For the week grains were mixed with March corn up ¾ cent, December corn up ¼, while March soybeans lost 4 cents and new crop November dropped 6 ¼, March soybean meal fell $7.50 per short ton, March soybean oil was 3 points higher. March Kansas City wheat led the complex climbing 16 ¾ cents, March Chicago gained 7 cents on the week, with March Minneapolis wheat 8 cents higher.
Funds sold in all the grain markets on Friday. Mike Zuzulo with Global Commodity Analytics says the trade has been very negative on demand because of deflation in China. However, the Chinese government surprisingly announced economic stimulus efforts two nights in a row, including a cut in reserve requirements for banks, which created some buying in markets like copper, crude oil and even wheat. “But it didn’t hold, and I think that’s where the funds that probably jumped in midweek and small traders that jumped in midweek they probably jumped right back out again on Friday,” he says. The reason, as Zuzulo explains, is because the Asian markets did not get done what they needed to. “In other words, the Hong Kong stock market didn’t rally above resistance, the offshore Chinese currency didn’t rally above resistance either. So, I felt like that the macro demand side of the equation was a really big player.” Traders became concerned about demand at that point he says. “When that happened, I think the trade went back to looking at the weak U.S. grain export sales.”
Soybeans and soybean meal saw the heaviest selling pressure. March soybeans hit chart resistance right below $12.50 on Thursday and profit taking ensued. However, the huge drop in cash basis levels in Brazil drug down prices. “I really think that Brazilian price and that basis you bring up is going to be more and more important. If we have a short crop those prices in Brazil should shore up but we’re looking at prices at $410 to $415 per metric ton in Paranagua verses our Gulf price at $480 per ton.” He adds the better extended weather forecasts with drought relieving rain for Brazil and Argentina also contributed to the sell off.
The corn market fell on Friday on spillover from lower soybeans and meal but is also watching South American weather. However, March corn ended a ¾ cent higher and Zuzulo says the best thing the corn market had going for it last week was the higher wheat market.
Wheat gained on the week on fund short covering and Zuzulo says also benefitted from the announcement of China economic stimulus. However, gains were trimmed on Friday on profit taking after hitting chart resistance. “The soft red winter wheat hit resistance on both the weekly and the monthly chart,” he says.
February Live Cattle added $4.07, April Live Cattle were $4.30 higher, and March Feeder Cattle surged $7.75. February Lean Hogs were up $4.17, April $5.10 higher.
Livestock futures ended higher for the week and made new highs for the move which brought fund buyers back in to buy. Cattle also got a push from higher cash trade at $174 to mostly $175 in the South, up $2 while dressed prices in the North were mostly $277, up $3. The stock market making new highs was also positive for consumer demand according to Zuzulo.
March Feeder Cattle futures were up $7.77 for week and closed above the 100-day moving average and the 50% retracement level. April Live Cattle closed just below 50% retracement but were up nearly $4.00 and Zuzulo thinks the technical action may attract more fund buying.
April Lean Hog futures also gained over $5 on the week and had a chart breakout above the November highs. The funds were in buying, plus the market followed cattle and higher cash. Zuzulo thinks these levels may be a good place to start putting some hedges on.
