Bears Run the Board: Grains Slide, Cattle Sell Off on Screwworm Scare

The bears were running the show again today. Corn's sitting three cents off its contract low, soybeans dropped double digits, and the cattle complex caught a fresh wave of selling the moment the bell rang. The lone bright spot on the board? Lean hogs. 

Headlines

-Last week’s ethanol production came in at 1.108 million barrels/day, up from 1.089 the week prior and up .3% from a year ago.

-The USDA reported an export flash sale this morning of 5.4 million bushels of new crop corn sold to South Korea.

-A headline surfaced this morning saying a possible screwworm case in southern Texas is under investigation. Samples from two calves on a ranch in southern Texas were sent for testing after a suspected case of screwworm infestation. 

Grain and Oilseeds Wrap Up

-July corn is now trading below its mid-January lows that were set near $4.33, leaving the contract low set last August at $4.28 ½ as the next downside target. Prices are crumbling as the mass exodus of long positions continues on limited weather concerns, ongoing wheat market negativity and ample old crop supplies to name a few reasons. Expect corn to have a 10 to 20 cent pop in it somewhere along the line as strong demand has consistently shown prices don’t need to stay in a free fall. December corn slipped a penny or two below $4.60 today on losses of 7 to 8 cents. There’s no weather premium in the market and you’d think the charts are getting oversold, especially if some corn acres flip to beans on the June 30th Acreage report.

-July soybeans breached support that had been in place the past several months within the $11.60 to $11.70 zone. There’s plenty of air under the market now and it only seemed like a matter of time before soybeans joined the freefall unfolding in the corn and wheat markets. Chinese demand news will have to surface to stop the latest slide.

-July Chicago wheat sits just a nickel shy of its next support level around $5.80 following another day of sharp losses. July Kansas City wheat looks like its headed for a challenge of $6.00, which is still another 20 to 25 cents away. Production uncertainty is a thing of the past in the wheat markets and bears remain firmly in control for the time being. 

Cattle

Live cattle started the day with losses of over $4.00 while feeder cattle took on $8.00 losses right away this morning. Both markets would stage a recovery, but we’re seeing the initial bearish reaction to screwworm potentially entering into the US cattle herd. August live cattle initially breached recent lows with their move below $237, falling to the $235 area before nearly turning positive past midday. Both live and feeder cattle would finish with decent losses as screwworm headlines lead to fears about how the consumer will react. Ultimately, expect to see prices able to rebound as the bottom line remains that the cattle herd will remain historically tight.

Hogs

July hogs overcame early losses to squeeze out a small gain, sending the market back to a challenge of recent highs set near $102.30. Yesterday’s upside reversal might be used as a signal for any market bulls to jump in while seasonals point to stronger price potential over the next month or two. A breakout beyond the $102 to $103 is necessary before anyone will get too excited.

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