Grain and cotton markets ended mostly lower on Tuesday except SRW wheat. In the livestock hogs were lower, cattle higher.
Grains End Mostly Lower Tuesday
Grain markets were higher overnight and early Tuesday following the big rally to start the week on news of China buying $17 billion of U.S. ag goods annually through 2028 on top of committed soybean purchases of 25 MMT.
However, the markets failed early into the day session with some profit taking as traders will now need to see proof of China purchases to continue buying according to Brian Grete with CommStock Investments.
“I think that the market’s just kind of waiting at this point in time, waiting on details to come on, more details on the trade side of things and or any confirmation from China on some of those purchase levels,” he adds.
When Will China Start Buying?
There were no flash sales on Tuesday morning, so when will China start buying?
Grete says, “Timing is one of the uncertainties that we don’t know with the deal. And I’m going to use soybeans as an example, because everything from the U.S. side of things so far has indicated that they would buy later in the year, and that would indicate new crop purchases.
So China could come in now and book new crop purchases. That wouldn’t be unusual for this time of year, but they could also wait if they want to.”
He says China has time on their side and will likely wait.
Tariff Rollbacks?
The market is also waiting to see if China is going to roll back the 10% tariffs on U.S. soybean exports and other products.
“One of the other uncertainties is whether this will be open to commercial-based purchases by China,” according to Grete, “And the key to that is whether there will be tariff rollbacks. The Foreign Ministry said that there would be some tariff reciprocity, but we shall see. If the U.S. takes off the 10% fentanyl tariff on China, then they’ll roll back their 10% on soybeans.”
That would make U.S. soybeans more economically feasible but right now Brazil’s soybean price is much lower than the U.S.
Marketing Year or Calendar Year?
Grete says the market would also like clarity on if the purchases or based on a marketing year versus calendar year.
“And if you remember back to October, there was all the confusion there. U.S. officials came out and said, well, they’d make the 12 million tons of purchases by the end of 2025 calendar year. And then it was all by the end of January or February. And all kinds of confusion on that. What we saw is the 12 million tons was purchased. It was by the end of March, basically. We don’t know if it’s calendar year, which governments work on calendar years or fiscal years, but markets work on marketing years,” he adds.
Grete says China’s marketing year is October through September, while in the United States, it’s September through August.
Enforcement Mechanism?
The other unknown is if there is an enforcement mechanism with the framework?
Grete says, “There needs to be, because if you remember back to Phase one, under the first Trump presidency, China bought gangbusters the first couple of years that culminated in 2022. And after that point in time, they started to drop off pretty significantly and they never did get to their end goal of what was agreed to under Phase one.”
The deal does run through the end of 2028, so through the end of the Trump administration.
“But three years is a long period of time to govern or keep track of whether China is on track to make its purchase agreed to purchases. So I think there needs to be some sort of compliance mechanism in this one.”
Does the U.S. Have Enough Ag Products to Sell China?
Another debate that has arose among some market analysts is whether or not the U.S. has enough U.S. ag products to supply $17 billion a year in addition to 25 million metric tons of soybeans.
Grete says, “Absolutely. There may be some changes in trade flows around the world. So let’s take soybeans, for example. If we send a bunch of soybeans to China, that may mean that somebody else has to step up and buy Brazilian beans that are displaced by U.S. soybeans going into China and those types of things. So whatever we’re talking about, whether it’s corn, wheat, sorghum, meat products, it’s going to take all those to get to that $17 billion beyond the soybeans.”
That will dictate a change in trade flows but he adds the U.S. will supply them with their needs.
U.S. Soybean Ending Stocks
So if the U.S. sells China the whole 25 million metric tons of soybeans where does that take ending stocks?
“Oh, it would tighten them up,” says Grete, “Keep in mind, 2026 is prorated. So we’ll be working with a different set of numbers as we move into 2026-27.”
He says USDA lowered its ending stocks projection for 2026-27 from where they are in the current marketing year.
“So things might get tight, but I’m sure there will be something there. On the soybean side of things, any exports that go to China, we are now seeing more domestic use because of biofuels. And so that brings up an interesting conundrum because we will support the domestic biofuels,” he adds.
Hit Chart Resistance?
