Grain and cattle futures ended higher on Thursday, hogs lower.
Rich Nelson of Allendale says grains closed quietly higher and brushed off news of reciprocal tariffs as corn and wheat were supported by strong weekly exports.
Corn exports for old crop were just shy of 65 million bu. up 12% from the previous week and up 20% for the four week average.
Nelson says the corn market was also digesting South American production numbers as Conab raised Brazil corn production 2.46 MMT to 122 MMT, while the Rosario Grain Exchange lowered Argentina’s production forecast by 2 MMT to 46.6 MMT.
Corn continues to be technically range bound and will need a bigger bull story according to Nelson to get above overhead chart resistance.
Soybeans were able to brush off poor export sales of only 6.8 million bu. due to lower production estimates for both Brazil and Argentina.
Conab lowered Brazil’s soybean crop by 310,000 MT to just above 166 MMT, citing drought in Southern Brazil.
The Rosario Grain Exchange also lowered Argentina production to 47.5 MMT on soybeans due to heat and dryness.
However, added together and the South American crop is still a record, so are soybeans fairly priced?
Nelson says, “You know in our viewpoint roughly a good midpoint for soybeans at this balance sheet number that USDA currently is at along with the trade risk discount is gonna be about $10.50. So $10.50 is our target for nearby futures, we’re saying a good midpoint price. And roughly for the next few months, we can probably bounce around for roughly $10, $10.20 on the low end, perhaps $10.80 on the upper end. So at this point in time, we can say we’re more or less fairly priced.”
However, there have been no ag products included in the list of China retaliatory tariffs which has been positive for the soybean market.
The next question is what will be included in the reciprocal tariffs President Trump announced Thursday?
Nelson says,” As it stands right now, the new tariffs that Trump has announced this week, which are called the reciprocal tariffs. The trade is right now is not expecting that to include grain. So as it stands, maybe we’ve got a little bit of reprieve here.”
Wheat futures followed corn higher but also got a push from stellar export sales at nearly 21 million bu.
That’s up 30% from last week and a whopping 45% above the four week average.
Nelson says there was also some buying tied to weather concerns with bitter cold and subzero temperatures in parts of the wheat belt.
Cattle bounced with better cash bids according to Nelson and the futures discount to cash.
However, he thinks there is more downside risk ahead for both cash and futures.
He says, “Keep in mind here we have in this case about a $16 break in wholesale beef over 21 days. Yes, futures are at a discount to current cash, but we’re still taking out hot air, which was added back in during the Mexico border closure, as well as those prior concerns about a tariffs possibly limiting Canadian cattle going into the US. So, I would suggest there’s still a bit more to go.”
Although he doesn’t think cash has to fall all the way to $185 which was where fed prices were before the Mexican border was closed.
Meanwhile, hogs saw profit taking after new contract highs Wednesday.
The market has been pushed by stronger than expected cash and cutouts.
“So cash hogs and cash pork, we’re looking at gains of 24 to 28 days straight. Very good news there. The question for us right now is a lot of us are gonna question is exactly how high do they need to be? Cash hogs right now, are 18 % over last year,” he adds.
