Grain and livestock markets were mixed on Monday.
Soybeans Make New Lows
Soybeans made new lows for the move with Jan down 17 1/2 cents.
Chip Nellinger of Blue Reef Agri-Marketing says the soybean complex saw technical selling with funds still holding a sizable long in soybeans and meal.
The CFTC Commitment of Traders Report indicated funds are still long 185,000 contracts in soybeans, 170,000 long contract in meal and 56,000 in bean oil.
“In spite of some of the selling we’ve seen over the last three or four weeks, the funds still held a pretty lofty number net long. And I think it was all about technical selling in here. We didn’t close very well last week. You could put an excuse for crude oil being down near $7 today. That didn’t help. Stock market got hit last week pretty hard. That didn’t help. But at the end of the day, I think it was just technical selling, fund liquidation.”
Soybean Complex Breaking Down Technically
Dec soybean meal ended below the 200-day moving average and so did soybean oil, which could open the door to more selling according to Nellinger.
Jan soybeans are still holding above the 200 day moving average which is around $12 but will it hold longer term or do the funds push the market through those support areas as they exit longs?
Nellinger says, “It would not shock me one bit if we hold it ahead of the WASDE report next Tuesday. That’s going to be a major report. I think the fear is, based on farmers’ results from the field and the combine seat, that they could maybe raise yields just a little bit. I think that’s the fear of the market maybe driving some of this fund liquidation.”
So he thinks soybeans will hold the $12.08 level or could even bounce slightly.
South American Weather Watch
The other factor the market is watching is South American weather, which so far has not been a major threat to Brazilian soybean planting progress.
In fact farmers have been ahead of the five year average. However, Nellinger says that is because of the dry weather in the central and northern areas and it is still early.
“Plenty of time to still have issues. Perception is that that forecast changed slightly for the better. That may have been some of the selling pressure today in the bean market. But again, at the end of the day, I think it’s all about the technicals.”
Corn Tries to Bounce Off New Lows
The corn market also made new lows for the move and then tried to bounce early in the session with wheat.
However, it ended fractionally higher despite the drag of the sharply lower soybean complex.
Unlike soybeans, the funds have liquidated nearly all of their length in corn so that may be taking some pressure off the market.
So, can corn find a low?
Nellinger thinks the market is trying to bottom and that wheat already bottomed last week which will help support the corn futures.
Corn is already at a multi-month low as well and Nellinger sees a bounce going into the November WASDE. The contract low was around $4.25 hit on June 30 and he doesn’t see that level taken out unless USDA raises yield on corn in the report.
Nellinger believes there is a good chance USDA lowers national corn yield from the 181.2 last month.
Corn Sees Demand Surface
One big plus for corn is under $4.50 the market is finding good end user buying. In fact, Mexico bought nearly 69 million bushels of corn in a flash sale on Monday morning with 44.7 million bushels in the current marketing year and the balance for 2027-28.
Nellinger says, That was the biggest number we’ve seen on a corn sale in a long, long time. And the first time we’ve seen Mexico for several months as well. So I think maybe we’re at a low enough price that we’re stimulating some demand.”
Weekly exports have been running 34% behind a year ago in large part due to lagging sales to Mexico, so this was a good sign. Plus, there are renewed hopes that China may start buying corn.
Wheat Still Waiting for China Purchases
Wheat was up 2 to 3 cents in the three exchanges as wheat prices have finally gotten low enough to stimulate some export buying after a $2 break.
Nellinger says talk of China pricing SRW wheat also helped to possibly bottom the wheat market last week and again there are carryover hopes for China corn purchases as part of the pro-rated $17 billion of non-soybean buys. In fact, he thinks China is likely to buy corn and wheat futures before they make the actual cash purchases.
“So I do think we’re at a low enough level fundamentally on corn and wheat that we’re starting to find some real fundamental value there. We’re seeing some buyers step up. Wheat exports have picked up a little bit,” he adds.
Wheat Still Awaiting Black Sea Peace Deal
The wheat market was lower for the week though last week as there were renewed hopes of a Black Sea peace deal. Plus Russia was moving some wheat through the Kerch Strait.
So, even if the market has bottomed how much recovery is realistic?
Nellinger says the attacks have not slowed down so he thinks there is the potential for a rally especially with the funds short and out of position. “I think you could see a sharp one. I mean, it’s been several rotations of the funds get a basically a massive short position, 80,000 plus thousand contracts short right now.”
He thinks the market could rally 60, 70 cents very easily especially with European wheat prices hitting new highs and U.S. wheat looking like it is at a value level.
Live Cattle Fail Again
Live cattle futures had a terrible technical week last week posting lower weekly closes with the cash market also lower.
So can the live cattle recover?
Nellinger was discouraged by the the close in live cattle as the financial markets broke.
“We couldn’t hold those early gains. A lot of correlation between, right now at least, cattle and the equities markets. We had a horrible week last week in the equities. We tried again early today to bounce and then
kind of turned around and reversed into lower territory on the equities markets,” he says.
Additionally, the market is concerned about the election.
“Historically, this marks kind of a low point in a midterm election cycle for the stock market. We’ll see if we’re going to break a 40, 50-year trend with that.”
Fed Cash Falls
The fed cash market was also lower last week with the weighted average at $223.65 down $3.41. Cash also developed early which broke the psychology of the market.
Cash was also lower last week which adds to the pressure.
“Cash has been the king, and that was disappointing last week. It was. I do think you’re into a value area on the chart. But we’re going to have to see stable and maybe a touch better cash trade before we can kind of push cattle out of this recent low.”
Feeder Cattle Futures Hold With Cash
The feeder market has been holding up better than live cattle due to the higher cash trade and the futures are currently at a discount to the index.
Nellinger says, “But that push lower last week did maybe get a little too extreme to the downside based on where the feeder cattle index is and the most recent cash trade out there at the sale barn. So hopefully that can stabilize the feeder market, maybe snap back closer to the feeder index.”
