The grain markets have been full of surprises lately, with the USDA’s recent reports catching traders off guard. Jason Gehler, Senior Market Strategist at Blue Line Futures, noted on RFD-TV’s Market Day Report that the USDA raised its corn yield forecast despite poor crop ratings, a move Gehler called a "complete 180" from market expectations. The USDA also acknowledged missing a number in a previous corn report, adding to the confusion.
Corn prices have seen significant liquidation, with managed money reducing its net long position from about 415,000 contracts to roughly 165,000 in recent weeks. Gehler believes this liquidation may be nearing its end, though he expects the USDA might slightly trim its yield estimate. He noted that while there are problem spots in the crop, the overall yield could still exceed 180, which might help stabilize corn prices.
Soybeans, on the other hand, dropped sharply on Monday following Brazil’s election results, an outcome few in the market anticipated. Unlike corn, soybeans have seen little liquidation so far, with funds still holding a net long position of about 221,000 contracts as of last Tuesday. Gehler warned that more liquidation could be ahead for soybeans, given Monday’s steep decline.
In livestock, September placements were the lowest since USDA began reporting the figure in 1996, coming in 12% below a year ago. This tight supply has driven the cattle rally, largely without managed money involvement. However, pork supplies are not as tight, and funds have held close to a record short position in hogs. Gehler cautioned that broader economic uncertainty could weigh on demand, especially with beef prices already high at the grocery store.