Grain and livestock futures end mostly lower on Friday in a commodity wide selloff.
Randy Martinson, Martinson Ag, says corn and soybeans saw early pressure as both markets ran up into chart resistance which triggered profit taking.
March corn ran into resistance around $4.60 and March soybeans just shy of the 100-day moving average around $10.19.
So were the reversals in corn and soybeans just correcting the overbought status of those markets or topping action?
“I think we just saw fund liquidation and a pick up in farmer selling or hedge pressure in both corn and beans at these levels,” he says.
Martinson says there was also some position squaring ahead of the weekend and in anticipation of USDA’s big data dump on January 10.
“I am expecting demand to be raised for corn in the USDA reports with strong exports and ethanol crush but very few adjustments in soybean or wheat,” he adds.
Pressure on Friday was also due to StoneX’s latest production estimate for Brazil. Their new soybean production estimate is 171.4 MMT vs 166.2 MMT previously. Their corn production estimate is 128.6 MMT vs 128.3 MMT.
Lackluster weekly exports contributed with wheat and soybeans exports at a marketing year low.
Martinson says estimates were low because the reporting was for a holiday week but the totals came in even lower than the trade had anticipated.
Corn, soybeans and meal had been adding some weather premium earlier in the week due to dry forecasts for Argentina and Southern Brazil.
As a result March soybeans did close higher for the week by 2 cents but March corn ended 3 1/4 cents lower for the week.
Wheat futures ended lower on Friday and for the week as it was pulled down by corn and soybeans, despite weakness in the U.S. dollar index.
Weather was also a factor as forecasts in Hard Red Winter wheat areas added some snow which will serve as a insulating blanket to protect the crop from the below freezing temperatures that will accompany the system.
“The U.S. Drought Monitor also shows only 25% of the winter wheat areas under drought which is well below last year,” he says.
Live and feeder cattle futures made new highs for the move and all time highs in the March feeder cattle contract early in the session working in record high cash trade.
However, the market ended mostly lower and scored reversals on profit taking and hedge selling.
Is this topping action?
Martinson says he is watching for follow through on Monday to determine if this is just a short term correction or a top.
Cash trade was re-established at even higher money on Friday with Southern deals at $197, up $4-$5 from last week’s weighted averages and Northern business at $315 dressed, was up $8 but there were live sales as high as $201.
For the week, Southern live business had a range of $192 to $197, mostly $196 to $197, $4 to $5 higher than the previous week’s weighted averages. Northern dressed sales ranged from $309 to $320, mostly $312 to $315, $5 to $8 higher than the prior week’s weighted averages but over $200 live.
