Corn and soybean futures made new highs for the move in November with optimistic buying tied to news of a trade framework with China. Soybeans led the rally with the January contract hitting a high in November of $11.69 1/2 but has retraced nearly $.50 of that. So, what will it take to retest that high?
China Soybean Bulls Need to Be Fed
Tommy Grisafi with Nesvick Trading says bull markets need to be fed daily and the overall slow place of China’s soybean purchases has them doubting the deal. “We need a lot more proof. And every day at 8:00 brokers, traders, speculators, whatever, we’re all looking for that big export number to China. And we’ve seen little bits, but not enough and it’s going to become a problem.”
He says the soybean market trades up $.07 to $.10 at night and the speculation is the U.S. did some business with China. However, the next day there is no confirmation and so the market trades down the same amount. “That bull market needs to be fed every single day, Michelle, it was led by the soybean, soybean futures. And especially by soybean meal, and if you start to look at a meal chart, it could be rolling over.”
Will China Buy the Full 12 MMT?
Grisafi says the other problem for the soybean bulls is the U.S. and China have not signed the trade framework yet and there’s speculation that China may not buy the full 12 MMT of soybeans agreed to by the end of 2025. That was backed up by Treasury Secretary Scott Bessent on Wednesday when he said China was “right on schedule to buy the entire 12 MMT by the end of February,” which is disappointing for the market. Currently China is estimate to have purchased upwards of 3 MMT of that total and so they have some work to do. As a result, soybeans have continued to drift from the November highs.
What Will it Take for Soybeans to Retest the November Highs?
According to Grisafi the soybean market will need to see some big Chinese purchases in December. “It doesn’t have to be the whole 12 MMT but it needs to be substantial amounts and it needs to be soon because Brazil’s new crop will be coming to market soon. At this point, they’re just buying what they normally would need to just cover that gap. Pretty soon, we’re going to be talking about a large South American bean harvest. And the beans they did purchase from us were at a significantly higher price than what they could have paid down south.”
South American Weather Problem
Grisafi says the other catalyst for a soybean rally is a weather problem in South America. There are a few concerns currently with dryness in Southern Brazil but he says that won’t have a real impact on production until January. Still, some private firms have already started to lower the size of the Brazilian soybean and corn crop by 1MMT to 2 MMT. Unfortunately, the soybean crop is still ranging from a record 176 to 177 MMT.
Corn Range Bound
The corn market has recently been in a $.15 trading range as it consolidates with soybeans off the November highs. Corn continues to see the tug of war between record demand and a record crop according to Grisafi. USDA provided demand news on Thursday with flash sales of 4 mb to Columbia and 15.5 mb to Mexico.
What Could Rally Corn Into the November Highs?
Grisafi says the market is already trading record demand and so it will need to be a spark from South American weather problems or USDA lowering yield in the January Crop Production report. He says it will need to be a three or four bushel decrease though to get the market excited enough to retest the November highs. “If you had a 179 in front of the corn yield instead of a 184, that would definitely change some balance sheets. But we seem to be able to play the shell game where we could lower the yield, a few bushels, yet we find a few more acres or something else. We play the shell game where we can lower a bushel or two and not really affect the balance sheet. So we’d have to see a dramatically lower yield. And Michelle, you’d think you’d be seeing that in the cash markets already if yields were truly that low.”
While USDA provided a bullish report last January that lowered yield down to 179.3 bu. per acre he’s not confident in USDA being that aggressive nor is he confident about the accuracy of the data. “We knew when the government shut down our data could be corrupt. We shut down for 45 days. That’s six weeks of just not putting out the information. And there’s some of that information could be lost. So, I mean, if you’re going all in on this January report, I think you need to have your head examined.”
Trade Aid Could Impact the Grain Markets
USDA Secretary Brooke Rollins says the administration will be releasing trade aid next week with talk of anywhere from $12 to $15 million in the works. Grisafi says this could keep some grain off the market. “If we can get that cash in the farmer’s hand before Christmas, that may allow them to hold out not selling much grain in the month of December. You may see spread starting to tighten in some of the market. You may see basis appreciation. But in the end, all bushels will go to town or get ground or get exported or something, unless you’re really one who likes to have a birthday party for your grain. But most bushels are going to make it there eventually. So it could create some, the market may have to work
harder, Michelle, to get those bushels out of the hands of farmers.”
