Soybean futures are dropping sharply Thursday, down over 25 cents headed into the noon hour, weighed down by uncertainty surrounding U.S. biofuel policy, while corn holds steady and livestock markets remained under pressure.
“The trade woke up to the idea… that we’ve got questions on the EPA biofuel policy,” said Mike Zuzolo, president of Global Commodity Analytics. “You notice today’s big trade is the bean oil market down almost six percent on the day. That follows an overnight session that was down about the same.”
Zuzolo noted that recent strength in the soybean complex had been largely driven by gains in soybean oil, not necessarily by any significant changes in trade relations.
“Really been driven higher in the soy complex, not so much by the US-China trade thaw. That has been a neutral welcome feature, but really has been driven up higher by that soybean oil trade. We’re unwinding that because of more questions on policy,” he said.
He added that traders are watching for further developments tied to federal policy. “As we get ready to the end of the week, I guess there is some information that’s been sent by the EPA to the White House. We’ll see and get more details as we get through this next couple of days.”
In the livestock markets, both cattle and lean hog futures were trading lower. Despite the decline, Zuzolo said it’s too early to suggest a long-term downturn in cattle.
“I think the technicals are extremely important to the funds, especially at record high prices,” he said. “Export sales were strong today. Beef numbers were up about 21% , pork 16% versus the four week average. So we’re still seeing a lot go out the door, more than probably what we have enough supply for.”
Zuzolo also pointed to outside market signals potentially pressuring livestock. “This is one of those markets where you never know where the high is going to be because you don’t know what the funds have plugged in. Walmart is raising their prices. I think that’s in a shockwave, maybe fed the bear a little bit and gave us the second day of down.”
Meanwhile, the annual wheat tour is wrapping up in Kansas, offering a mixed outlook for the crop.
“They hit a really good point about it’s not made yet. It’s looking good. It’s looking a little bit better than last year, but we’re a long way from being made, especially if we turn hot and dry, and some of the weather models are showing that,” Zuzolo said. “I think the trade’s picking up on that in the world wheat weather as well.”
