Corn and wheat ended higher Friday, with soybeans slightly lower. Livestock were mostly lower except nearby feeders.
Wheat Leads Gains
Wheat was the price leader on Friday mostly on technical buying according to DuWayne Bosse with Bolt Marketing.
“I think it probably spills into funds that are still short. They’ve been short that complex for so many years and comfortable that way. And I think with the war going on, higher energy costs, maybe a little weather premium, they just don’t want to be short anymore. And that is a reason for the market to rally back up. And I mean, the chart does look very good, too, technically.”
Weather Premium in Wheat
Bosse says the wheat market may have also been adding some weather premium with extremely cold temperatures on the way for winter wheat areas, followed by a big warm up. That could further stress the crop. “Some of this wheat has come out of dormancy, some extreme cold temperatures could nip it,” he adds.
Corn Following Wheat and Crude Oil
Corn futures also recovered from Friday’s lower opening with the rally in wheat and the recovery in the crude oil market according to Bosse.
“I think crude oil rallied first, and I think that helped the wheat market rally. And then wheat rallying, I think, helped the corn market rally.
As strong as it felt all week, we were in danger of actually having a lower weekly close. But the rally into the close here really helped corn,” he adds.
Corn New Highs for the Move Entices Selling
Corn made some multi-month highs this week and new highs for the move which was an opportunity for producers to do some selling, so the market absorbed it well.
“There was a pick up in farmer selling on this week’s rally. I think we saw quite a bit of old crop move. I’m trying to be a little bit stubborn and hoping to hold out for a little bit more. But no, farmer selling has increased a lot. And you can see it even in the local basis up here in the Northern Plains, it widened out a bit,” he explains.
Higher Crude Oil Could Lift Corn Higher
Bosse thinks if the war continues to escalate in Iran and crude oil extends its rally, the funds will add to their length in the corn market.
“They have a lot of buying power in that corn market. Now, the last two weeks, they have been aggressive buyers. And I’m curious to see what this afternoon’s commitment of traders report looks like. But I know they still have a lot of buying power left. And we’ve got a big growing season in front of us and world stocks that are the lowest they’ve been in nine years. So, you bet they could come back in and keep buying,” he says.
New Crop Corn Buying Acres
New crop corn got close to $5 this week as well in an attempt to bid for acres on the fear that higher fertilizer prices will force some farmers to switch to soybeans or other less fertilizer intense crops.
“Oh, there is absolutely some fear of that. You know, not all the fertilizer is down and it’s not all booked, sadly. And, you know, yes, 90% of what we’ll use is probably already in the U.S., but fertilizer and fuels are the markets that seemed to price on replacement price. And we all know that’s going to be higher. So, no, I think the market does feel like we better make sure we keep the acres.”
Soybeans Cool on Friday
Soybeans made new contract highs on Thursday night and then eased sligthly on Friday. Bosse says that was some profit taking.
“And also the fact that I think the funds are going to be long over 200,000 contracts here this afternoon (in the Commitment of Traders Report). I think they’re getting to their high end and they’re running out of bullets.”
U.S. China Trade Meeting
He also thinks there were some traders that may have been nervous with top U.S. and China trade negotiators meeting over the weekend in Paris.
“If the Iran war the last two weeks hasn’t stopped us from talking to China, I hope nothing else stops us this weekend. But yeah, I think we’ve already rallied the market, counting on China buying more U.S. beans. Plus, the top negotiators have said soybeans are going to be part of the discussion here over the weekend in this meeting,” he says.
Will China Buy Beans Heading Into the U.S. China Summit?
Bosse thinks the market is gearing up for at least some of the announced 8 MMT of old crop soybean purchases taking place surrounding the meeting between President Trump and Xi in Beijiing at the end of March. Still he is skeptical.
“And I hear more brokers kind of saying the same thing. Like it’s just the economics don’t really suggest they should buy U.S. soybeans. I’m still worried that Trump will claim a huge victory if China just promises to buy our new crop beans, which is good. But boy, I feel like we’re overvalued if that is the case.”
China Not Buying Brazil Beans on Phytosanitary Concerns
However, China tightened their phytosanitary requirements on imports of soybeans from Brazil this week causing Cargill to halt shipments.
China may be stalling with higher freight costs or it may be a signal they are going to try to buy fewer soybeans from Brazil so they have room for more old crop purchases from the U.S. according to Bosse.
“I think China is just smart and good at what they do. They’ve been pushing on Brazil and their quality issues for quite some time. And I think the last couple of years, they just wanted their beans. So I think they kind of let it slide. But I think now with world soybean stocks at record high. I think they don’t need a whole lot of beans. I think the demand is down a little bit right now. So I think now they’re pushing back on Brazil of like, clean this stuff up here a little bit because they feel like they have the negotiating power. So but the timing is very interesting, isn’t it?” he explains.
Cattle Fall With Equities
Cattle futures were mostly lower Friday and posted lower weekly closes along with the steep selloff in the equity markets this week.
Bosse says this is trumping some of the strong fundamentals, including tight supplies.
“It’s frustrating because it feels like when the stock market rallies the cattle can’t rally but when it goes down oh we really follow it and and stay hinged to it.”
While supplies are tight he points out the packers have bought cash cattle lower the last three weeks in a row.
“And I really think it’s time to get hedges on. Of course, now when the market turns, everybody wants it to go back up to the highest to get their hedges on. And I would not wait for those. This market feels in trouble to me.”
Await Plant Strike
The market was also nervous awaiting the possible plant strike at Greeley, CO, but Bosse thinks President Trump could step in and make the union go back to work if they announce a walk out on March 16.
Some of the strike is already priced into futures though according to Bosse. “I think they’ve been dark most of the week and isn’t it kind of half what the packers wanted anyway? I mean they’ve been closing other plants they’ve got plenty of capacity. Obviously, they got to move these cattle around to get killed at different plants. But I think it’s factored in for the most part.”
However, he admits the headlines could trigger some technical selling on Monday.
Hog Futures See Profit Taking
Hog futures were down a second day Friday on continued profit taking and the futures got too far ahead of the cash, at least in the summer months.
“The global market isn’t very bullish. I think, you know, China’s still got a large herd. They’re looking to reduce that. But domestically, I think we’ve actually got kind of a bullish market. Our supplies are a little bit tighter than we thought. And there sounds like I keep hearing some disease pressure. And our demand is good. But we maybe did get a little bit ahead of ourselves.” he adds.
