Grain and cotton futures were sharply higher Monday, livestock futures lower.
Grains and Cotton Explode on China’s $17 Bi Buys
The grain and cotton markets gapped sharply higher on the open after the White House released a fact sheet on Sunday providing further details of the trade outcome from the China summit including an additional $17 billion of ag purchases from China through 2028, prorated for 2026.
Mike Zuzolo with Global Commodity Analytics says this is above the 25 MMT of soybean purchases China committed to in October of 2025.
“So it looks to me like it’s going to be right around that $30 billion mark. That would get us back to, in terms of total beans and non-beans and ag in general, probably close to 2023 levels in dollar terms,” he describes.
More importantly for Zuzolo and the trade was the Chinese noting that there was going to be an increase in U.S. ag exports by more bilateral trade.
He says, “So I think that was the necessary piece of the puzzle to make the market believe that we were going to see an increase in demand coming out of the summit. Obviously, Friday, they weren’t buying into that mindset. They were, in fact, fearful that we were going to lose demand because nothing specific had been given.”
What Commodities Will China Buy?
There were no specifics on which commodities will be purchased, so what might be on China’s buying list?
Zuzolo says the market may have told the story.
“I’m going to go with what was up the most on Monday because I think there’s probably some of the commercials that probably understand what was on that list or going to be published on that list, I would guess. And so with the corn, July corn up almost 4.5%, July soft red wheat up over 4.2%. This was about the grains. The soybeans you’ve got to give them credit. They hung in there. They kept the whole thing together going into last week’s close and into the weekend trade but I think it was about the grains if you look at the percentage gainers,” he explains.
However, he says cotton, sorghum and other items are also on the plate.
“I think sorghum is on the table, but I get the impression. that the Chinese probably want more corn outright as opposed to sorghum. Maybe they have a little bit better stockpile of sorghum after the last couple of years, maybe not getting as much of the corn from the Middle East and not getting as much, especially from the Black Sea region at this stage,” he adds.
China to Lower Tariffs?
So will China lower the tariffs on ag products, including the 10% tax on soybeans?
China mentioned lower tariffs but President Trump denied even talking about it with Xi during the summit.
“Yeah, this is where it’s going to get a little bit tough to read in between the lines until we get more clarification, because the soybeans, especially going back to South Korea’s agreement, that never has really materialized. We got the original bump in the first, what, 12 million metric tons or so. And that then just kind of fell apart. So I think that’s a yet to be determined situation,” he adds.
How High Will Prices Rally?
So, how high will grain prices need to rally to factor in the China business?
Zuzolo says that may be dependent on what the dollar index does because it started moving higher last week because bond rate yields were going higher. “And the bond yields were going higher because the energy market was going higher. So now all of a sudden with this energy market rallying so long we’ve got it actually a double-edged sword when it comes to the commodity sector as a whole.”
He says the trade is starting to get more nervous about higher interest rates and investment money is starting to move.
Grain markets need to take out the old highs to continue to rally.
“That’s the $6.88 area in the July soft red wheat, $506 1/2 Dec corn, $12.14 November beans. I’d love to see that happen before we go home for the three-day weekend.”
China Soybean Buys Below Normal
The 25 million metric ton soybeans buys for 2026 through 2028 are not any more than China bought in past years and the trade thought there would be additional purchases above those levels.
“No, it’s not a huge victory, but we won’t slip anymore in export demand. And I think that was the biggest caution flag and fear that the trade has is we’ve been living off of that domestic biofuel policy in terms of keeping these prices elevated,” he adds.
Market Will Need to See Purchases
While this is encouraging the market will need to see purchases to continue to rally.
Plus, Zuzolo says investors will also need to see the dollar index stay under wraps. “So, that you can assume that our yields are not going to go higher, keep the investor and keep the export market alive. This is where the Russian ruble being so strong recently should help us
quite a bit as we go forward.”
Grains Also Add War Premium
The grains also added some war premium with crude oil prices continuing to be elevated and he thinks wheat is the most directly impacted by those prices.
Cattle Fail
Cattle futures ended lower on Monday as live cattle failed at resistance when nearing the May highs. This is despite last week’s record cash trade at $262.85 and the tighter numbers and drought which is lowering weights.
“You look at the spreads like the Jun/Dec spread that has gone essentially from zero at the end of February to a positive $15. That tells me that we’ve got a very current market and a very tight supply out there heading into the cattle on feed report,” he explains.
The real problem has been the feeders. Zuzolo says, “It’s the same old story almost every week. We get revved up. We want to go after that old
high around $258 in the fat cattle futures and the feeders give way. And whether it’s because of the same drought and the fear of seeing some yearlings come into the placements or whether it’s the corn market rally and the funds playing that spread, it just seems like the feeders can’t give us that push to keep the funds defending their long position.”
Zuzolo says cattle rallies for the last 25 to 30 years have been led by the feeder market.
He is also getting nervous about funds getting nervous about Wall Street as bond yields go up, as well as due to the border reopening to Mexican cattle or higher beef imports.
China Beef Buyer?
China did relist 425 U.S. beef plants to export to China but Zuzolo isn’t sure the U.S. has the beef to sell to them.
“I really question whether we have the supplies to send them. I was just looking at the the grocery store weekly retail activity and the activity index for the beef was up almost 21 last week and this is at these kind of prices even for hamburger were one of the biggest features out there from what the report discussed, So, if our domestic consumption remains so elevated in part due to this diet change that we have going for us.”
Hogs Unimpressed With China News
The lean hog futures were also lower on Monday seemingly unimpressed with the idea of getting any China export business.
However, Zuzolo is still hoping the summer low is in place, especially as June becomes the lead month.
“I really like the way the monthly chart looks. And I like also the fact that we’re starting to get some traction on the cutout values.”
He admits the market may have been concerned about Mexican import restrictions on U.S. offal, etc. due to pseudorabies.
Still he says China continues to see big hog producers or the government curtailing supplies which should eventually be supportive.
