Grains ended mostly lower except for fractional gains in corn. Cattle and hogs were mostly lower.
Soybeans See Profit Taking on Friday
Soybeans were lower by 3 to 4 cents on Friday on profit taking heading into the holiday according to Darren Frye with Water Street Solutions. “Yeah, we have a three -day weekend and, you know, we had some good gains in soybeans and meal for the week.
Soybeans Higher for the Week on China News
Soybeans were 18 to 20 cents higher for the week with the big push coming from optimism about more China purchases as part of the additional 8 million metric ton President Trump says is on the way. However, the market also got a push from news that China and the U.S. were extending the trace truce a year and lowering tariffs. Will the market be able to continue to rally on that hope without confirmation of purchases?
Frye says, “I think it’ll come down to what China does ahead of this April meeting. And whether we see a truce or not, the tariffs get backed off. President Trump is pretty confident they’re going to buy beans. We’ll see if they do or not. He was confident last time, and they have purchased those 12 million metric tons, they agreed to. So I don’t know why they’d purchase a lot more, given where South American origin are. They’re a $1.20 under the Gulf and so I don’t know why they would other than they’re getting something in a trade deal.”
Can Soybeans Get Above $12?
So can the soybean market get above the November highs if flash sales from China start emerging or is the technical momentum enough for the funds to keep buying?
“Well, I think we can stretch up to $12 easy enough, before we have a retracement. I do a lot of work on the quantitative side, and soybeans have had the best setup. Soybeans and meal have had a better setup than corn or wheat. And so I’ve felt for quite some time that if we’re going to get a rally and something is going to lead us out of here, it’ll be the soybeans.”
He says it doesn’t make sense fundamentally with the record crop in South America but something is brewing with China. “Maybe there’s something going on with weather issues coming up in our growing season and we can’t even see now, but there’s some reason that soybeans are doing what they’re doing and they certainly have fooled a lot of people that are fundamentalists, they’re looking at balance sheets, looking at how big the supply is in South America and they were just too bearish as beans rallied out of here heading toward that $12 area.”
South American Headwind
At the same time harvest is starting in Northern Brazil and the market is trying to price in a record crop with Conab raising production on soybeans this week by nearly 2 MMT to just under 178 MMT. Frye says the crop is pretty much made right now.
“Well, their crops big down there. They’ve had really good weather, not in every single, you know, area, region in South America, but overall, they have gotten so much needed rain to stabilize Argentinian crop and, of course, southern Brazil. And so I expect that yields out of Argentina are going to be larger than we’ve ever seen, maybe close to that 56 -58 million metric ton mark.”
Frye says soybean production in South America could be up 5 to 6 million metric tons over last year’s record. “So we’re talking about some big yields, some big numbers. Now, China is importing more. There is more demand in the world, but will demand be able to keep up with the supply? The supply will be overwhelming for a while coming out of South America. And you’ll see that in FOB prices which are $1.50 under U.S. Gulf.”
Corn Needs Catalyst to Break Out of It’s Range
Corn was higher for the week by a couple of cents but still is trading within its sideways range. Can anything change that? Frye says the market needs a catalyst like a weather issue or war. Demand has been record strong as far as exports but he thinks feed and residual is still to high. “It is not as big as what the USDA stated. I think that number has come down, but I also think exports have to go up. Those are kind of a trade -off.”
He says what the market really needs is a supply shock in Safrinha corn. “We’ve got to watch what happens as we get into the end of February here, the beginning of March, and we see what’s happening at the end of March, beginning of April, where the corn is developing, and how their moisture situation is, because if it does cut off early, we could reduce that crop. And with their industrial use being up, that’ll take it away from the export side. That will give us more exports. And that could be the supply shock we need to get corn off its rear end.”
Can Wheat Rally?
Corn needs help from the wheat market which had a strong week of gains. But was this just short covering and can the market build on the gains especially as Russia just raised their crop estimate again by 3 MMT?
Frye says, “Yeah, I mean, from a money flow standpoint, we could build on this. One of the things against wheat is just our balance sheet increased on this last USDA report. We know that Russia’s got a target with the USDA 44 million metric tons for exports. I don’t think they’re going to come close to that. I think there’ll be a couple million metric tons under that just because of logistical problems, weather, war, what have you. Plus demand has not been stellar on the wheat side. So, hey, if they’re ending stocks are growing, we have plenty.”
