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Livestock Futures Rise, Grain Trade Mostly Lower

grain livestock

This morning, livestock futures have moved to the plus side, while grain trade shows mostly lower activity with a few exceptions in the corn market and spring wheat.

Watch the full interview with Michelle Rook and  Paradigm Futures Kent Beadle

Soybean Pullback Due to Tariff Concerns

Soybean futures are experiencing a pullback, primarily due to the Biden Administration’s announcement of new tariffs on China. This has sparked fears of retaliation, with soybeans potentially being a primary target for increased Chinese tariffs. This could shift more business to South America if they can handle the additional demand. Additionally, rumors last week about imported used cooking oil, or yellow grease, being contaminated with palm oil and involving unfair trade practices have also influenced the market. Although yellow grease tariffs were not included in the latest list, soybean oil prices have corrected, pulling soybean futures down.

Brazilian Production Estimates Adjusted

Brazilian production estimates for soybeans were raised by increasing acreage, despite expected yield declines due to flooding. This adjustment narrows the gap between U.S. and Brazilian acreage estimates. However, there’s still a significant discrepancy in total production estimates, with a gap of about 6.5 million tons. The Brazilian corn production estimate also increased slightly, with a similar adjustment of increasing acreage but lowering yield. A substantial gap of 10.3 million tons remains between the latest USDA and Conab estimates for Brazilian corn production.

Corn Market Dynamics

USDA’s latest outlook for corn suggests larger supplies, greater domestic use, and higher ending stocks. Corn production for 2024 is expected to reach 14.9 billion bushels, with yields projected at 181.0 million bushels per acre. Total corn supplies are forecasted to reach 16.9 million bushels, the highest volume since 2017/18. Corn exports are expected to increase to 2.2 billion bushels.

Technical Resistance and Profit-Taking in Corn and Wheat

Corn futures faced technical resistance around the 475 area, a 50% retracement from last October’s highs to February’s lows. This has led to profit-taking and some farmer selling. The wheat market is also correcting due to profit-taking after a significant rally fueled by concerns about frost in Russia. This speculative short covering seems to have driven much of the rally across grain markets.

Cattle Market Supported by Lower Corn Prices

The cattle market has rebounded this morning, supported by lower corn prices and a significant discount to cash. The ongoing correction in cattle prices appears to have run its course, with the market moving away from recent bird flu concerns. Fundamental supply factors continue to underpin the market, with futures expected to close the gap to cash prices as the delivery period for the June contract approaches.

Hog Market Correction and Future Outlook

The hog market has found solid technical support, correcting due to futures trading at a premium to the cash index. Seasonal tendencies suggest cash markets may improve between June and August. The recent correction appears to have exhausted, with potential for hog futures to rise, especially if cattle prices continue to rally. Cutout values back over $100 also provide support to the market.

The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results.

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