Grains and cattle futures ended lower on Wednesday, lean hogs were higher.
Grains Crash on Profit Taking and Biofuels News
Grains futures saw sharp losses on Wednesday on profit taking according to Rich Nelson with Allendale, Inc. He says after the recent rally in soybeans the market was due for a correction. However, Reuters also released a biofuels story around noon that also weighed on corn, soybeans and bean oil. It suggested that EPA was possibly delaying their proposal to provide a half RIN value for imported biofuels and feed stock like Used Cooking Oil from China. The approach was part of the Renewable Fuels Standard Renewable Volume Obligations draft that was set to be implemented on January 1 and would cover 2026 and 2027.
High Dollar, Lower Crude Oil Also Pressure Grain Markets
Nelson says the strength in the U.S. dollar index and inverse weakness in the crude oil market also contributed to the lower day and risk off appetite in the grain complex.
China Sales Priced Into Soybean Market
USDA reported another flash sale of 12.1 million bu. or 330,000 MT of soybeans sold to China for 2025-26. However, the six cargoes was just confirmation of part of the rumored business early in the week, so Nelson says it is already priced into the soybean market. When added to the Tuesday sales, China soybean buys total just shy of 50 million bu. which is only 11% of the total 440 million bu. purchase commitment made in the recent trade accord.
“This, of course, will be a state versus a government -to -government agreement. So we do have to assume that these sales will get done 12 million tons total but keep mind here with the Brazil still at a price discount to us in addition for the Chinese buyers you throw on that 10% import tariff that U.S. beans specifically do see and we’ve got to point out it’s a little headwind as far as getting all the all the business done here.” he explains.
Growing Concerns About Soybean Export Target
Nelson says even if China fulfills the entire commitment he has concerns that the other export customers for U.S. soybeans will just purchase from South America due to the lower price. That will leave the U.S. 92 million bu. short of USDA’s soybean export projection of 1.635 billion bu.
Lower Yield Could Offset Lost Exports
He says if USDA lowers soybean yield by 1 bu. per acre in the January report that would shave around 80 million bu. off of production. While it would help offset some of the export shortfall, Nelson’s projected ending stocks figure would swell to around 350 million bu.
What Does That Mean for Soybean Prices?
Nelson says the increased carryout would suggest that soybeans are fairly priced at around $11.60. So the current prices levels are adequate for the time being.
Corn Futures Follow Soybeans
Corn futures also saw spillover from the lower soybeans, wheat and crude oil as it continues to be more of a follower. Nelson says corn may have also reacted negatively to the biofuels news. He says the market is rangebound but the bottom end of the trading range has held because of the general belief of the market that yield will be cut by USDA in the January report. He says, “In the past 25 years, you can have another drop here going into January. The lower limit of that drop would be down to 182 at the very low end of things. But keep in mind here, analysts have been too low with the yield estimates on the most recent three USDA reports. So expecting much of a yield hit on this one, maybe it’s something we probably shouldn’t be doing. So maybe take off one, maybe two bushels, get us down to 184, that still leaves a balance sheet over 2 .0 billion bushels.”
Wheat Lower
Wheat futures were also down 1 1/2 to 10 3/4 in the three exchanges as a higher dollar weighed on futures. Talk of a potential Black Sea peace deal was also slightly negative for the market. However, Nelson suggests there’s not much war premium in current prices.
Cattle Make New Lows For The Move
Cattle futures made new lows for the move as technical selling and fund long liquidation continued. Nelson says the fundamental catalysts included record cattle weights being reported by USDA. “Now, realistically, these are only about 2 % over last year. This does not fill our shortage of U.S. beef production, but it is something which is psychologically negative.” he states. The market also saw lower cash. Northern cash trade developed at mostly $345 to $347, down $6 from last week’s weighted average in Nebraska.
Where Do Cattle Find Support?
So how low do cattle prices need to fall before the futures find support? Nelson says it is hard to tell. “We’re far below anything which I could have made up on from a balance sheet perspective. This market is certainly right now in a heavy psychologically based situation right now. And as far as the current trade with his confidence for new lows, perhaps another $5 to $8 here on the futures in the short term,” he adds.
Lean Hog Futures Bounce
Lean hog futures saw short covering and staged a technical bounce off of six month lows scored on Tuesday. Other than being oversold Nelson says there is not much reason for the market to rally.
