Grains resume their weather rally with wheat taking the leadership role on global production concerns, corn and soybeans followed.
Mike Zuzulo, Global Commodity Analytics, says the wheat market is taking its cue from the Paris wheat futures which are hitting prices of $7.50 to $7.60 a bushel on Monday’s close.
He says, “The European market as we jumped into Monday’s trade realized that there were bigger problems than we had originally assumed the end of last week in both Ukraine and Russia. Some out there I’m hearing are saying 20% to 30% yield losses in some of those key Black Sea provinces that were hit more than one day with freeze damage and the Russian price is showing that as it’s getting upwards of $235 to $240 per ton U.S. dollars in the key exporting regions.”
Zuzulo says the metal markets are also pushing wheat higher. Copper, silver and gold are all moving into record territory and there is a strong correlation of around 90% between copper and the Soft Red Winter wheat market. “These markets are very powerful, and investors are coming in to buy,” he says.
However, wheat is into chart resistance, and he says July Chicago wheat needs a close above $6.97 before the three-day weekend to keep the rally alive. He says a 2-month high in the Russian Ruble may also get the job done.
Corn followed wheat higher on Monday but may be trading some of its weather concerns. The key will be planting progress as he is hearing of some possible prevent plant in the wettest areas of the Corn Belt.
Soybeans have seen bull spreading and the July contract may be seeing some underlying demand or are putting in some premium due to weather and crop concerns in Southern Brazil. There are also serious infrastructure damage for soy processors and port areas. “If we keep that inversion going into the end of the month, I think soybeans have a chance to continue to follow corn and wheat higher,” he says.
Live cattle end mixed take a breather after a strong week for cash and futures last week. “This week will also be a cash story and that $188 plus cash trade on a negotiated basis USDA reported was very necessary, very timely. The retail numbers were very strong on the weekly featuring report,” he says.
In order to go back and challenge the contract highs in cattle Zuzulo believes the live cattle market will need help from higher feeders and lean hogs. “If the corn continues to go higher I suspect the funds will continue to buy corn and sell feeders and that could weigh on the fat cattle futures,” he says.
Hogs continue to struggle with the futures premium and the drop in China exports. “We saw a really weak export number last week. One week doesn’t make a trend but as we get closer to the Presidential election hogs are going to get more politically sensitive.” He also thinks for the hogs to go back up the market needs a strong BLT seasonal to increase demand for bellies.
