Corn and wheat are higher early Thursday, with soybeans lower. Cattle are also seeing selling with higher hogs.
Corn and Wheat Bounce
Corn and wheat futures are seeing higher prices on Thursday on a combination of short covering and end user buying. Darin Newsom, senior market analyst with Barchart, Inc. says corn saw some short covering on Wednesday after holding support at the 100-day moving average on the March contract. However, he thinks demand has also been a factor with ethanol production at a record level this week and exports continuing to run at a record pace. “These are value levels for end users at these prices,” he explains.
Wheat was mostly lower on Wednesday with soft red winter making new contract lows but is following the strength in corn and also seeing some short covering as the funds are still short in all three classes of wheat.
Why Can’t Corn Rally With Record Demand?
While the corn market has seen record demand confirmed it is still in a 15 cent trading range and has been in that mode for weeks. Why? Newsom says corn likes to trade sideways but it is also a function of commercial interests not having to chase the market hard with the large supplies that overhang the market.
Why do Soybeans Continue to Slide?
Soybeans have continued to slide and make new lows for the move despite the string of flash sales reported recently by China and unknown destinations. USDA reported another sale of 4.2 million bu. of soybeans to unknown destinations Thursday morning and China sales are now estimated to by at 9 MMT of the 12 MMT purchase commitment. Yet, the market has been unimpressed and has continued to grind lower.
China Shipments Lag
Newsom says the export sales are just not enough even if China makes its entire purchase commitment. Plus, while China has been purchasing soybeans it is not shipping those soybeans. “So far according to the shipments report China is not moving those soybeans yet and so there is fear in the market that China could cancel their purchases,” he says. That fear is warranted with soybeans going on sale at over a $1 below the prices China paid for their early purchases of U.S. cargoes.
Funds Liquidating in Soybeans
The other problem for the soybean market is the funds got record long at the peak of the market and they have continued to sell and take profits which are pushing the market lower. While the chart gap areas were filled on the January and March contracts this week the market has pushed below those areas. January soybeans held the 200-day moving average on Wednesday but are having a tough time holding that level.
Crude Oil to Stay Below $60
The crude oil market is trying to stabilize after the recent sell off to multi-month and year lows. However, contracts are still trading under $60 and Newsom doesn’t see much change in that trend for the foreseeable future with the glut of oil in the world. Currently, he doesn’t think that is having a big impact on the ag space, even soybean oil and corn which have been in the past somewhat hinged to the energy markets.
Lower Energy Prices Lead to CPI at 2.7%
Newsom says the lower energy prices are one of the big reasons the CPI or Consumer Price Index came in cooler than expected Thursday at only 2.7%, while the trade was looking for 3.0%. However, he says that number does not adequately reflect the sticker shock consumers are seeing for a host of food products and other goods and services. “And I don’t see those prices coming down anytime soon,” he says.
