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Welcome to Markets Now. I'm Michelle Rook with Shawn Hackett of Hackett Financial Advisors. Well, we had a higher day in all but the cattle market on Friday. And Shawn, let's talk first of all about the grains. We did see a pop there end of week after the big selloff on Monday in reaction to those bearish USDA reports. So what's your thoughts? Do you think that it was mostly short covering activity? I know we've had some good end-user buying.
We've had very good end-user buying for sure. I think a lot of... I think the market is questioning some of the supplies that came out on this report, especially the corn numbers. I think a lot of pretty good data that we have suggests they might be too high on the corn numbers. And so I think because of some of the distrust over the legitimacy of the USDA numbers, the value that was brought into the market, and some weather worries next week coming into Russia-Ukraine on the potential for some frost risk, I think that was enough of a combination with the lack of follow-through selling after Monday's report to bring the market some short covering and at least put some prices back up a little bit from where we were.
So, do you think the funds continue to go short here in the corn market or have we reached some values? You know, we held the August lows. Will those hold and can we maybe build on that a little bit?
Yeah, I really think Monday was anticlimactic. Normally, when you have a large supply report like that, if the market truly embraces and believes it, you would typically get follow-through selling over the next couple of days. We did not see that. And the fact that we did not see that means that the market pretty much, in my opinion, in our opinion, has priced all of that large supply numbers in on the balance sheets. And I think now we're going to start chipping away from better demand, from some weather issues, acreage battles that we're going to be talking about, some maybe some quarterly grain stocks adjustments, and the market I think is moving beyond that supply and moving ahead and start looking at what could go wrong here with those large numbers, where what is the market not considering? Have they overpriced to the downside here? We think they probably have for now.
Yeah, for sure. Now, we did have a lower weekly close. You had the March contract which could not take out that 425 resistance area for a couple of days. So, we're basically in a new trading range and it's going to be pretty hard to get out of that, isn't it? Without a catalyst.
Yes, it's going to be pretty hard to get out of it. I don't see how we would get out of it unless you were to get something going on with second crop corn weather in Brazil. And you really don't start worrying about second crop corn weather until late February into March after the crop is near finishing up its planting. And obviously, you know, if we were to get a big weather problem that's verified next week in Russia, Ukraine with a frost, that certainly would do it. But we definitely need a weather catalyst here in order to get ourselves out of this. If we do not, I think it's going to be trading range type markets, kind of back and forth technically until we get some... until we get further on into the March, the late March reports.
Yeah. So, maybe it's also putting in a little bit of a new trading range, but at least we did hold the January lows, that 1038 area in the March contract. A lot of people calling that a double bottom. Do you think that's true? Are we going to be able to hold that for a while here, especially with the big Brazilian crop coming?
Well, I really think that many people thought that the China trade truce was going to run soybeans higher. It did initially, but what we've now learned is they're not going to be taking offers out buying soybeans. They're going to be buying on weakness, providing a shock absorber when the market is weak. So, I do think we can make a double bottom here. I do think that China will buy plenty of soybeans on weakness, limiting our downside trajectory. I do not believe they have any interest in taking out offers on any rally with Brazilian production looking so good and with large supplies that will be ready to be hedged here starting in March. So, I think what this is telling you is, you know, we have a pretty good trading range developing here that's going to be hard for soybeans to get out of anytime soon.
Well, and then you're going to have hedge pressure from South America and the Brazilian crop coming at us, especially we're going to follow their price lower, aren't we, a little bit?
Absolutely. We're going to have to eat through that first couple of months of supply before we can start seeing something different. And yes, China has committed apparently that they're going to buy more soybeans going forward. You know, that 20 or 25 million metric ton number, but I don't think they're going to do it during the throes of the initial couple of months of supply coming from Brazil. I think they'll start doing that afterwards, especially if our weather looks a little dicey here in the spring and the early summer.
Yeah. One part of this soybean complex that did have a sharply higher close this week was the bean oil market and a lot of that was kind of pushed by talk that we might get the RVO levels in the early part of March and those would be favorable. We still have a lot of question marks about how the feedstocks are going to be treated, but do you think this is positive enough news to help support the market?
Well, it's enough to support the market from going any lower. Is it enough to really rally bean oil higher? Probably not. I mean, we've had so many false flags, you know, carrots dangling that it's going to be this, and then we find out, we then we get disappointed that it's not exactly what we thought. I think the market's going to be very reticent to trade too much premium in there till they actually see the whites of the eyes of an actual policy that confirms a more bullish outlook. There's been too many, too many misfires here. And I think the market's going to be very, very cautious.
