Grains end lower Friday with livestock futures higher.
Dan Basse with Ag Resource, says grain markets set back on profit taking after running into chart resistance in the March near $4.95 and may be seeing buying exhaustion.
“Open interest in corn is reaching a new record or at the old record of 2 million contracts of corn futures. When we look at the Commitment of Traders report that will be out Monday afternoon, we’re expecting that it’ll be somewhere in the vicinity of 360, 370 ,000 contracts of long corn. So since the period from late summer to where we are today, our estimates in the grains that funds have bought nearly a million contracts. And I think we all have the question, can that type of buying persist,” he explains.
Pressure in the grains also came from news Argentina is lowering its export taxes on grains.
Argentina’s government announced starting Monday they will lower the export tax on soybean meal from 31% to 24.5%, soybeans from 33 % to 26%, corn and wheat will go from 12.5% to 9%.
“You know, as you think about what it means for Argentinian exporters or farmers, it’s about 67 cents of bushel and soybeans, about 24 cents in corn. So not a small change, if you will. And I would imagine the Argentinians will be bigger sellers, particularly from the farm sector when they come back.”
Corn and soybean traders also reacted to a slight improvement in the South American weather forecast.
“We’re seeing some better rains over the next couple of weeks across Argentina, we still have chances of rain this weekend. If those materilize we’ll start to take some of that premium out,” he says.
However, even with losses in Argentina, the Brazilian soybean crop will be a record and is already trading a $1.22 under U.S. soybean prices at the Gulf.
He says, “Our estimate today is 172 MMT in the Brazilian bean crop. Argentina, we’re at about 49.7 MMT, so down a little bit there, but again, there’s chances based on the early Brazilian yields that that crop could be larger. Some of the data points to maybe 175 or more. So it’s a big crop, no matter what we lose in Argentina.”
Basse says China is also preparing to auction of around 4 MMT of soybeans after the Lunar New Year holiday.
“So that’s the soybeans that are in the reserve as they bring new crop beans in, they get rid of the older stuff. So they like the US beans this year because they’re so dry. I would imagine they’ll sell those beans that maybe go back to 2020 or 19 and kind of swap them out so they have room. We’re hearing that the Chinese reserve, soybean reserve now is up to like 26 to 28 MMT. So it’s relatively full. And I think that’s something to think about for Chinese demand over the remainder of the year,” he explains.
Rumors circulated earlier in the week that China had bought U.S. soybeans and even corn as part of a goodwill gesture and that a deal between the U.S. and China may be in the works.
However, Basse is not optimistic about a deal.
“The U.S. Congress Senate and House are both introducing bills that they will take away China’s most favored nation trading status And when that happens, that’s an immediate 35% tariffs on all Chinese goods. Not the goods that are $800 or more as Trump put on, but all goods.”
Wheat futures posted losses of 9-11 cents on Friday and Basse says lackluster demand is an issue and the funds continue to push the short side of the market and wheat is starting to replace corn in the feed ration.
Cattle futures made all-time highs again in both live and feeder cattle futures.
Cash is also trading at record levels for a fourth week with Northern business ranging from $210 to $212, on Friday morning, up $6 to $8.
Dressed trade in the North ranged from $328 to $330, up $6 to $8.
This is after the South traded earlier in the week at mostly $201-$202, which is steady to $1 higher in some instances.
Support is also coming in the feeders from the higher cash index and the border still being closed to Mexican feeder imports.
Right now consumers have been willing to pay up for beef in the grocery store and that has also pushed the market.
