Grains ended lower again on Tuesday, with hogs mixed and cattle sharply higher.
Weather and Higher Yields Weigh on Corn and Soybeans
Brian Grete, editor of Pro Farmer, says grains saw another ugly day with funds selling across the complex.
Both old and new crop corn made contract lows and September corn ended under $4.
Grete says favorable weather and an improvement in crop conditions by 1% nationally to 74% is historically high for this time of year and that has the bears talking about record corn yields.
“There’s some pretty wild numbers out there that I’ve seen tossed around, but you can probably go 181, 182 maybe,” he forecasts.
He says it may be too early for USDA to raise yields in the July WASDE but the market is already pricing in a corn yield that is above the 181 bu. per acre trend line.
“They have increased the yield before in July, but I doubt that they will right now.”
How Much Lower Does Corn Fall?
September corn ended below the $4 mark on Tuesday leaving many wondering how much lower corn will fall?
Grete says with speculators already short over 200,000 contracts he thinks that should limit downside risk but right now there is no weather threat or any other factors to make them exit those shorts.
."I think that we’re probably pretty close in both time and price here for corn, but there’s no guarantees. Like I said, there’s just nothing to encourage traders to be buyers and as a result their option is to continue to pump money into the short side of the market,” he explains.
Tariff Uncertainty Also Pressures Grains
The grain markets also saw pressure on tariff uncertainty as President Trump says he will keep the July 9 deadline in place for countries to step up to the negotiating table to avert higher tariffs.
However, he’s pushing back the implementation date for those levies until Aug. 1 which will give countries a little more wiggle room for talks.
Letters went out to 14 nation’s on Monday with increased tariff rates of 25% to 40%, including Japan and South Korea.
Meanwhile, the deals that have been negotiated are just frameworks and lack details.
Grete says the uncertainty of all this is leaving traders nervous and pushing the short side of the grain markets.
“And so it just continues to hang over the marketplace like a wet blanket because nobody really knows where it’ll end up.”
Hedge Pressure Continues to Weigh on Wheat
Harvest has picked up across winter wheat country after some early rain delays.
USDA pegged harvest at 53% done nationally in Monday’s crop progress report and so harvest pressure weighed on the wheat complex Tuesday along with spillover from lower corn and soybeans.
Cattle Futures Hit New Record Highs
Both live and feeder cattle futures made new contract highs on Tuesday.
The live cattle are being pulled up by their discount to the cash and better than expected cash trade last week.
The 5-Area Weighted Average Steer came in at $229.43, just $.08 lower than last week, and is prompting ideas of steady to better cash trade again this week.
The move in feeder cattle futures has been even more impressive considering the first Southern port in Douglas, AZ, reopened on July 7 to Mexican imports.
Lean Hogs Further Consolidate
Lean hog futures ended mixed but are still consolidating under recent contract highs.
Funds are record long in the hog market but Grete thinks the tops are in as seasonally in the cash market and cutouts peak out this time of year.
