Grains end higher on Friday and for the week, cattle and hogs were lower.
Grains See Technical Buying
Oliver Sloup, Blue Line Futures, says corn, soybeans and wheat all saw technical buying on Friday and had higher weekly closes after bouncing off key support on the charts.
He says with the government shutdown the void of information is allowing the technicals to have a bigger influence on the markets.
“I think it was largely technical in nature that may have spurred a little bit of short covering with the government shut down. There’s not a whole lot of new weekly data for traders to digest. So you are getting just broad technical momentum here in these markets,” he says.
Corn Closes Strong
Corn futures closed higher for a 4th session which is impressive considering the headwind of a massive corn harvest.
“If you remember on Monday, we were skating on really thin ice in that December corn contract, $4.10. That was the low from October 1st. If we would have closed below there, I think you could make the case that could have snowballed additional technical pressure down near four bucks. But not only were we able to defend it, but we were able to close positive on that day. And that brought us towards the 50 -day moving average in the following session, which then propelled us to the 20 and 100 -day moving averages. So a lot of constructive price action cleared some big technical hurdles,” he says.
However, the next technical objectives for the market include the $4.32 1/4 gap area left on July 7 that served as overhead resistance on the last rally.
“So if we can hold this strength into next week, I think you could make the case that we could tack on another dime or so, getting out above there with some conviction, probably going to need a new fundamental catalyst to do so,” he adds.
What is the Catalyst That Helps Corn Break Above Resistance?
Sloup says corn needs soybeans to continue to rally to get above these chart levels but confirmation of stronger demand or lower yields will help.
Soybeans Trade China Hopes, Stronger Brazil Soybean Basis
Soybean futures got some help this week from easing tensions between the U.S. and China.
Support Friday came from trade optimism linked to President Trump’s comments that current tariffs on China aren’t sustainable and his statement that “I think we’re going to be fine with China.”
However, the market was also trading the rising basis levels for soybeans in Brazil which has made China halt their purchases.
U.S. soybeans are now cheaper than Brazil and while that may not attract China buying yet, Sloup says it will stimulate demand from other customers around the world.
“A lot of people, I think, are so focused on the debate between the two countries that they forget that this demand doesn’t just disappear, just gets displaced and moved around. So eventually, high prices, urge people to look for lower prices. And right now that seems to be in the United States,” he says.
That helped to firm up U.S. soybean basis this week and Sloup is hopeful this is what continues to keep soybeans above the $10 mark on the futures but for a sustained rally the U.S. will need China.
“To get this market to really run away back towards the upper end of the year’s range, which is closer to $10.75. You’d probably need to get some sort of deal done with China. And I don’t think that’s going to happen.”
Lack of Farmer Selling and Lower Yields Support Market
He says the lack of farmer selling in the soybean market now that harvest is wrapping up is also part of the strength.
Many producers are storing beans this year and waiting for better prices and processors and the like are having to increase their bids to procure inventory.
However, Sloup says the market is also digesting lower yields. “The fact that corn is trading 40 cents off its lows and soybeans have also seen similar action is proof that yields are not living up to early expectations.”
Wheat Signaling a Bottom Technically?
The two classes of winter wheat bounced off contract and five year lows this week to finally post a higher weekly close.
While some of that was tied to short covering, Sloup thinks the charts may be signaling some type of bottom.
Cattle Futures Melt Down on Trump Plan to Lower Beef Prices
Live and feeder cattle futures gapped lower on the open and several of the feeder cattle contracts were locked limit down most of the session and will see expanded limits on Monday.
Sloup says the funds were liquidating long positions on the open Friday after President Donald Trump said the administration was working on a plan to lower beef prices. Some of it was triggered by algorithm trades that key their formulas off headlines but he thinks the selling could continue on Monday.
While there have been several key reversals in the cattle futures that have been negated, Sloup thinks this time is different.
“The government is working against the market now in their fight against beef inflation and managed money traders will likely see that as a trigger to take profits and get out of their long positions because they don’t want to fight against the government,” he says.
Cattle Futures Ignore Higher Cash
Cattle futures totally ignored the higher fed cash trade on Friday.
In the North live sales developed at $240, up $5 and dressed mostly $372, up $9 from last week’s weighted average in Nebraska. Southern live deals were at $240, $5 higher (basis Kansas).
When Will Lean Hog Futures Quit Going Down?
Lean hog futures have had a wicked correction from the contract highs and hit new lows for the move again on Friday.
Funds have been liquidating a record long position and Sloup thinks the correction may continue with support on the charts $2 below the current market.
Will Gold Hit $5000?
The precious metal market has also been on fire recently with talk of gold hitting $5,000 yet in 2025 and Sloup says technically it looks like it is possible.
However, he says the global race to this safe haven commodity is also driving the buying interest and that will likely continue under the current geopolitical climate.
