Corn and soybeans end slightly higher Tuesday on short covering, while wheat gives back some of Monday’s gains.
Tomm Pfitzenmaier, Summit Commodity Brokerage, says, “Yeah, I think it was primarily short covering. Funds hold a pretty substantial short position, so maybe a little positioning ahead of this quasi long weekend where we’re closed Thursday and open Friday. A lot of traders are absent and making a long weekend of it.”
The markets are oversold so the bounce isn’t a big surprise to Pfitzenmaier.
However, funds are an estimated 316,000 contracts short in corn.
“The record is around 341,000 but they may be near record short for this time of year,” he says.
Yet, corn and beans ended off highs as soybeans went up and tested chart resistance and fell away from that area and he says corn gave up early strength with the weakness in wheat and crude oil capping the rally.
Pfitzenmaier says he’s not sure if the grain markets have bottomed or if they are just pausing.
However, he thinks rallies in the grain markets will be tough to sustain with the funds comfortable with their positions and no real weather risk to the crops.
“If we come out of the Fourth of July holiday without any threatening weather and some of these wet areas can dry out a bit to stablize ratings, it’s going to be really hard to maintain higher prices,” he states.
Also capping rallies according to Pfitzenmaier, is the fact that farmers are holding about a third of last year’s corn crop in storage yet and it will need to be marketed before the new crop comes in.
“And everybody knows it. So there’s all kind of basis risk,” he adds.
Weather problems would have to be severe to cut into the huge new crop production coming and the large quarterly stocks and that will also show up in the next WASDE.
Wheat was lower Tuesday giving back some of the gains to start the week. However, he thinks the market is starting to find some chart support with harvest past the 50% mark and after such a huge correction.
Cattle futures rebounded with record cash trade for a third week, reported at $195.81, up 97 cents.
Pfitzenmaier thinks cash will continue to hold up the futures, especially as they are trading at a discount and cattle numbers continue to be tight.
Lean hog futures saw bull spreading with the nearby contracts gaining on the deferreds. He says the market may have bottomed and will likely trade sideways until the cash or cutouts can show some upside leadership.
