Grain markets ended mostly lower on Tuesday, with livestock mostly higher.
Chuck Shelby with Risk Management Commodities says old crop contracts in the grain markets continue to see profit taking after the recent relief rally pushed corn, soybeans and wheat up into technical resistance on the charts.
On Tuesday the May soybeans were under pressure with bull spread unwinding and profit taking after the failure to take out the 200-day moving average.
According to Shelby that may be a tough mark to get through.
Soybean prices have become more competitive with the lower dollar which helps but so far its not been enough to push the May contract above that price level.
November soybeans were higher on the long side of spreads and Shelby says with the lower planted acres any weather problem that lowers yield could take new crop prices higher.
“If we don’t get a record yield of 50 bu. on soybeans our ending stocks could get near 200 million bu. or below, which would be extremely tight,” he says.
May corn saw pressure with the unwinding of bull spreads and that contract also hit a 62% retracement level that it could not breach.
That was disappointing considering the corn market has been seeing some export business with a flash sale of 4.7 million bu. of corn to Japan yesterday and a 4.3 million bu. sale to Portugal on Tuesday morning.
Shelby says the lower value of the dollar has offset the 10% universal tariffs placed on trading partners and so the U.S. is still competitive on corn.
He expects some countries may try to front load more purchases just in case there is no resolution of the tariff situation during the 90-day delay.
Wheat futures saw continued pressure from the one day pop higher in the dollar and weather, with rains forecast for the hard red winter wheat areas in the 7-day time period.
Winter wheat ratings only drop 1%, which Shelby says is deceiving because the soft red winter wheat areas have seen too much rain and flooding, which is resulting in nitrogen loss and possible disease.
Cattle futures ended higher again with stability continuing in the financial markets and the big discount the futures are holding to the cash is supportive.
June live cattle got above the $200 resistance area in the morning but could not close above that level.
Shelby says so far it looks like funds have stopped liquidating their long contracts, but will need continued strength in economy to stay in the market.
He also thinks as long as cash stays at the recent elevated levels the futures will be able to rebound and be attractive to speculators.
Lean hog futures ended mostly higher on short covering and help from higher cutout values.
He thinks the market is at fair value right now considering the tariff concerns.
