Soybeans and bean oil were higher on Tuesday morning with wheat and corn weak. Cattle saw some early pressure with hogs rebounding.
Soybeans and Bean Oil Rally
Soybeans and bean oil were slightly higher on Tuesday morning with hopes President Trump may make an announcement or at least talk positive about the 45Z program according to Mark Schultz with Northstar Commodity. News reports on Monday indicated the Office of Management and Budget had finalized the 45Z rules and so an announcement is at least close.
South American Crop Watch
The soybean market is also watching the South American weather forecasts and crop estimates. Schultz says there has been some lingering hot dry conditions in Argentina but only Southern Brazil is in jeaopardy of seeing any production problems due to the lack of moisture. Overall, he thinks the weather would need to stay hot and dry in Argentina for another two to three weeks to see a bigger than 2 MMT cut to Argentina production.
Dr. Michael Cordonnier lowered his Argentina soybean estimate by 2 MMT to 48 MMT and on corn lowered his projection by 2 MMT to 54 MMT. For Brazil he raised soybean production 1 MMT to 179 MMT and left his corn estimate unchanged at 137 MMT. Meanwhile, AgRural raised Brazil’s soybean crop by 600,000 MT to 181 MMT and the corn crop the same amount to 136.6 MMT.
China Buying Brazil Soybeans
News reports indicate China is in the market buying cheaper Brazilian soybeans and has booked 25 cargoes for March/ April delivery. Schultz says that makes sense with the record crop coming to market from Brazil and with China reaching its 12 MMT U.S. purchase commitment. He thinks China is likely to be out of the U.S. soybean market now until at least fall when they start buying for their next 25 MMT purchase agreement.
Soybean Technical Action is Poor
On Monday soybeans made three week highs before hitting chart resistance and reversing to score an outside day lower. Schultz says this was poor technical action and March soybeans cannot take out or at least close above the 200-day moving average for any sustained period. He thinks it would take some type of weather problem in South America to change that.
Corn and Wheat Remove Weather Premium
Despite a flash sale of 4.33 million bu. of corn to unknown destinations on Tuesday morning the corn market was lower. The wheat market was also serving as an anchor for corn similar to Monday’s action. Plus, both markets hit chart resistance and failed which triggered some speculative profit taking. The wheat market was also removing weather premium as many of the winter wheat areas that received bitterly cold temperatures also saw insulating snow. For the corn market the weather slowed marketing of grain and ethanol plants also slowed production and instead sold natural gas on the market. That situation was also normalizing on Tuesday and so the markets had a weaker underdone.
Cattle Consolidate Awaiting Cash
Cattle futures were mostly lower on Tuesday morning as the market was consolidating after hitting technical resistance areas on the charts and failing. Schultz says the futures will need to see higher cash trade again this week to make it through those chart areas. He thinks beef demand has been compromised with Winter Storm Fern closing restaurants. However, the cold weather is likely to have stressed cattle and performance which will trim carcass weights.
Lean Hog Futures Resilient
Lean hogs opened lower on Tuesday but quickly found their footing. Schultz says the resilience of the market has been impressive. He thinks its tied to solid demand but also disease problems that will likely mean a marketing hole in the summer time period. However, even the April contract hit new contract highs on Monday.
