Grain and livestock futures are mostly lower Thursday morning.
Risk Off Selling
Darin Newsom, senior market analyst with Barchart, Inc., says commodity wide selling is hitting the grain and livestock futures early Thursday and some of it is tied to uncertainty regarding the future of tariffs. The tone of Wednesday’s opening arguments in the SCOTUS hearing looking at the constitutionality of the IEEPA tariffs imposed by the Trump administration seemed to indicate the tariffs may be struck down. If so the U.S. would have to pay back a large portion of the tariffs collected this year.
Grains See Profit Taking
However, Newsom says the grain markets are also seeing profit taking. January soybeans had a $1.15 runoff the lows in the last couple of weeks and for a second time this week ran into some chart resistance right around the $11.35 to $11.40 area. December corn failed at the 200 day moving average of $4.36 1/2 and wheat was also running into stiff resistance on the December Chicago contract around $5.60.
Soybeans Await More Clarity on China Deal or China Buying
While China said Wednesday it was dropping its retaliatory tariffs on U.S. ag goods starting on November 10 for one year the reality is they dropped the tax by 15% and left the 10% tariffs imposed in April in place.
That is making U.S. soybeans more expensive than Brazil soybeans and so China has secured physically beans for December from the Southern Hemisphere. Meanwhile, market talk is that China is instead buying soybean futures instead of cash soybeans from the U.S. Newsom says that would make sense given the bull spreading that has been seen on the futures board.
There is still uncertainty about whether the amount of U.S. soybeans China has agreed to purchase is 12 MMT of additional business or 12 MMT total for 2025. Newsom says this is a typical China maneuver because if it is 12 MMT total for 2025 that means they only need to buy 6 MMT of additional soybeans from the U.S. Additionally, China likely has a “market consideration” clause in the deal that allows them to buy U.S. soybeans only when they are cheaper than Brazil beans.
Is China Buying on Concerns About South American Weather?
Newsom contends that any buying China does will be tied to the weather in the Southern Hemisphere. He says the coffee market may be providing a clue to the dryness concerns that are emerging in Brazil. Some of the major coffee producing regions are seeing drought after being void of rain the last 200 plus days and there are areas of Central Brazil where soybean planting is starting to lag due to dryness.
China’s 25 MMT Future Commitments Won’t Happen
Newsom says the 25 MMT of soybean business China has committed to annual for 2026 through 2028 are no more than routine business and that part of the deal is unlikely to be upheld. He is of the opinion that this deal was all smoke and mirrors and really about rare earth minerals, of which China has the leverage on. So, at the end of the one-year deal on rare earths China will likely restart the trade war and the soybeans purchases will be null and void.
Corn Sees Profit Taking and Hedge Pressure
Corn was lower early Thursday following soybeans and wheat and also seeing profit taking after the inability to take out resistance on the December chart around $4.35 and on the March chart around $4.50. Plus, Newsom says the corn market is seeing hedge pressure from the last 15% of the U.S. corn harvest.
Wheat Fades China Business
Winter wheat contracts also saw profit taking with corn and soybeans Thursday. Reuters confirmed 120,000 MT of wheat had been sold to China with one cargo of soft white wheat and one cargo of hard red spring wheat in the tender. So, he says this was likely a buy the rumor sell the fact response.
Cattle Continue to See Technical Selling on Trump Beef Plan Fears
Cattle futures ended limit down on Wednesday and says follow through selling on Thursday under expanded limits. The markets had poor technical closes with new lows for the move and so funds are continuing to liquidate. However, Newsom says the cattle market is suffering from fear of Trump’s plan to lower beef prices as “the fundamentals of the cattle market have not changed,” he adds.
