Grains were lower early Wednesday with livestock mostly higher.
Soybeans Make Fresh Low on USTR Comments
Soybeans hit new lows for the move with continued technical selling and pressure from U.S. Trade Representative Jamieson Greer’s testimony that the 12 MMT purchase commitments from China must be completed by the “end of the growing season” not the end of December as originally outlined by the White House. This comes despite flash sales Wednesday morning of 5.0 million bu. of soybeans to China and 12.2 million bu. to unknown destinations for 2025-26.
Jon Scheve with Scheve Grain says the soybean market is reading Greer’s comments as proof there is no real deal and it has been trading that way for a while now. “That means we don’t have a firm number or any idea of what really is going to happen and when these beans are going to be purchased. So the market kind of caught wind of that when the Treasury Secretary said that it wasn’t end of our calendar year. It was the Chinese New Year. The market didn’t like that comment at all. That was basically moving the goalposts a week ago. Now they’re moving them again.”
Scheve says this was to be expected because it makes more economic sense for China but it doesn’t matter because, “even if the Chinese had bought the 12 million metric tons and they still need to buy between 6 and 8 million metric tons, dependingon kind of how many of the unknowns are going to be switched over. There’s still not going to be enough beans to even meet what the USDA has said we need for exports.”
Plus, he says as soon as soybeans futures get over $11 and even closer to $11.75, the U.S. is not competitive in the rest of the world. “So not only do we need the Chinese to buy what we hope they were going to buy in that agreement, we need the rest of the world to continue to buy. So it’s a bigger issue than just saying that we need to worry about the Chinese here. We’ve got a bigger problem overall. And I think that’s what the market is realizing is where are all these beans going to go to? We don’t have enough homes. We need to go in and buy some demand.” That means prices are headed lower he says.
Let’s Focus on Corn Exports
Scheve says the market needs to turn its focus to the corn market and exports. USDA upped the export figure in the December WASDE by 125 million bu. to a record 3.2 billion bu. and those exports are incredibly important to the Dakotas and Minnesota as they are what is holding up the basis levels in those areas. He says, “The basis has been incredibly strong for how much corn was grown in the Dakotas in Minnesota and there’s a limited amount of space that we can ship all of this grain out of the Pacific Northwest or out of the Gulf or even to an extent Houston and the container markets.”
He says USDA already acknowledged this in the WASDE Report. “They increased the corn export number probably because if you look at last year’s total exports for corn, wheat, and beans and Milo, the corn number needed to go up because most of these elevators aren’t going to want to run with less capacity, especially when we have such a big crop in the field or in the bins now. And I think what you’re looking at is the USDA acknowledging we’re going to keep exporting something.” Scheve says with corn being competitively priced in the world it makes sense the U.S. will keep shipping corn. And clearly with corn being
Corn Rally Needed
Scheve says a corn rally above the current levels is needed to allow farmers to make profitable sales. “Most farmers
would rather have this corn being exported out to try and support corn prices. We’ve already had beans at or above break -even levels for this past crop here. Corn has not shown us that since February. So we’re a long ways away from break, even yet on corn. So I think that instead of focusing so much on beans and worrying about the beans, let’s get the corn out of this country while we can,” he adds.
Market Awaiting January Report
With the December WASDE out of the way the market will now be focused on the January report. Scheve says volume in the grain markets will start to become thin closer to the holidays and the end of the year as the markets prepare for this new news. However, if yield is cut by USDA is will be offset by lower feed and residual.
“The market is certainly waiting for the January report. Everyone got caught off guard last year with that huge drop of four bushels per acre. I know every farmer is going to yell at me for this but ultimately, I don’t expect that yield to drop much. I don’t expect prices to rally too much. I think that we’re certainly not going to drop. The farmer doesn’t sell if it keeps going lower because they’re not even close to break even. But the higher we go, I think there’s way too much grain left to be sold. I think that corn is sold into any rally that is hit and that will just keep it in a range bound,” he explains.
South America Focus After First of the Year
After the first of the year the market will be more keenly focused on the South American crop as it will be the prime reproductive stage for the soybean crop. Scheve says they are starting off in pretty good shape. “Yeah, I mean, it’s basically June, late June there and you know, their weather is key for the soybeans is in the month of January, I don’t think there’s going to be huge problems there they tend to not have too much problems on their beans so you know i’m i’m expecting it to be pretty good. The thing is, is they just keep growing more and more every year on acres. So that’s why you’re just going to see that the yield’s going to be pretty good, and it’s going to be competition for us.”
Global Supplies Weigh on the Wheat Market
USDA confirmed larger global supplies in the December WASDE with a 275 MMT carryout, up 3.5 MMT from last month. So is there anything that could rally the wheat market? Scheve says, “Oh, I think you could have global conflict in the
Black Sea region. You can have any issue with Russia whatsoever. But outside of that, it’s going to take some unknown that we can’t even potentially see that’s going to cause wheat to rally a ton.”
However, he says even a geopolitical rally is unlikely to move wheat above $6. Yet, it doesn’t want to be below $5 either he adds. “And break-even points are so much higher than this. It doesn’t make any sense to plant that wheat other than I know that the winter weeds are right in the ground, but that spring wheat, that doesn’t look very profitable. So I think that if anything, you start limiting some of these acres,” he says.
Trade Aid Coming
The administration also announced a $11 billion of aid for row crop producers this week. So, what will that mean for farmer’s marketing decisions? Scheve says it could keep some bushels off the market. “Well, they say it’s coming in February, which would be the March deadline for a lot of cash rent, so I’m sure that that will put an ease on some of the farmers who are a little bit concerned about a cash flow situation. I think that that also keeps it with prices where they are currently, certainly under $11 on the beans and under $4.50 on corn, I think you’re certainly going to have a farmer who isn’t profitable at those numbers looking at the market and saying, well, My cash flow will make it with that payment from the government. I can keep operating and maybe limp by until after I get the crop planted into June. And then I can think about starting to market this crop into the weather market of June, July, and August.”
