Grain futures ended higher on Thursday as well as cattle, but hogs retreated.
Soybeans Rally as Brazil Basis Climbs
Kevin Duling of KD Investors says soybeans saw some short covering and technical buying but got a fundamental push from rising Brazilian basis levels.
Traders are reporting China has not booked much of its soybean supply for December and January as high premiums for Brazilian cargoes are tempering buying interest.
This means China could dip into state reserves to meet near-term needs.
“Brazil’s basis is moving up too. That’s telling me that they’re running low on supplies. We’re going to have to get some stuff moving out of the U .S. And maybe that’s why we’ve seen the Pacific Northwest moving basis lately,” he explains.
China Hopes Linger
Soybeans continue to see hope linger regarding Chinese reentering the U.S. soybean export program as U.S. Treasury Secretary Bessent said Wednesday the possibility of extending a pause of import duties on Chinese goods for longer than three months exists if China halts its plan for strict new export controls on rare-earth elements.
This could be hashed out at the end of the month when the two leaders meeting.
Duling says it would be nice to see resolve between the two countries.
“We’ve seen it soften up the last day or two, but the tone the last week or so has been pretty rough. So it’s been hard on the grain markets. And then you’ve got the port fee in the background and you get a lot of bad press off of that, despite most of the industry groups saying that doesn’t involve the bulk shipments. It’s still there in the background kind of paints a dark picture with China retaliating on that,” he adds.
Lack of Farmer Selling in Soybeans
Duling also thinks the soybean market is seeing a lack of farmer selling as harvest is wrapping up in some of the major soybean producing states.
Plus, more of the soybean crop is being stored this fall especially in the Northwest Corn Belt with wide basis levels and that also makes farmers reluctant to sell.
“You’ve just got to keep those beans off the market until something is a little more desirable than that,” he says.
Corn up a Third Day
Corn futures were higher for a third day as Duling says funds are covering shorts after December corn held the $4.10 area on Tuesday and bounced.
The market closed above chart resistance with several key moving averages including the 10, 20, 40 and 100 day layered from $4.17 to around $4.21 1/2.
However, Duling says $4.30 is the next technical objective the market needs to get above to keep the rally intact and the gap areas from July after that.
He says, “I mean, that’s a pretty strong pattern, a nice head -and -shoulders on the daily. So, you know, there’s room to go up and test that $4.30 area technically. And I don’t think producers really want to sell anything until we get there.”
Corn Demand and Lower Yields Could Fuel the Rally
If corn has a chance to get above these technical areas Duling says it will take a combination of lower yields and strong demand.
“If we could just get some positive trade news on deals, that would help,” he states.
Corn Exports Moving Off the PNW
Corn is moving out of the Pacific Northwest as demand has been strong to Southeast Asian countries but also because with no China soybean business corn is being shipped instead.
“I think part of the reason the shipments have been so great with corn is because of the lack of the soybean program. And the same holds true with wheat. Portland’s going to want to fill up, whatever they can fill up. And so you’ve got this extra capacity that’s available. And I’m not seeing any kind of a decrease in the train traffic from, at least in the Columbia River standpoint. So to me, that’s saying, okay, we’re moving corn,” he explains.
Wheat Futures Signaling a Bottom?
Wheat futures were higher with the help of a weaker dollar but mostly on short covering and technical buying according to Duling.
He says the fund have tried to push wheat futures back into contract low areas the last couple of sessions and have failed so he is hoping they will have to cover more of their massively short position.
“To me, the hedge funds are trying to push it lower, but they’re starting to lose this battle. And technically, you’ve got patterns on the monthly, the weekly, the daily in the wheat. And then you’ve got a very good formation in the hourly chart. So to me, the tide’s turned here, if we can hold it,” he says.
Global Wheat Stocks Not Rising
Although USDA and others have increased production estimates for several of the major wheat producing countries around the world, the ending stocks figures are not going up in tandem.
He says that is a function of strong demand, but he also questions USDA’s production estimates.
“Their last numbers in China, basically a record crop despite their weather woes. I don’t agree with that. Canada, I don’t agree with their number there, the U.S. or the EU. I think they’re too high on all of those,” says Duling.
Cattle Make More All-Time Highs
Live and cattle futures saw all-time highs again on Thursday pushed by higher cash trade at auction barns on cash feeders but early indications are that fed cash will also be higher.
A light trade was reported in parts of the North with dressed deals in Nebraska at $372-$373, $9 to $10 higher than last week’s weighted averages.
