Corn, soybeans and cattle end mostly higher on Wednesday with hogs mostly lower.
How High Do Soybeans Rally Post-WASDE?
Soybeans saw follow through buying and were up around 11 cents Wednesday continuing to price in the bullish news from the August WASDE, including lower ending stocks.
Chuck Shelby, Risk Management Commodities, says soybeans may need to run higher to accomplish that.
“Can we go $10.75 in in the futures market in the November contract would be a target of the market and and some resistance there but if you could push you there with some reasons then the $11 would be the ultimate target of the market,” he explains.
To get past that area may take lower yields and there are still questions about whether or not the U.S. can get to a 53.6 bu. soybean yield.
There is dryness in areas of the Eastern Corn Belt and not much in the forecast for rains the last half of August.
The other bi wild card in determining how far soybeans prices rally is China export demand.
Shelby says a deal that would include soybean purchases are what the market needs to push over that $11 mark.
With the bullish setup from the WASDE report Shelby says he’s fairly confident the market has made a low and won’t go back and retest the recent lows.
Has Corn Digested the Most Bearish Yield?
Corn followed soybeans on Wednesday and saw some short covering but has handled the bearish yield and production estimates better than expected.
Shelby says the market had already priced the most bearish news, plus there may be some traders that don’t believe the high 188.8 bu. yield estimate from USDA since it was done without field surveys.
“I think the crop tour coming up will probably have an impact as far as what they find. I know there’s been some pollination issues reported. And ultimately, we went into this report pretty negative and came out, you know, with the market rallying a bit, the fund’s big short. So we’re at the moment, I think we probably digested all the negative news we’ve had so far.
Is The Low in the Corn Market?
Shelby is less confident the low is in the corn market because he expects significant hedge pressure at harvest.
The market will also need to go through the September WASDE where USDA will finally get some boots on the ground data.
“So corn may need to retest the $3.85 low from last year at some point but hopefully it will be a double bottom,” he says.
Corn Acreage Questions
There are also questions about acreage after the market was shocked by the extra 2 million acres of corn USDA found even since the June Acreage Report.
Nearly 1.2 million acres of the increase came from fringe states like Kansas, North Dakota and South Dakota which will have a difficult time raising the national yield even with record production.
Shelby says farmers in some areas took prevent plant on corn and then replanted those same acres back to corn.
“Some of that might have been in parts of southern Illinois and in Ohio where guys ended up taking prevent plants, some fields have been replanted to corn, you know, that it was corn in the USDA’s eyes, even though for crop insurance purposes, they took prevent plant.”
Will the Cattle Market Make New Highs?
Live and feeder cattle futures were mostly higher again Wednesday and got within striking distance of the all-time highs but settle off those highs.
That was despite some light cash trade at higher money and the recent surge in boxed beef values.
Shelby says profit taking trimmed the gains but until consumer demand falters he’s thinks the market will retest and make new highs.
Brazil Tariffs Slowing Lean Trim Imports
Supplies are tight and getting even tighter as Brazilian beef imports have been shut down with the additional 50% tariffs from the U.S.
That is driving up the boxed beef values as well as Labor Day buying.
Lean Hogs Lower Except August
August lean hog futures made new highs for the move trying to converge with the lean hog index.
However, deferred contracts ended lower on profit taking and the drop in cash and cutouts.
However, Shelby says hogs have benefited from higher cattle prices and demand has been stable so he’s optimistic the market will be able to hold these levels.
