Grains ended lower on Monday, with cattle mixed and hogs lower.
Grains Hit New Lows For The Move
Grains ended lower on Monday with most of the complex making new lows for the move. Dec corn closed 7 1/4 cents lower at $4.67, closing below the $4.70 1/4 report day low. Nov soybeans were down 7 3/4 at $12.53 1/2 and also made new lows for the move.
Arlan Suderman with StoneX says corn and soybeans both saw harvest pressure and fund long liquidation.
“With funds selling as USDA has been piling on with negative information on the corn balance sheet with higher stocks than expected, lower feed use than the market expected, higher production than what was expected. So that’s understandable there.”
He says funds are defending their long in the soybean complex better than in corn and the CFTC report on Friday showed them longer than expected in soybeans.
“Soybeans, we have the strong Chinese buying. We have the strong biofuel program, all of that giving a good long-term demand picture. But as you said, harvest pressure as farmers selling off the combine particularly soybeans tend to go to the right across the scales, corn on the other hand they tend to put as as much as they can into the farm storage,” he says.
Plus there has been chart damage done which triggers algorithmic selling and the end users are content to let the market come to them.
How Much More Fund Liquidation?
So the funds have liquidated over half of their long position in the corn but do they continue to liquidate?
Suderman says that is the key question, “And one of the things that’s going to eventually be a supportive factor, we believe, is when you look at the 2027 growing season, if you plug in the same number of planted acres into next year’s balance sheet and then you have to have in the demand that we currently anticipate, that means you’ll have to have a yield of something like 183, 184 next year. That’s not much margin for error from a weather problem standpoint.”
He says the same is true for soybeans so that sets the stage for an acreage battle. Right now, the price ratio is leaning towards soybeans and corn can’t afford to give up those acres.
“But that’s six months down the road. So the funds could end up shorting it, turning short the corn market, and then come back sometime this winter to start going along again. The question is how much damage they could do between now and then. And that’s what leaves farmers at risk.”
Exports Slow on Corn
Export inspections on corn were only 26.5 million bushels on Monday’s report and weekly sales are are 30% behind last year. He says that is another problem for the market.
“USDA just raised the export target, and I feel good about the long-term export demand, but we’ve got to start picking some of that up. And right now, Argentine corn, Brazilian corn hitting the market and supplying much of that need. That weekly export inspection for corn was the lowest week total in two years, so that’s pretty significant.
Soybean Exports and China
Soybean export inspections were at 73.6 million bushels but at the level needed for this time of year in order to hit USDA’s target.
China also bought another 4.2 million bushels of soybeans this morning on a flash sale bringing their total over the last week to over 54 million bushels. Suderman says China has bought about 15 million metric tons or 60% of the 25 million metric tons they committed to.
“When Xi came to the United States to meet with Trump, we felt like, okay, they had bought enough to last them a while, seasonal weakness. They probably wait a few weeks to let the price come down to them. That’s exactly what they did. They started buying, but the market kept coming down. And so they’re basically chasing this market lower right now to get the coverage that they need.”
China Buying Keeps Funds Long
China’s continued export buying is helping to keep funds more intact in their long position of over 237,000 contracts of soybeans.
“Yeah, I think they see the long-term strength. Now, in the end, it’s going to come down to what’s the final yield. If it holds right where it’s at right now. then we probably still need to do some more rationing of non-China business down to Brazil in order to make the balance sheet work, assuming China goes ahead with the 25 million metric tons that they committed to, which I think
they’re on course to do that. If, on the other hand, we see that yield continue to go up, that may remove some of the need to ration demand with higher prices,” he adds.
So he thinks that’s attracting the funds to hold their position.
The soybean market is not rallying on that news as harvest pressure and farmer selling in the U.S. and South America is offsetting the Chinese buying.
“Brazilian farmer sales are picking up as rains are falling very well in Brazil. Their crop prospects are very good. They’re worried about losing China business to the United States with the trade deal we have with China. So that’s a concern right now. And so they’re taking advantage of these price levels to add to their sales.”
Biofuels Uncertainty
Suderman thinks once the soybean market gets past harvest it can stabilize due to strong domestic demand and with some clarity on biofuels policy from EPA. “We see strength in that biofuel program, but the problem is we keep having more uncertainty always added on to it. And that is weighed on the soy oil market in the near term and hasn’t given the support that we anticipated.”
EPA gave the market and industry two different proposals on the SRE reallocation which is just added to the confusion.
“It’s not necessarily a fundamental problem there so much as it is, more uncertainty. So that makes the traders
reluctant to really be involved in the market.”
Wheat Falls to New Lows
Wheat was also lower on Monday with poor export inspections at only 8.8 million bushels and the stronger dollar.
Suderman says, “The higher dollar is contributing to the lower exports and also the strength that we’ve seen in demand for alternative supplies. With the Black Sea basically being shut down, we’re seeing buyers go to other sources. Those other sources will dry up, we believe, here over the next couple of months or a few months. That’s when we see the strength. But until then, whenever we see strength in U.S. wheat prices, we hurt U.S. exports. And the strength of the dollar is definitely a factor in that.”
Putin Meeting Weighs on Wheat?
There was also a story this morning that Russian President Putin wanted to have a summit with President Xi and President Trump to try to work out something in terms of a peace deal that’s favorable for Moscow.
Suderman says the market may not have given that much credibility in regards to restarting exports or opening a grain corridor.
“They’ve seen so many different headlines about possible corridors in the Black Sea. The market’s becoming very skeptical that it’s going to happen. At the same time, if, in fact, we were to have some type of moratorium on hitting export channels, be it ships, be it terminals, etc., then that would open up the flow of a lot of wheat and some corn coming out of the Black Sea. I think there’s a lot of skepticism that’s going to happen.”
Cattle Disappoint
Feeder cattle were slightly higher on the lower corn market. Live cattle ended mixed with nearby contracts lower despite sharply higher cash trade at $228 in the south.
Suderman says it was a little disappointing. “Yeah, we thought it’d be up a little bit more today. We opened weak, we rallied, and then we started losing some of that strength. When we look at the cash cattle market, we did finally see some strength, particularly in the southern plains where we traded as high as $228 or higher after five weeks in a row and being stuck on what was at $226.
So that was a positive. Struggling, though, because the board already kind of reflects that.”
So the futures ran into resistance which is a concern especially heading into bullish anticipation for this month’s USDA Cattle on Feed Report.
It is expected to show steady on feed numbers but placements down another 7% to 8% from year ago levels. Marketing’s down 7%. If we’re right on the placements, that would be the third consecutive month of record small placements, and that is providing some of that underlying support underneath this futures market.
