Grain and livestock futures end in the red on Wednesday with commodity wide selling pressure.
Corn Sees Profit Taking
Jim McCormick with AgMarket.Net says corn saw some profit taking after hitting chart resistance as the December contract neared $4.25.
“Yesterday we got up, we probed the downtrend and took it out last night, but there was no follow through, even though the crop ratings dropped two points. And I think we started to pull back. I mean, right now on the big picture from the winter high to the summer low is a just shy of a 38% retracement.”
He also thinks there are some early bushels that are starting to come to the market and so hedge pressure was another pressuring factor for the market.
The crop is dying fast in some areas due to disease pressure and so the harvest will ramp up quickly.
“If you drop that crop to say five bushels toward a 183 that would still give you an over 16 billion bushel production We’re here in less than 10% of this crop been sold. So that’ll leave you over 15 billion bushels unpriced. If a third of those bushels comes to the market, 5 billion, you’re talking 200,000 contracts. If half that 15 billion comes to the market, you’re looking over 350,000 contracts of hedge pressure. The question is, if you’re an end user, are you going to bid up on that, or are you just going to wait for the hedge pressure to move the market back down?
Corn Crop Getting Smaller?
Corn crop ratings showed 69% of the crop is rated good to excellent, down 2%, and the highest in 9 years.
But does that adequately tell the story of the yield loss associated to dry conditions in the Eastern Corn Belt and the heavy disease pressure in some fields?
McCormick says its tough to know until the combines roll and so that’s why yield models and the market are figuring around a 185 yield.
Soybeans Wrestle With Lower Yield and Lower Demand
Soybeans saw follow through selling pressure on Wednesday.
McCormick says the market is realizing even if yield is dropping it can’t offset the loss in China exports.
“The Chinese are not buying our beans. We are in a trade war with them for all intensive purposes and they are trying to make it as painful as they can. So you’re talking potentially 500 -600 million bushels of beans that normally go normally go out in the fall that if China’s not buying, we’re not gonna be able to find a home for them quick enough. And that’s just gonna back that system up all the way,” he explains.
That would severely pressure the soybean market, which is already seeing cash bids in the Dakotas in the $8 range.
Will We See MFP 3.0?
McCormick says it feels like China is planning to drag out the negotiations to avoid a deal that includes soybeans.
“And then you look what our government officials said at the Farm Progress Show, they were talking about adding $30 billion to the CCC fund. And I think, Michelle, that’s critical because that’s the fund that President Trump used during the first trade war to essentially put out those MFP payments.”
He says that tells him that the government is also planning on this situation lasting a long time.
Wheat Can’t Get Traction
The wheat market continues to fall with lower corn prices but also due to ample supplies globally.
Demand has been solid but its not enough to overcome the competition from bigger crops in Russia, Australia and Argentina.
He says, “Russia’s got a supply they’re trying to drop prices to generate revenue for the war,” he says.
Cattle See Profit Taking
Live and feeder cattle futures were also lower on routine profit taking perhaps ahead of the Jobs report on Friday.
McCormick says the bullish supply picture hasn’t changed and the only thing that break the market is prices finally getting high enough to ration demand.
Boxed beef was higher at noon and on the close with the Choice cutouts up $2.59 at $416.01, only the second highest price since COVID.
Light cash trade developed late in the day at $242 in the South, steady with the prior week. The North saw dressed business at $383 to $383, $1 to $2 lower than last week’s weighted averages.
Lean Hog Futures Also Consolidate
Lean hog futures also saw profit taking after hitting new contract highs in the December and deferred futures on Tuesday.
Hogs have benefited from the rally in the cattle market and so also followed that market lower.
McCormick says even if cattle have a larger break he doesn’t think it will severely impact the hog market because of the discount in price its holding in the grocery store.
