Grains closed higher on Wednesday with livestock lower.
Soybeans End Higher
Mike Minor with Professional Ag Marketing says soybeans ended slightly higher but off session highs as the market ran into chart resistance.
The spreads also firmed today with November gaining on deferred months possibly signaling demand.
Early strength was also tied to renewed fund and technical buying and the market is still chasing China headlines with reports the Trump administration is considering more tariffs on China
However, Minor says the market was able to hold."Obviously some nice China optimism going into Bessent’s meeting this weekend. And then Trump’s supposed to be meeting next week as well with Xi,” he says.
Market Volatility High Ahead of Trump Xi Meeting
Minor says market volatility is already running high in many markets besides soybeans ahead of the planned meeting between President Trump and Chinese President Xi in South Korea at the APEC Summit.
“You saw a little bit of the volatility here directly around 11:30 during today’s trade in the S&P, cattle and the corn and soybean markets. We saw a massive downward correction in a very big hurry. And I think that was just based on some of the Trump’s comments that came out here today ahead of these meetings. He’s going to play hardball early on and then come out of the meeting, hopefully smelling green, basically, is what he wants to see.”
Will They Talk About Soybeans?
Will the two leaders reach an agreement for China to buy U.S. soybeans or will that talk be sidelined by negotiations regarding rare earth minerals?
Minor says, “It’ll be a little bit about soybeans, but it’ll be short. I really believe that he’s going to try to say that we talked enough about soybeans to make the American farmers happy. Will anything happen? That obviously is a long ways off at this point to get some real traction. But he’s going to make it sound like it was a really good meeting.”
How Far Will Soybean Prices Fall Without China?
Minor says there are some strong support areas just under $10.
“You know, that $9.90 level on November is obviously a very supportive range. That line from those last three lows is holding some support levels there. So if we correct back to where we had really lifted off here the last couple weeks. That would be a comfortable spot, but also that’ll be a pivotal point not to break through here if these meetings go sideways.”
However, he says even if China agrees to buy U.S. soybeans the export window has nearly closed for this marketing year.
“It’s only a matter of time before we get to Brazil’s export window, which really starts the end of January. So At this point, it looks like China’s built up their reserves greatly, and they could start dipping into those reserves somewhat soon,” he adds.
Trade Deal and Trade Aid Could Provide Incentive for Farmers to Hold Soybeans
Minor says if the U.S. gets some type of deal with China and U.S. farmers also get trade aid they are going to hold on to soybeans in storage even longer, which should support a stronger basis.
“At this point, it seems like the processors are going to be the ones really driving the markets, and we’ve already started to see that in the Northwest Corn Belt,” he explains.
Corn Sees Technical Buying on the Heels of Soybeans
Corn futures ended higher on fund short covering and technical buying but with spillover strength from wheat and soybeans according to Minor.
However, he thinks the market is also seeing forward spreading which is an indication that yields are less than expected.
“Hearing yields lower maybe for the United States down to the 180 or below category,” he states.
However it’s also an indication of strong demand from ethanol plants and export customers and Minor says with China boycotting U.S. soybeans many of the merchandisers are moving corn by rail instead.
Cattle Futures Melt Down on Trump’s Beef Comments
Live and feeder cattle futures melted down on Wednesday on profit taking and fund selling with limit down closes in many of the feeder contracts.
The big selloff came after President Trump posted on social media, “The Cattle Ranchers, who I love, don’t understand that the only reason they are doing so well, for the first time in decades, is because I put Tariffs on cattle coming into the United States, including a 50% Tariff on Brazil. If it weren’t for me, they would be doing just as they’ve done for the past 20 years — Terrible! It would be nice if they would understand that, but they also have to get their prices down, because the consumer is a very big factor in my thinking, also!” Trump shortly thereafter posted: “In addition to everything else, Tariffs on other Countries SAVED our Cattle Ranchers!”
Funds Liquidate in Cattle?
Minor says funds could continue to liquidate their massive long position as USDA announced more details on their plan to help lower beef prices.
“When you have this much choppiness and uncertainty, the easiest way is out for these funds at this point.,” he explains.
The question will be how much do the funds liquidate and where does chart support hold?
He says, “In the short term, nothing’s changing fundamentally right up front. Supply is still low. We’re not growing our herd at all. And if we are, it’s going to take a couple of years. So at this point, it depends what the consumer can really stomach and how much leverage this packer can gain back in the meantime.”
Lean Hogs Follow Cattle
Lean hog futures saw spillover selling pressure from the collapse in cattle but funds have been liquidating their long position in that market the last few weeks.
Minor says, “Open interest dropping there. We found some support the last couple days, which was needed. That was a good move, but cutout still just over 100. If that continues, that’s gonna be a pretty big win, I think, going forward.”
Especially with weights nearly five pounds above the five year average.
So he says December futures need to hold the $81.00 to $82.00 level of support which should be possible with the big discount the futures are holding to the cash index.
