Futures Fall: Grain Down 3%, Livestock Drops 5%

Quick Overview

  • Grains Market: Ending in the red, driven by unexpectedly high crop ratings.
  • Corn: 75% rated good to excellent, boosted by favourable weather.
  • Soybeans: Slow exports, lowest new crop exports in 19 years, bearish market.
  • Wheat: Losses due to better-than-expected yields rapid U.S. winter wheat harvest.
  • Technical Analysis: The grains market is oversold, potential rebound for corn.

The grains market recently ended in the red, leaving traders and farmers alike pondering the cause of this downturn. The primary culprit is the better-than-expected crop ratings across the board for corn, spring wheat, and winter wheat. This unexpected boon in crop health led to a significant shift in market sentiment, pushing prices downward.

Corn: Riding the Rain Wave

Corn, often dubbed the staple of the grains market, received a rating of 75% good to excellent. The sentiment on the trading floor can be summed up with the adage, “Rain makes grain.” This year’s favourable weather conditions were pivotal in this positive assessment. Vince Boddicker, an industry expert, succinctly captured this sentiment: “You’ve got to believe that’s a lot of it. We had the run up in grains prices and it seemed like when we got to right before the Memorial Day weekend and they couldn’t take out the highs we got some of the month selling and then you have to have something to change that psychology and get the trade to want to buy.”

Soybeans: Struggling Under the Weight

Soybeans, however, are facing a different set of challenges. The pace of old and new crop exports could be much faster, with end users purchasing only as needed. This conservative buying behaviour and the lowest new crop soybean exports in 19 years have created a bearish price environment. Furthermore, lower product values have only added to the downward pressure, making soybeans the black sheep in the grains family this season.

Wheat: A Harvest of Losses

Wheat futures experienced double-digit losses, reflecting the various dynamics at play. Concerns over the Russian crop, which had initially caused some market jitters, are now old news. The focus has shifted to the U.S. winter wheat harvest, progressing rapidly, particularly in Texas and Oklahoma. Early yields have been better than expected, and there’s growing anticipation that ending stocks in the June World Agricultural Supply and Demand Estimates (WASDE) report might push above 800 million bushels. Vince Boddicker weighed in on the situation, noting, “Wheat harvest in Texas and Oklahoma is ahead of normal and early yields are better than expected. Plus, there is already talk of ending stocks in the June WASDE pushing above 800 million bushels.”

Technical Analysis: A Glimmer of Hope

Despite the recent downturn, technical analysis suggests the grains market is currently oversold, hinting at a potential rebound. For corn, this rebound could be in the range of 10 to 20 cents, but as Vince Boddicker pointed out, a more significant recovery will require an additional catalyst: “In corn it could be 10 to 20 cents but to get more than that it will take another catalyst.”

Cattle: A Roller Coaster Ride

The cattle market has been on quite the ride, with early gains giving way to mostly lower prices. Support levels held firm on Monday’s charts, but the market remains precarious. Vince Boddicker expressed his cautious outlook, saying, “I would not be surprised to see Monday’s lows taken out. I have some cycle lows coming in next week in both the feeder and the fat cattle market.”

June Live Cattle Contract: The Discount Dilemma

The June live cattle contract trades at a discount to cash, a situation traders watch closely. The anticipation is that cutouts could top, pulling cash prices lower to meet the future. This dynamic adds an extra layer of complexity to an already volatile market.

Lean Hogs: Hitting New Lows

Lean hog futures have been making new lows, driven by funds’ ongoing liquidation of long positions. Vince Boddicker had initially thought the liquidation might have ended the previous week, but the market had other plans. “I thought the funds were done liquidating last week but it seemed like today when the July contract took out that February 13th low there were probably stops underneath that, and it just ratcheted lower. Now you have to see where we hold support,” he remarked. This sentiment underscores the uncertainty and volatility currently defining the lean hog market.

Navigating the Agricultural Market’s Stormy Waters

The grains, cattle, and lean hog markets are navigating challenges and unexpected developments. From better-than-expected crop ratings to sluggish soybean exports and volatile livestock markets, traders and farmers must stay vigilant and adaptable. The potential for rebounds and recoveries is ever-present, but as always, these markets require careful attention to both the technical indicators and the broader economic factors at play.

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