The grain markets didn’t feel particularly strong this week, but the corn, wheat and soybeans all closed higher for the week. There were several factors at work for the bull camp, such as solid demand for soybeans and wheat, and problematic weather in much of the US. Trade news has waffled back and forth from bullish to bearish from day to day, which seems normal, and it still seems unlikely that we will actually have a “Phase 1,” or any other phase, of a trade deal signed any time soon.
With all the weather issues we have seen for the past several months, it just doesn’t seem likely that U.S. corn yields can stay so close to trend, but we will find out what the U.S. Department of Agriculture thinks on Friday when we get the November supply and demand report. Soybean yields ought to be suffering as well, so another cut to the bean yield seems likely. Harvest progress is well behind normal, so perhaps there isn’t enough data for USDA to work with. In 1993, USDA didn’t get acreage and yield sorted out until January, so we may have more waiting to do.
On the charts, the December corn posted an outside day higher Tuesday, and then saw strong follow through buying Wednesday. The overbought condition of the market has been relieved and we should be set for another leg higher. The $4.25 area remains the next upside objective for the time being.
The December Kansas City wheat tested some very important trend line support Thursday, which ended up holding, and the market made a nice bounce off of the support. The wheat ended up posting a strong close Friday, which took out the prior five session’s highs. The top end of the upward trading channel will come in at the $4.45 area next week, but long term a move up to $4.70 is in the works. There won’t be any market moving data from USDA to work with, so some strength in the corn would be a huge help to the bulls.
Soybeans were basically the weak link of the bunch but still managed the higher close for the week thanks to Friday’s gains. Thursday’s test of the 38 percent retracement was a key development for the week, and that should support area should end up marking the starting point of the next leg up. The next upside objective for the January contract will be the $9.80 area.
Cattle futures had a great week. The post Tyson fire march higher continued and we got more multi-month highs. The December live cattle are now within about $4.50 of the contract high. Other than the fact that technical indicators are overbought, there isn’t much that is negative about this market. At some point we will see a correction, but one should be very careful trying to pick a top. If the boxed beef is at multi-year highs, why can’t the live cattle also be at multi-year highs?
The feeder cattle were strong as well. The November feeders reached the 62 percent retracement of the move down that began back in May. This is a good spot for a pause, but that will only happen if the live cattle make a pause as well. For the time being one should look at a $3 to $5 pull back in the feeders as an opportunity to buy.
Schwieterman, Inc. is a full service commodity brokerage firm. If you would like more information on commodity markets or our brokerage services, contact Eric Relph at 800-272-9131 or www.upthelimit.com.
Note: This material has been prepared by a sales or trading employee or agent of Schwieterman, Inc. and is, or is in the nature of, a solicitation. This material is not a research report prepared by Schwieterman, Inc. Research Department.
(Schwieterman, Inc., weekly market summary issued on Nov. 1, 2019.)