Corn and wheat ended lower on Tuesday with soybeans and livestock higher.
WASDE a Non-Event
The March WASDE, as expected, was a non-event and that has historically been the pattern according to Rich Nelson with Allendale.
“Keep in mind, USDA often for the March report does not make any changes. In 11 of the past 20 years, they stood aside on corn ending stocks, 9 of the past 20 years on soybeans. And for today’s report, no change in ending stocks for corn, soybeans, or wheat.”
Those ending stocks coming in on corn at 2.127 billion bu., soybeans at 350 million bu. and wheat at 931 million bu. “Minimal changes as far as soybeans, a light increase on the import side that was offset with a light increase for our discussion with soybean crush. There’s certainly more ahead for that crush report, but USDA chose really to stand aside for most of their main moves here.”
There were some slight adjustments in global numbers with Brazilian corn production up 1 MMT to 132 MMT, with Argentina down 1 MMT at 52 MMT and on soybeans South America was unchanged with Brazil at a record 180 MMT and Argentina down just .5 MMT to 48 MMT.
“The only thing that kind of caught my interest today was really this decline we saw for the Argentine crops. And that does fit in with the rainfall they’ve seen in recent days. So I can’t say today was really a big market mover in terms of USDA type reports.”
March Planting Intentions
USDA’s March Planting Intentions will be the big market mover but uncertainty is rising with fertilizer prices spiking in response to the Iran conflict. So will that mean even fewer corn acres than last year?
Nelson thinks the impact is minimal, “So I think we can argue that in recent days we may have psychologically traded that story a little bit into these markets in recent days. I’m not quite sure if we actually are going to factually change too many acres at this point in time. A lot of producers still tell us that their local areas still have pretty much their needs are lined up all through spring and into early summer so there’s a question about which time period this will impact some people tell us it’ll probably more of a be more of a fall application type of impact here for the U.S. so there are some questions at this point in time we here are not making any major changes to our prior acreage estimates here.”
He adds it would take a bigger cut than a million acres to corn to move prices. “So all you’re really doing is bringing things down from a 1.8 to the low 1.8 or maybe the high 1.7. You’re really not getting the stock numbers to substantially change into the 1.6 or below range. That’s the numbers you need to get this market really into that firmly to the $5 range here for the futures.”
Corn and Wheat Fall With Crude Oil
What was really moving the markets was the plunge in crude oil by $14 after President Trump said the war was about over in Iran. So could this let all the air out of the grain markets?
“In the very short term and especially with so many events coming in these next few weeks it does mean we could have some moderately important changes on price side by the time we get into mid-April or so here so there’s still a lot of a lot of things going on here,” he explains.
Are the Tops In the Grains?
With the highs in the grains and crude oil markets Sunday night followed by huge reversals are the tops in those markets?
Nelson says, “So our focus is the market’s perception. And in this case, we would argue that the largest of the psychological impact point was probably over the weekend and into Monday’s trade. So I would suggest in my personal viewpoint we probably will have a light rebound in crude oil prices these next few days, perhaps feel some moderate chart targets left on the way down. But I personally would not expect that crude oil market to surpass that Sunday night high.”
Will the Funds Defend?
Funds bought a large amount of contracts in the grain markets, extending their long in soybeans, moving long in the corn market and exiting shorts in wheat. So do they defend those buys? “Keep in mind, on the corn side, through last Tuesday, they had bought just about 135,000 contracts, in this case, over about seven weeks. For the soybean side, over six weeks, they bought almost 189,000 contracts. So, there is a lot of question regarding how much support there is still left remaining for these markets. And if we are going to, quote, unquote, pop a hot air balloon.”
He says the funds would need to see some reinvigorated concern over the Iran story to defend those positions. “And I’m not quite sure if we have that psychologically in this market here right now at this time.”
Soybeans Hold Better
Soybeans held together despite the lower corn and wheat markets as Nelson says the balance sheet is still a little tighter compared with the corn balance sheet. “Soybeans, have the potential for a further upside if we do have some other story here,” he adds.
China Deal?
That story could be the 8 million metric tons of soybeans purchases President Trump says China is going to buy, old crop. But will that happen now?
Nelson is doubtful, “I think as of maybe the start of last week, we probably argued maybe there would be a good 50-50 chance at it. Given the past few days of continuing tensions with the Iran story, and I should say continuing tensions with China regarding the Iran story, I do think in this space, maybe we probably have psychologically hurt some of the expectations going into this end-of-the-month meeting. So at this point in time, we are not banking on it. If it happens, that’d be great. But for right now, at least we’re not going to get too locked into the belief that it’s gonna certainly will happen.”
Cattle Recover with Equities
The cattle market recovered with the equity markets on Tuesday but can that recovery continue?
Nelson says, “I think at this point in time, we certainly hurt this market psychologically with the JBS Greeley story. Friday’s very tough employment numbers and the implication for what that can mean in these next few reports ahead as well.”
There are also concerns with the rise in gas prices and what it will mean for beef demand.
Tops In?
Technically he expects more recovery in the cattle market but maybe not a retest of the highs.
“Maybe we can rally back just a little bit more fill the gap left from Monday’s gap lower trade on the charts but i would not really look for a strong rebound after that point though.”
JBS Plant Strike
There are still lingering fears in the market about a plant strike at the JBS facility in Greeley, CO, as the market ramps up to the March 16 decision day.
“We have heard some talk that maybe are slowing chain speed or whatnot for this week. I personally have not seen that in the daily slaughter numbers here just yet. Keep in mind, Tuesday’s run was estimated at 108,000 head, pretty much right where last week’s numbers were at. So I’m not quite seeing a major change from that perspective. But the main issue for us is in these coming weeks, we should have maybe a little more or coming days.”
Hogs Recover With Cattle
Lean hog futures also recovered with cattle and the stabilization of outside markets. However, Nelson says wholesale pork also fell nearly $2 at noon.
“So we might see perhaps a little setback from today’s maybe a little too strong of a rebound in the hog side,” he says.
Supplies are holding steady with slaughter numbers he says, “And for the most part, we’re not seeing any major surprises with demand either way. So hogs I think for right now, we do have kind of a magnet in this $94 to $96 region here for this April contract.”
