Grains ended mostly higher on Thursday, with cattle mixed and hogs lower.
Soybeans Make New Highs for the Move
Soybeans closed higher Thursday and made new highs for the move. Yesterday’s high of $12.38 3/4 was the highest tick since May 27 of 2024. The markets continued to see fund and technical buying according to Mark Schultz with Northstar Commodity.
He says the buying was partly driven by the rally in the energy markets. Brent crude, surged more than 9% to end at $100.46 a barrel Thursday, its first close above the triple-digit threshold since August 2022. However, there were also some other factors that boosted prices.
Cargill Halts Brazil Soybean Shipments to China
Cargill also announced it was halting shipments of Brazilian soybeans to China and stopped buying from local farmers as China put tighter sanitary requirements on soybean imports due to concerns about quality.
Schultz says, “It may set the stage for the U.S. seeing more business coming back from China.”
Soybeans Focus of China Meeting
He says the upcoming trade talks with China will also focus on soybeans. “We’ll start this weekend and then follow up with a meeting supposedly in the first full week of April. I think there’s always been that chatter that there will be more business and hopefully China will be buying U.S. beans. So it obviously helped out the market and gives a little bit more boost. Now, we’ll see if all this comes to fruition but when you look at the bean market, it’s performed the best of all.”
China Not Buying U.S. Soybeans
Will China confirm any of the 8 MMT of old crop soybean purchases President Trump says they agreed to buy at the meeting? So far the weekly export reports indicate China is not in buying many soybeans from the U.S. and have been more focused on cheaper soybeans from Brazil.
“And rightfully so. You’ve also got energy prices up, so freight rates are going up. It’s making it more expensive. Fuel surcharges are going to come into play.”
However, it’s not just China that is sitting on their hands and waiting according to to Schultz. “So a lot of people are unsure where they are and want to see what unfolds before buying from the U.S.”
Funds Buying in Grains
Funds are buying the grains but is its because of the energy market rally or is this outright inflationary buying? Schultz says, “In the grains, I think they’re buying just in anticipation. You’ve got higher price fuel and it’s basically if you sell it it’s watch out if it doesn’t work. So, you’re making new highs for the year across the board in the markets and in case of the soybeans, two-year highs.”
How High Before Demand Destruction Sets In?
Will funds keep buying in the grains and how high can prices run before demand slows down? Schultz says he’s getting nervous, especially about soybeans.
“The length is getting to be rather sizable in soybeans, maybe a billion bushels or better net long on the soybean market and probably quite a little bit more than that now after this week. Corn, they’re probably getting themselves into the long side and the wheat probably out of their short positions and maybe to the net long here slightly,” he adds.
What $150 Crude Oil Means For the Grains
The IEA says this is the worst disruption of oil supplies in history and so could crude oil go to $150? If it did how high would the grains rally?
Schultz says if crude oil gets that high it will hurt grain demand. “Go back to 2008 when you saw the market go up, and I believe we got up to $140, $147 a barrel on crude. Fuel prices were extremely high. We got into, what, August or October, and the collapse of the markets globally took place, and everything went down, and it won’t matter who you are, what you have you’re going to everything will eventually sink. So, it is not a good recipe in the the big picture for prices staying strong for a long period of time,” he adds.
Cattle Hold Despite Equity Selloff
Live cattle ended higher on Thursday with feeder cattle mixed, despite a sell off in the equity market once again. Schultz says what may have held the market together is the futures discount to cash at mostly $235.
“I think when you look at the market, you got the futures trading down $228 to $230 on the opening on April cattle. You had cash trade again. This week looks like it’s going to be pretty well done at $235, maybe $236. So you’ve got a premium of the cash to the futures. And that’s, I believe, is the reason why you at least stopped it from going down and pulled it up a little bit higher.”
Plant Strike
However, it may be difficult to hold the market together, he says, if the workers at the JBS plant in Greeley, CO, decide to walk out on March 16.
Slow Down in Beef Demand?
So if there a fear of a slow down in beef demand with Choice Cutout at close to $400 and higher gas prices. Schultz thinks it is a real fear for the market.
