Grains ended lower on Monday with livestock futures mixed.
Grains End Lower on Year End Positioning
Grain markets all ended lower on Monday under light volume seeing year end positioning and tidying of books by hedge funds or managed money traders. Kevin Duling with KD Investors says there was also some algorithm trades that moved the market, even though traders were physically absent from the market. “In the old days we used to move a cent and think it was a big day in the holiday week because everybody took the week off. But with the computers, there’s always a little more activity than we’d like to see.”
With grain markets rallying up to the top end of their trading ranges through last Wednesday there was also some profit taking and farmer selling he adds. “Producers probably have some some year end sales to make especially as March corn ran above $4.50, which was the second highest trade in the contract clear back to June,” he says.
Macro Markets Create Risk Off Selling in Grains
With big moves in the precious metals like gold and silver off of record highs plus higher crude oil the macro markets created some risk off trading which spilled over in the grain markets according to Duling. “And it’s going to be a rocky road on the macro side for the extended. So when we have a low volatility session you’re going to get moved around hard on stuff that’s not necessarily related to supply and demand.”
Duling thinks 2026 is going to be a “macro year” that could create some allocation changes by money managers, hedge funds and banks, that could impact the grains. “The biggest one is the metals with gold and silver doing what they’ve done, and you’re getting to the kind of the apex of those moves and they’ve been forecasting some major changes coming up. And so that’s going to make the whole portfolio on the macro side and on the fund side change as as those markets move. And so the last time we saw anything similar was 2010, which was after the 2008 bubble popped,” he explains.
Grains Mark Time Ahead of January WASDE
One fundamental the market is watching is the January WASDE. Duling says the grain markets have been in ranges or holding patterns waiting for that new infusion of data. For corn he thinks yield needs to be cut. “There’s just too many reports where where I think they’re off off the mark there by quite a bit. So that has to come down. Are they going to bring it down enough. I doubt it.” The good news is USDA is projecting a 16.7 billion bu. crop but 16.2 billion bu. of demand.
In contrast soybeans export demand or at least inspections are down year to date by 46% which may require a cut in exports in the WASDE. Duling says, “They probably should drop those exports. I’m not sure if they will. China says they’re going to keep on buying. You know they’re going to finish their12 MMT and roll into the 25 MMT? I don’t know if that’s going to happen.
Brazil Weather Weighs on Soybeans
Brazilian weather has been more favorable lately and crop estimates continue to climb above 180 MMT which is also pressure the soybean market. However, Duling says Argentina is seeing some dryness in the South which could cut their yields. “So they’ve been a little bit on the dry side. but it’s hard to get excited when South America continues to expand.” he adds.
Wheat Fails After Higher Weekly Closes
Wheat futures managed higher weekly closes last week but failed to see any follow through Monday, despite some lingering risks. Duling says, “You’ve got the Ukraine infrastructure shut down enough that they’re only running about 20% of what they can. And that that’s a pretty big factor and the war is not necessarily over. And so I mean, there were some peace talks going on over the weekend and whatnot, but I think there’s some still some sticking points. And it sounds like there’s still quite a bit of headline risk there.”
Duling adds that the wheat crop is also at risk from a weather perspective. “There’s also quite a bit of cold weather risk for not just the Black Sea with Europe and the U.S. as well right after a warm stretch. So there’s some risk there.” Plus, he says demand continues to be good. However, there may be some concern about more China cancellations of U.S. wheat and large global supplies continue to be bearish for the market.
Cattle Market Still Sideways
The live cattle ended mixed with feeders slightly higher but both are still in sideways trading ranges? Duling says that is likely to continue through the end of the year. The market is in a tug of war between tight supplies and the push by the administration to lower beef prices according to Duling. “We have kind of have a an administration cap on that market and what it does is it keeps the hedge funds from wanting to take the long side and build a big, long in that market, because they know at any moment they could get slapped with something political.”
However, he thinks by spring the market could rally. “I would not be surprised to see markets trend higher just to follow the cash market. Its just a matter of when,” he says. The other bearish unknown is when the Mexican border reopens to cattle imports.
