Grain and livestock futures were mixed early Wednesday.
Corn Sees Lack of Follow Through Buying
After nearly 10 cent gains in corn on Tuesday the market was unable to generate follow through buying as futures ran into chart resistance and consolidated.
Randy Martinson of Martinson Ag, says the lack of news on a federal holiday is allowing corn to drift and while it was good to see the yield cut on corn and ending stocks the market wants more.
Will USDA Cut Corn Yield Further?
So will USDA further cut yield in future reports?
Martinson thinks so. “USDA came in with this report and they showed a lot more of their methodology on how they determine the yields and the ranges. And it opens the door for, I think, seeing further cuts.”
He also says there is about 20% of the corn yet to be harvested nationally as of Monday’s report, and the later bushels will be lower quality and lower yield.
Iowa still had 28% of the corn left to harvest as of Monday’s USDA report and so that could mean a cut in their record 219 bushel per acre record yield estimate.
Martinson says, “That seems pretty high. I definitely think they’re going to see a little bit of a cut as far as their yield is concerned. I would expect that the crop that’s left is going to be the stuff that’s down in the wetter, the poor quality area. And I think that will pull that yield down. And I think we could also see that same scenario play out with South Dakota and Nebraska as well.”
Corn Demand Lowered
USDA also lowered usage by 50 million bushels in the report with corn exports cut by 25 million bushels.
Will that number need to be cut further in the future as corn exports to date are running 34% behind last year’s record pace.
Martinson is optimistic exports can catch up especially with the lower corn prices. “You know, I thought USDA was a little bit premature. We’ve just started to see a lot of business on the export side of things. Mexico has been coming in, buying quite aggressively over the last couple of weeks. And so I think it’s maybe a little premature they did that.”
Has the Corn Market Bottomed?
With the bounce on Tuesday and the friendly news from USDA there are hopes that the corn market has put in a low.
Martinson isn’t sure a bottom has been forged. “You know, I think we’re closer to the bottom than we are to the top at this point. I’m not quite ready to say that the bottom is in. I figured we would try to test the contract lows since we were so close to them.”
He says the corn market needs to put two higher closes together first to change the trend.
“Then I think we got a chance where we can maybe see a good dead cat bounce and then test the lows. Then that will tell me whether or not the low is in or not,” he adds.
Soybeans Pause After Big Report Gains
Soybeans were up nearly 40 cents on Tuesday as USDA increased soybean yield by only .2 bushel per acre and lowered ending stocks by 15 million bushels to 300 million bushels.
The market was pausing early Tuesday but Martinson doesn’t think this is all worked into the market as many traders were anticipating an even higher yield than 53.5 bushels per acre.
Higher or Lower Soybeans Yields Moving Forward?
With the modest increase in soybean yield Martinson thinks USDA could actually lower yield in the future.
“You know, it came in less than anticipated. And that tells me we could be opening the door up for a little bit of a decrease as far as the yield is concerned before the final yield estimate comes in.”
Soybeans harvest is farther along than corn but some of the same states are still lagging, like Iowa and Nebraska and so he thinks those yields could be trimmed.
“I think we could see a little bit of slippage in it. I wouldn’t say a big drop, but at this point, I wouldn’t be surprised to see yield to see a little retracement,” he adds.
Soybeans Demand
USDA did raise soybean exports by 25 million bushels to 1.72 billion bushels. However, he thinks USDA will need to raise those even more because exports to date are running 76% ahead of last year.
Plus he says not all the China demand is factored in. “I think the exports that are being estimated right now are the ones that have been talked about. I don’t think we have the full 25 million metric ton going to China worked in yet. I think USDA is waiting to see that China gets closer to that before they put that full estimate in.”
Plus, if El Nino does impact South American production China will need to buy even more soybeans from the U.S.
China Tensions?
China so far has purchased 17 to 19 million metric tons of the 25 million metric ton purchase commitments they’ve made according to Martinson.
However, there are increased tensions with accusations about a Chinese spy having an affair with the CEO of NVIDIA. At the same time China said within the last week they would buy more U.S. ag goods when the tariffs were dropped. And this week agreed to extend the trade truce until Jan. 10.
“Nobody was expecting that, we overlooked that that was coming due here. So right now, China, I think, is trying to hint about trying to get some tariffs reduced with the change as far as the U.S. government is concerned coming up in January. I think they’re trying to get a little better deal worked out,” he explains.
Soybeans Bottoming?
So with the big gains on Tuesday is it possible the soybean market is bottoming?
Martinson says short term he thinks the funds will at least quit liquidating for the short term futures are trading back above the 200 day moving average. Plus prices have gotten down to levels that should continue to stimulate Chinese buying.
However, after China hits their 25 million metric ton commitment he is concerned the funds may step back in as sellers. He thinks that could happen after the first of the year.
Wheat Adds War Premium
Wheat futures were up on Tuesday with spillover from the higher corn and soybean markets.
However, wheat was seeing some additional buying on Wednesday still trying to access the details of the peace talks between the U.S., Russia and Ukraine and as drone attacks continued in the Black Sea overnight.
Martinson says President Zelensky was happy with how the talks went yesterday but there are no concrete developments yet.
“They did put together some parameters or some asks and sent them over to Russia. Now we’re waiting to see their response on some of the criteria or some of the listings. I think what Ukraine is really going to want to get out of this is just a safe corridor to move grain, and I just don’t see Russia doing that.”
The market doesn’t have any war premium left as it is setting near contract lows.
Wheat Needs Export Demand
The wheat market has also suffered from a lack of export demand with poor weekly export sales and inspection this week.
Even the low prices for U.S. wheat are not competitive in the world market. That needs to change according to Martinson for the wheat market to bottom and ultimately rally.
“We continue to be the supplier of last resort as far as wheat is concerned.”
Stronger Dollar Following CPI
The U.S. dollar also strengthened Tuesday into Wednesday after the CPI came in hotter than expected at .4%.
That could continue to be a headwind for grain exports, at least for wheat, according to Martinson.
Closes Important
He emphasizes that the closes will be important for all of the grain markets today to start at least stabilize the futures.
“We need to see some follow through. Wheat has seen it, you know, so far would be nice for corn and beans. But yeah, they need to finish with higher closes to confirm a little bit of a change in the trend.”
Cattle Futures Try to Extend Gains
Cattle futures started mixed but pushed higher shortly after that after a rally the last two days.
The market has seen corrective buying plus news Tyson is working with Allied Beef to restart a second shift at the Amarillo, Texas plant has been supportive. The news release indicated they had already started some slaughtering with hope to be running a full second shift by summer of 2027.
Martinson thinks there is more upside as the WASDE indicated production is down for 2026 and will be down another 155 million pounds in 2027 with an average steer price of $238. That is even though beef imports are offsetting some of the production short fall.
Cash is Key
He adds that cash trade will be the key this week for feeder and fat cattle markets.
The feeder cattle runs in the north have also picked up with better weather and producers finishing up the harvest but yet cash prices in the barns have improved.
Fed cash in the North has been lower due to heavy weight cattle but producers are working to clean up that situation. Plus, with the rally in the futures Martinson thinks that will give producers more leverage in the cash market this week.
