To hear Brandon’s recap of today’s trade, click here.
MARION, Iowa – Demand for corn, beef and hogs continues to clip along, but the soybean market may be tuckered out. Today’s analyst is owner of Ag Management Services Rich Balvanz.
Corn
The corn market, I think today, is basically reacting to its own fundamentals rather than following the sharp dip that we saw in soybeans yesterday. So overall I think people are still rather pleased with the level of demand we’ve seen regarding corn. Also, there was a private estimate regarding Brazil’s corn crop that was released this morning, which showed a fairly significant reduction in expectations for Brazil’s corn harvest this season.
Add those things together and we’re getting a little bit of a bounce. Along with some new export sales reported here from the United States as well, so all in all, I think just a refocusing on the better-than-earlier-anticipated fundamentals for the corn market, and so we’re seeing a bit of a bounce today.
Soybeans
Soybeans have taken a big turn, obviously, with the activities of yesterday. I think we almost have to say the rally in the soybean market appears to have run its course, at least until we get much later into the season.
The soybean market, I think, is simply one that has tired out. We still have a very hefty long position in the market that is starting to get tired, I think, and with the indications yesterday from the private trade that China had begun rotating some of its old-crop purchases into new-crop positions, that was enough to give us kind of a warning shot that prices cannot continue to go straight up. The charts had looked extremely toppy yesterday, and so we’re seeing some continued pressure on that market.
But here at midday, at least at mid-morning, we’re still seeing some slight upward move in beans; it’s been a rather volatile day, actually, for as quiet as it’s been, with a fairly wide trading range once again.
Cattle
The cattle market was a lot like soybeans, if you looked at the charts. Sort of a blow-off type of situation as we came into the end of February. This, of course, is the final trading day in the February cattle. And now it’s a question of waiting to see whether or not this $8 spread that we have between February and April cattle starts to narrow up as we get into next month after February’s gone off the board.
If the demand for beef is as strong as a lot of people seem to think it is, then we could see some continued rally in that April futures up toward wherever it is that February expires today, but here at mid-morning, $152 has been the top in February, and that may be the next target for April cattle as well.
Hogs
The hog market’s proven very interesting. The hogs are setting some brand new highs here. I think right now what it’s boiling down to is not only domestic but global demand. There’s been some reports here that Russia is going to be coming into the market with purchases here early in March. Russia is primarily a buyer of lower-value pork items, especially pork trimmings, but we’re already low in quantity on those. The inventories on pork trim at the end of Janaury were down about 30% from a year ago. So the type of product that they’re going to be seeking is already somewhat in short supply; could be we’re already seeing the trade preparing for that type of demand. It’s been known for a while that Russia was showing some interest in U.S. pork.
So, with global demand increasing, and with domestic demand strong, particularly when you look at pork relative to beef prices at the meat counter, that’s helping our hog market out right now.
