Wheat and hogs were slightly higher early Thursday, with corn, soybeans and cattle lower.
Wheat Tries to Extend Gains
Wheat futures were just slightly higher Thursday morning, trying to extend gains after an explosive rally on Wednesday.
The market has been pricing in export concerns with the Black Sea attacks escalating and shutting down export of wheat out of the Kerch Strait, which accounts for nearly a third of Russia’s exports.
However, DuWayne Bosse of Bolt Marketing says the market may be getting close to pricing the export disruptions in.
“I think we’re already priced high enough to price the U.S. out of the global export market, which is probably part of the reason why I think eventually we need to be selling this rally. But I mean, it’s a big story. I mean, Ukraine attacking ships in the Russian Strait where they want to export about a third of their wheat. So it’s a big deal,” he explains.
U.S. Needs to See Increased Wheat Demand
However, he says the market is not shrinking the global supply of wheat.
“We just kind of narrowed up a key export path,” according to Bosse.
So the U.S. will need to see export business to push prices much higher and more than the 8.6 million bu. on the weekly export report Thursday morning.s this morning.
Heat Hurting Spring Wheat
Extreme heat in the Northern Plains is also taking a toll on the sprign wehta crop and could be trimming yields. However, Bosse thinks that may also be priced in.
“This heat is accompanied by good subsoil moisture so the wheat producers think they’re okay. When it gets this hot for this long, it
does shrink the kernels, test weight maybe dips down. The plant itself gets kind of a bluish gray color to it, and I don’t think it’s helping it by any means,” he describes.
So he thinks the weather is shrinking the yield a little but we may not know how much until the harvest starts, and that’s probably
almost a month away yet.
Could Funds Push Wheat Back to Contract Highs?
The charts look good for all the classes of wheat after Wednesday’s technical breakout so it is possible the markets could retest the May contract highs.
However, Bosse says the market will need to see continued escalation in the Black Sea region.
“That’s the unknown. If Ukraine keeps attacking Russia battling back and forth there, do we want go back up and test the highs? I think that’s what we’re doing here yesterday and today. It is the funds getting out of their shorts. I don’t think we really have new buyers coming in,” he adds.
Corn Sees Profit Taking
Wheat helped the corn market close above some key moving averages on Wednesday but without a big rally in wheat on Thursday the corn market was seeign some profit taking.
Bosse says corn also ran into the next chart resistance areas and will need a bigger rally in wheat to get through those areas, or a bigger weather threat.
He was disappointed with corn’s muted reacted Monday to the hot and dry forecast which showed no precip for a week while temperatures were in the mid to upper 90s in the northwest Corn Belt. Plus, if corn loses one or two bushels on yield the ending stocks get tight in a hurry.
“I thought the market would have rallied more on Monday but I think corn’s got its own story. We are up to this level on the charts where it is going to be up to the funds to help push us through this resistance,” he adds.
The timing may be wrong to do that though. “If the funds to go crazy long and put in a big weather premium at the second half of July or going into August is kind of a little late. There’s a lot of areas in the U.S. that I don’t think we can hurt the corn crop anymore.”
Corn Demand Story
The real story for corn has been the record demand and if China stepped in to by corn it could really get the market excited.
However, weekly exports were a marketing year low on Thursday at only 12.4 million bu. old crop and new crop was only 12.3 million bu.
Bosse says, “That was a bit of a surprise. We’ve had such good export demand just rolling through. And I don’t know if the price jumping up here kind of quieted this down and pulled demand back a little bit. So, yeah, that was a little bit disappointing.”
Soybeans Correct, Despite China Business
Soybeans closed above $12 Wednesday with the help of the wheat rally but were seeing some profit taking early Thursday.
This comes despite talk of China buying another four to eight cargoes of soybeans on Wednesday.
He says, “Soybeans got drug above $12 yesterday, but at that level I think you see some profit taking and farmer selling.”
USDA also confirmed strong new crop weekly export sales of 65 million bu. Of that China accounted for 38.3 million bu. of new crop soybeans and 4.9 million bu. of old crop sales.
“That’s kind of the pace we need to see them doing if we’re going to meet what the White House says we’re going to meet,” he says.
Bosse believes the funds will need an August weather threat to add to their length and keep soybeans pushing past $12.
Strong Processor Demand
Soybean crush was also a record for June with the NOPA figure at over 214 million bu.
Strong processor margins have kept soybean basis strong and continued demand is helping support the futures as well.
“NOPA crush beat all the trade estimates so processors want the beans as they do not want to run out. So, they’ll give any price and that’s what makes the basis that much tighter they can’t run out until they get to harvest,” he adds.
Cattle Spiral
Cattle futures were down again on Thursday marking the 14th down day in the August live cattle contract and making more new lows for the move.
Is the bottom anywhere in sight?
Bosse says,"It sure doesn’t look like it. The cattle market has been tough lately. I don’t think we’re close to the lows and the reason being I am just watching the trade action.”
While the fundamentals have not dramatically changed but the one things that has is packer leverage.
“Packers got the leverage a couple weeks ago and now that they’ve got leverage, they’ve lost money for a long time. They’re going to take it as far as they can and they’re winning lately,” he says.
The evidence was cash trade developing at $239 to mostly $240, down $7 to $8 from last week.
Plus, funds are liquidating their length.
Psychologically the market also took a hit from news the Trump administration is going to put 25% Section 301 tariffs on a lot of products, but beef is not one of them.
Hogs Extend Gains
The lean hog futures were higher on Thursday, extending gains with help from high cash and cutouts, which have both moved above $100.
However, the market is running into chart resistance that it needs to overcome to keep the funds covering their massive short position in the market according to Bosse.
