Grains are quietly mixed Wednesday morning with livestock higher.
The U.S. dollar index is higher and crude oil is lower which was initially a headwind for the grains and there could have been some farmer selling.
Alan Brugler, A and N Economics, LLC says corn and soybeans are caught in a tug of war between farmer selling and strong cash basis levels due to strong demand.
That was confirmed by more export sales Wednesday morning.
USDA reported flash sales of 4.8 million bushels of soybeans to China and 10.8 million bushels to unknown destinations, plus 3.9 million bushels of corn to unknown destinations all for the 2024-25 marketing year.
Brugler says that type of business is expected around harvest with more available supplies and lower prices.
He thinks the U.S. has a more favorable export climate especially moving into 2025.
“Brazil did have some crop problems last year. We’ve got a more favorable first quarter window than we did a year ago,” he explains.
However, he says right now China is not buying soybeans as aggressively as some past years or at least is not booking past January.
He ties that to uncertainty about the election, possible tariffs and low water levels on the Mississippi River for a third year.
“That tariff situation has some global buyers front loading their purchases,” he says.
Brugler thinks the markets is overplaying the concerns about possible tariffs if former President Donald Trump is re-elected.
“What we do know from the trade war in 2018 is China does need some U.S. supplies, they can’t rely totally on South America,” he says.
He further explains that if China’s economy is weak enough they may accept the lower selling price on the goods that have a tariff on them in order to get the volumes moving to keep employment.
“A tariff is a tax and it can be paid by the buyer or the seller,” he adds.
Cattle futures started higher and December live cattle made a fresh for the move high before selling off.
December live cattle got just under the July highs and into the $190 resistance level on the charts and failed.
However, is there an impact from McDonalds temporarily removing Quarter Pounders from their menu after reported e.coli illnesses in several states?
The CDC has linked the illness to the onions, not the ground beef itself and so Brugler thinks the impact on the cattle market will be short lived.
Brugler says, “These things tend to tend to have short -term impact on on demand, but it’s again It’s gonna be mostly in your in your ground beef but that’s not what drives the cattle market and the carcass value overall. It’s a piece of it, certainly. But I think we’re gonna get past it fairly quickly.”