Grain markets also ran up into the top end of recent trading ranges on Tuesday and hit chart resistance.
He says that created some profit taking and farmer selling. “There is a big double top on the July corn chart that needs to be cleared. And so questions there, can it happen or not? Who knows? Farmer selling. I believe there probably was some farmer selling. No real way to confirm that but if farmers aren’t selling they probably need to be especially if they’re behind on their sales right now,” he adds.
Fast Planting
U.S. corn planting was at 76% on Monday and soybean planting at 67%, which are both well ahead of the five year average, which also pressured the market.
“I think if you look at the plantings and overlay that with topsoil and subsoil and drought conditions and all that, it’s setting up as a haves versus the have-nots. And right now, just rough numbers, about two-thirds are halves where they have plentiful moisture and the crop’s off to a good start. About one-third is the have-nots where drought conditions, =soil moisture conditions are very dry and they need to have some timely rain. So we’ll see how that evolves,” he adds.
Wheat Conditions Fall
U.S. winter wheat conditions were only 27% good to excellent and 43% poor to very poor, so some of the worst in history.
Is that all priced into the market?
Grete says, “Those are the second worst since USDA has been doing national weekly ratings since 1986. And only 1989 was worse than this year at this point in time in mid-May. And so, you know, 43% is poor to very poor, that has a real risk of not being harvested this year.”
That will mean a high level of abandonment in the plains HRW states.
“I do think that that’s mostly factored in the market. Anybody that doesn’t know about how poor the HRW crop is this year just hasn’t been paying attention, to be honest,” he explains.
Money Flow
Money flow has also had a large impact on the grain markets according to Grete.
“Ultimately, no matter what the reason is, whether it’s fundamental, technical, whatever, money flow at the end of the day determines what happens on a price structure. And we saw last Thursday and Friday just massive money flowing out of long positions. And it was a massive net
long. So they shed a bunch of that. But then they come back in on Monday and buy a bunch. And so the money flow will be a key price determinant as we move forward here near term.”
Cattle Bounce But Disconnect With Cash
Cattle futures were higher on Tuesday seeing a technical bounce with the big discount to record cash trade.
That spread is abnormally wide. So why aren’t the futures responding?
Grete says, “I think that the trader at this point in time is just saying, hey, cash, you do your thing and we’re going to sit here and wait on the cash market to eventually roll over and it eventually will and come back to the futures. And so they’ve just decided they’re not going to aggressively chase to the upside.”
That doesn’t mean the futures won’t make new highs, it just means the discount is going to remain wide especially in the back months.
“USDA’s forecast for the fourth quarter, average cash price is $255, and the futures are trading well below that at this point in time.”
Funds Liquidating
The funds have been slow shedding length but are they spooked by headlines of higher beef imports, the DOJ probe or other headline risk?
He says that is possible. “If you remember back earlier in the spring, it seemed like late in the week, every time that they chased to the upside because the cash market was on fire, there would be a rumor that started about something, whether it’s the border reopening or some other market factor. And it just kind of tripped up the futures. And I think that, quite honestly, they’re tired of it and they don’t want to deal with the whipsaw back and forth. And so they’ve decided not to chase anymore.”
Cattle on Feed on Friday
The market is also positioning ahead of the Cattle on Feed report, although placements could be higher because it is being compared to much lower numbers of a year ago.
He says, “Yeah, huge range in the estimates on placements. So that will be the read, so to speak, on the report. The feedlot inventory is expected to be up about 1.5%, a little bit more than that from a year ago. And like you said, we are now comparing apples to apples because the border was fully shut at this point in time in 2025.”
Lean Hogs Fail Again
The lean hog futures were down again on Tuesday failing to establish a solid low in the market.
Grete says the futures premium to the cash index is part of the problem.
“If you remember back to late winter timeframe, in early March, we caught fire and we rallied and everything looked really bullish at that point in time. The cash market just literally leveled out since that point and futures have been doing nothing but removing a bunch of that premium.
So basically the cash market sideways and the futures down since early March when we had the high in both the cash index and the futures,” he states.
He says the slaughter numbers actually line up really well with what the last H&P report said. However, with the talk of disease there could be some revisions in the June report.
