say, I think you could shoot up to $11.50 is your next resistance and then the contract highs of like $11.72. But the whole time, I guess I’m going to be thinking farmers need to be rewarding this market rally.”
Corn and Wheat Follow Soybeans?
On Wednesday corn and wheat did not really follow the huge uptick in soybeans but the markets looked like there was some spillover or as Bosse calls it, a delayed reaction, in Thursday’s session. “On Thursday then, this market actually looked pretty strong. Corn with the highest close we’ve seen in quite some time. And wheat also with a nice pop off the lows, which made me think we’ve got a bigger money flow thing happening here,” he adds.
The funds are a large short in the wheat complex and have been that way for four years running according to Bosse. “They’ve been just rolling their positions to a deferred contract and letting the market come down to it and making money that way. But I do wonder when I look at the wheat market in general, it does feel like $5 is really strong support. And remember, if you’re short the market, it has to keep going lower to make money. So maybe the funds are kind of getting a little tired of the wheat complex, not making them much money. So maybe the short covering rally would be them getting out of their short positions.” He says the U.S. dollar index trending lower also helps.
Corn Closes at $4.35 Resistance
However, March corn closed right on chart resistance at $4.35. So can the market get above that technical level or do farmers sell against the rally?
Bosse says, “I think it was $4.34 the last time we got up here and farmers started increasing sales. And I actually was getting text from clients, you know, as we’re setting up this interview saying, I sold some more old crop corn. And, you know, good job. That’s from here on up. I tell them to do scale up sales. Even though I’m fairly bullish the corn market longer term because of the world stocks being down, but we don’t have that bullish story right out to really spark a huge rally. You know, weather scare in the Safrina corn crop or something, that would really get a rally going in corn.”
Corn Rally to Fight for Acres?
If soybeans continue to rally does corn have to follow to compete for acres and how many acres would need to shift to soybeans for corn traders to get nervous?
Bosse says, “I think we got to see more than 3.5 million acres shift. And I think everyone’s kind of in that area right now of a three million acre shift. And not because soybeans are not much more economical. It’s just that none of the economics work. And maybe we plant more soybeans because it’s a cheaper crop to plant. Just overall, if you plant 99 million acres of corn, you normally see a pullback, you know, it’s a little bit more normal rotation. But, you know, as you and I know, you get this far north for us, it’ll depend on spring weather and ultimately price comes spring. So that’s, you know, this job is fun because it’s always changing.”
Cattle Tank on Possible Plant Strike at JBS in Greeley, CO
The cattle market saw a gap lower opening as the JBS plant in Greeley, CO faced a worker strike as 99% of them voted to strike if they didn’t get a better deal. “That’s a huge plant in Greeley, CO. So if they would be down for any amount of time, that would, you know, hurt the market.”
He thinks a strike is crazy with packers margins in the red but he thinks it will be short lived. “They’re not striking today. It’s just a tool they might use.”
He thinks the market saw some profit taking after new highs for the move on Wednesday. “Also wasn’t a great chart formation yesterday the way it closed.”
Lower Stock Market a Factor
With the financial markets lower Bosse says money flow was also part of the lower day in cattle futures. “If I step back and look at everything, you know,
cattle, which have been crazy high, the stock market, which has been crazy high. They’re both selling off. And in general, corn, wheat, soybeans are all low when you think of the inflation numbers of everything else. So it felt like it was a big money move, a money flow thing.”
He also adds that he doesn’t look for it to really drive the cattle market down much though, because the fundamentals are still very strong and the cash market is now back above the futures. “So I wouldn’t doubt to see it bounce back tomorrow.” And he thinks it has the full potential to go make all -time highs again.
Lean Hogs See Profit Taking
Lean hog futures followed cattle lower but also saw profit taking after hitting new contract highs the previous day. “I think just profit -taking and
money -flow there, too. Exports are actually pretty good for beef too, which is the first time I could probably say that in three years.” It may have also been some hedge pressure as the summer months did run above $110.
