Ag markets ended mostly lower on Thursday except for wheat and bean oil.
KC Wheat Makes Fresh Highs
Wheat futures rallied on Thursday adding weather premium with expanding drought and a mostly dry forecast for the Western third of the Plains says Naomi Blohm of Total Farm Marketing.
“On Monday’s weekly crop progress ratings, we saw the good to excellent category for wheat decline yet another notch. And it just really shows
how poor things are with some producers even starting to talk about abandonment of those acres. And so when you add that onto the fact that, you know, we are seeing in the United States the lowest planted acres of wheat in decades, it really makes it tricky for us to know for sure,
like going forward, you know, what are we going to have for supply here in the United States?”
She says there is also talk about the world fertilizer crunch and key production areas not being able to get fertilizer or prices being too high because of the conflict in the Middle East.
Can Wheat Continue to Rally?
Hard red winter wheat contracts took out the March highs and made new highs for the move but is there enough ammunition fundamentally to keep the rally going?
Blohm says, “I would say in the short term, meaning like going into Friday, it might be questionable because we could see some profit taking. But over the weekend, if the Plains still don’t receive rain or if things continue to flare up in the Middle East, that could be supportive for trade next week to justify that market to move higher. Because when you look even at the weather forecast over the next two weeks, there’s not much rain relief in sight for the Western Plains and Southern Plains. And so unless the forecast changes, the wheat market should be supported for the short term.”
Markets Trade Like War is Over
At the same time most of the grain market is trading like the war is over.
Blohm says there just hasn’t been any fresh bullish news. “There hasn’t been enough new dramatic headlines to shake crude oil out of the trading range and the trading range of course is large so for crude oil we’re looking at major overhead resistance at $120 a barrel but big support is at $80 and so as long as there’s just moderate back and forth talking, the crude oil market just doesn’t have a reason to necessarily trade out of that range one way or the other right now.”
However, if there is any headline over the weekend the market could move higher and pull the grain market with it.
Corn Can’t Follow Wheat
Corn tried to follow wheat early in the day but gave up gains to close lower and putting in a disappointing finish.
Blohm says the market ran into chart resistance and saw profit taking.
“Definitely. That’s exactly what happened. So without enough fresh, friendly news on its own merit, what we saw was the. corn futures contracts test short-term overhead resistance in the form of some different moving averages and then just didn’t have a reason to get through it so a little bit of a price pullback it wouldn’t surprise me if corn futures prices trade in a very cautious sideways trading pattern for maybe another week because we still have plenty of things to be watching in terms of weather and in terms of the Middle East.”
Otherwise, she says corn futures don’t have a reason to stage a big rally or a reason to break.
In fact, when prices fell she says the market did spur some demand.
“We saw some decent flash sales for exports. So it does show that countries are paying attention, that when our prices just get a little bit cheaper. We’re seeing exports pick up. We had amazing weekly ethanol numbers this week, higher than expectations. So the demand is there and that’s going to keep the market supported. But we’re just in the short term lull for news. Again, one eye on weather, one eye on war.”
Too Early for Weather Concerns
She says although there has been talk of planting delays it is too early for the market to get real concerned until late April.
“I know that there’s a lot of producers who over the past couple of years have been used to getting planting a little bit early. So they’re getting
a little bit anxious about it. And the weather conditions around the Midwest are just all over the place. Some places are able to get planted because it’s been so dry. Portions of Iowa just getting about a quarter inch of rain every other day and it’s humid. So it’s keeping things on the wetter side there. They haven’t had the ability to dry out. Wisconsin, we have flooding in west of Green Bay. So that’s become an issue and it’s just been kind of hit or miss. So I think for the market, it’s really going to take until the end of April before we start getting a little bit nervous,” she explains.
Soybeans Also Hit Resistance
Soybeans were also higher early in the session in tandem with wheat but couldn’t close higher on Thursday running up into chart resistance just like corn and saw profit taking.
Blohm says soybeans were supported Wednesday by the positive commentary from President Trump on his social media that he will be meeting with President Xi of China in a few weeks here. So that gave the market a supportive tone yesterday. But then when the export sales came out this morning, just not a lot of fresh news there. So we have strong domestic demand from the crush. And that information was out yesterday, which was supportive. But again, not enough fresh news this morning. to justify a further rally. So just a little bit of profit taking and got to keep those day traders happy.”
Soybeans Sideways Until China Meeting
Soybeans have been sideways on a combination of strong crush and hopes for more China business and so that could continue for a while.
“So for about the past three or four weeks, old crop beans, new crop beans, if you look at a daily chart, it feels like every other day, there’s either a signal that technically would suggest, hey, maybe the prices are going to go higher, either bullish key reversal or outside bullish reversal,
but then just give it a couple days and the technical indicators turn a little bit negative to where there’s a bearish reversal or a bearish hook reversal. And we’ve seen that price scenario about four or five times now. So what it tells us is that the market is really teetering on every
single piece of news that’s out there in terms of crush demand, in terms of watching export demand, keeping an eye on the weather in South America and harvest progress down there, keeping an eye on the weather in the United States, trying to understand where the acres are actually going to be,” she explains.
She says the longer the market trades sideways the more explosive a breakout could be.
“We’re poised to see either a 50 cent move higher or lower, depending ultimately on where the fundamentals lie. If the fundamentals lean friendly, we are going to definitely go back up and test those March highs on the old crop. But if fundamentals start to lean negative, then we could very easily slip about 50 cents lower in the short term. So really pay attention to these markets.”
That makes getting some of the 8 MMT of old crop soybean sales made to China or the market could fall apart.
Soybean Acres Rising?
USDA raised acreage 3.5 million in the March report but there is also talk of even more soybean acres due to the problems getting fertilizer for the corn crop and due to the high prices.
“It’s really hard to quantify because people aren’t really in the fields yet to know for sure. So wanting to keep an eye on the situation, wanting to talk to see dealers to see if there’s been any switching, it is something that could really be a shocker. in a few weeks as the planters get rolling.
And then of course, we’ll know for sure better what the June 30th report has to say for the planted acres. But it would really affect the balance sheets if the soybeans gain more acres than what we’re expecting,” she adds.
Cattle Consolidate on Profit Taking?
Cattle markets were lower for a second day on profit taking off of contract highs but also some nervousness about the border reopening to Mexican cattle imports.
“Then we saw a little bit of technical selling once prices went below the five-day and the 10-day moving average. And then news-wise today, Secretary Rollins is going to be in Texas on Friday, and she’s going to be speaking around 11 o’clock Central Time. So we’re going to try to get some more information on that border. Is it going to stay closed? Is there any... of it opening. And then, of course, on Friday afternoon at two o’clock is the cattle and feed report. So plenty of things for this cattle market to be watching for. Still the conversation, too, of higher crude oil prices and with higher energy prices, are families able to spend more money at the grocery store or not because they have to spend
higher. prices at the pump. So that conversation is all tucked in there. So I’d say it’s a little bit cautious right now. The market is supported fundamentally, yet at the same time, it’s wondering how much friendly news is actually there to justify one more leg higher or not.”
