Grain and cattle futures closed higher on Tuesday with hogs mostly lower.
Soybeans Rally on China Pricing
Soybeans were the price leader with November up 22 1/4 and settling at $13.03.
The rally was fueled by talk that China was pricing soybeans off the U.S. Gulf and could resume buying after their Golden Week holiday.
Allison Thompson with The Money Farm says, “Rumors of China stepping in are obviously very helpful. They’ve been relatively quiet over the last couple of weeks. So seeing some renewed business there would obviously be good, especially when they’re on their Golden Holiday this week. So we weren’t expecting business to start with, until maybe the end of the week. So if they are going to be stepping in a little early in that, it’s a good sign.” She says hopefully it will be accompanied by some positive tariff news.
Meanwhile, President Trump was in Grand Island, Neb. on Monday night and reportedly said China was going to double their purchases of U.S. ag products which may have added to the narrative. Thompson says the market will need proof though.
Harvest Delays
U.S. harvest pace on soybeans is running 8% behind normal with farmers in the western Corn Belt slowed by excessive rain. Iowa is 33% behind the five year average on harvest, with Nebraska is lagging by 25%.
There have also been some quality concerns as a result. “If they’re going through crop insurance or anything like that those
assessments really need to be done before that crop can be binned or sold. So there might be some time here where some guys might have to sit and maybe wait for some of these quality adjustments before they can really go too strong on the combining front.”
Otherwise the weather has improved enough to allow farmers to get in the field and that pattern is expected to last through the early next week.
Brazil Real Rallies
Soybeans and corn got a shot in the arm from the rally in Brazilian real tied to their presidential election. Thompson says at the same time the U.S. dollar weakened, making their exports less competitive.
Thomson says, “That’s obviously affecting things in the background and maybe helping corn out more than beans right now because we are competitive on the global market with new supplies. Their second crop corn is hitting the global market. Our new crop is going to be hitting the market so when we see them competing for business a few dollars in that currency exchange can make a big difference.” She adds that it also impacts the price farmers receive and can slow selling.
Technical Bounce
All of the grain market also saw technical buying off key support areas according to Thompson.
“We bounced off some good support levels three times in both corn and soybeans. And we found buyers, that $4.93 area on corn, that $12.73 area on beans and we really saw that momentum build today and we went through some resistance.”
She says the markets will need to build on that heading into the WASDE.
Next Resistance on Soybeans
With November soybeans back about $13 she says there is not much chart resistance until the contract high around $13.35
“So it’s within striking distance when you get a 20 cent day. So hopefully we continue to see this momentum build and building into Friday’s report is definitely good. I hope guys are rewarding the market. If you’re hauling beans in, got some basis levels or locked, you know that you need to lock reaches in. These are days you got to be taken advantage of.”
Corn Harvest Slow, Ratings Drop
Harvest is also 4% behind nationally on corn with states in the west again seeing delays due to heavy rains and flooding.
Crop conditions also dropped 3%, which is unusual for this time of year. However, it’s not surprising with the standability and quality issues farmers are reporting.
Corn Yields Dropping?
That is likely fueling ideas that corn yield could be lowered by USDA in the report on Friday.
“If we continue to see that yield move lower one to two bushels will definitely be supportive and I think that quality is really coming into play here,” she adds.
A two bushel yield cut would offset the additional 173 million bushels USDA reported in the quarterly stocks report.
“So we kind of need to see that cut to keep ending stocks the same with all those supplies going over.”
Additionally she says the question is what will USDA do with demand.
Bloomberg’s average trade estimate has a 177.8 bu. per acre yield, down .7 bu. from September and ending stocks are just shy of 1.7 billion bu. which would put the stocks to use ratio back above 10%.
Corn Chart Resistance
December corn closed back above $5, so where’s the next chart resistance?
Thompson says corn also closed above $5.04, so now she is watching the $5.20 area for resistance.
Wheat Adds Risk Premium
Wheat futures were higher with the softening of the dollar and the market was also adding risk premium tied to the Black Sea war.
Russia damaged Ukraine’s key export port of Odessa and its evidence the Black Sea issues are going to continue to limit exports according to Thompson.
She adds that winter wheat is adding risk premium due to the slow planting of the winter wheat crop in the southern U.S.
“Planting is actually running behind the five-year average, as well as emergence. So that is something that’s definitely helped out the KC market. And that’s kind of been leading the move the last couple of days. And thankfully, it’s taken Chicago and Spring Wheat,
Minneapolis with it as well,” she adds.
Export Demand Picking Up?
Some big international tenders have also supported the wheat markets including Saudi Arabia at 683,000 metric tons.
“It’s really good to see some large tenders and some big buyers of wheat open up on the global market, and they’re not seeking Black Sea needs. They’re sourcing elsewhere. The EU got a bunch. The U.S. supposedly got part of that big tender from Saudi Arabia,
too. Maybe not enough to really change the balance sheet yet, but it’s good to see them coming into the market.”
She says the U.S. needs to take a bigger piece of the pie going forward to really make this market excited. Exports are running behind last year by around 31% which she says is a bit concerning.
Cattle Bounce
Live and feeder cattle futures were higher on Tuesday following a $4 plus jump in wholesale beef values.
Still the futures are range bound and need to breakout about the September highs to keep the technical momentum intact.
“So we’d really like to see that technically take it out. So if we can start breaching some of those highs, that would be good. But for right now, it seems like we’re just playing with a yo-yo in the cattle markets.”
Some better cash trade this week would also help support the futures.