He says the only other spark for a rally is something geopolitical like a bigger attack on Ukraine. “It’s a breadbasket. And the three bread baskets, Argentina, Ukraine, and United States are very important in world production. And if we’d have something happen there with escalation, then obviously wheat would really take off. But other than, you know, those things like a weather problem or a war or some problem in Ukraine, I don’t know how wheat leads us out of here.”
Rally in Crude Oil Could Help
Frye says as far as money flow the best scenario for the grains would be a rally in the crude oil market. “The energy markets really are key, and they’re starting to turn. If you take a look at heating oil, crude oil, or the RBOB, you look at those and you say, hey, we’re turning this thing. And as we turn higher, that’s going to be supportive to our markets. And so that’s not a negative, but that’s probably not enough to give us the old highs that we’re used to, you know, three or four years ago, but definitely a reason to start grinding higher. “
He says the key will be talks with Iran. “We’ve shipped a lot of our military over there, planes and ships and people, and obviously arming up for something. We’ve told everybody to get out of Iran and we’ve told people not to be flying over that countries and airlines not to be flying over that airspace. And so something’s going to go down there. And that could have a huge impact on energy prices. And that could be a catalyst that takes corn, beans because of bean oil, all the biofuels higher if crude oil goes higher. And obviously that would be key to our complex.”
USDA Ag Outlook Forum
The grain markets will also be gearing up next week for the USDA Ag Outlook Forum and possible acreage changes. So what is Frye expecting?
“We couldn’t believe how big the corn acreage was this last year, right? And we’re going to lose some of those corn acres, probably three, for at a minimum, maybe five or six even. Where do they go? They go to beans. And we’re going to lose some cotton acres, too, because beans going up and cotton is still on the bottom at 62 cents. You’re not going to plant cotton with the cost of inputs. So you’re going to have Mid -South and Delta farmers switching over to beans, maybe a million, million -half acres, at least down there. So beans are going to pick up a lot of acres, and you’re seeing that in the base price, And you’re seeing that in the Delta and the mid -south just because of input costs on cotton.”
So he expects corn and cotton acres to be down and soybeans up. This as the National Cotton Council predicted 8.99 million acres of cotton in 2026, down 3.2 % from last year.
Cattle Ended Mostly Lower Despite Higher Cash
Live and feeder cattle futures faded as the day wore on and ended mostly lower except for nearby contracts. Markets keep running into resistance on the charts but the markets also look tired according to Frye. Even Friday’s higher cash was unable to help the cattle futures. “I’ve talked to my producers, our client base, to get hedged, be defensive. I wasn’t defensive last year. I thought cattle prices, feeder cattle price would go higher and they did. We did have a few hedges from time to time last year that didn’t work out. The market was really strong, but we didn’t get locked into a price and stay with it. I think it’s a little bit different.”
Frye says the market rally may be nearing its end as markets top when the news is the best. “This cattle market in the monthly trend has been up for 63 months. That’s the longest duration going back to the early 1800s. And time usually ends a trend, not price. Yes, the price has gone up a long way. I think we’re 4 .4 times on price, the standard deviation, but we’re 6.7 times on the time interval. And usually anything past three, dangerous ground, we’re twice that in time. We’re one and a half times that in price. This market, I think, is getting more and more vulnerable.”
He says the fundamentals are bullish but markets top out on bullish news plus break evens are also starting to turn negative. “I mean, a guy is going to be very careful here because you could rack up four, six, $800 losses in these steers real quick if this market slips away from us. So just caution everybody, be defensive. Maybe we go higher. Maybe we keep going higher. But I think there’s a lot more risk to the downside than there is to be hedged to the upside.”
Cattle Need to Take Out Last Weeks Highs
The first technical objective cattle futures need to take out is week’s highs.
“And really beyond that, you’ve got to get above high that that break that came down so hard from October into November we got to get above the October high and if we do yeah we’re going to clear the way for you know $270 cattle and you know $390 feeders.”
Lean Hogs Close to Stabilizing?
Lean hogs have been down seven days in row so how much lower will the market go?
“Actually, I think we’re close. We can go a little lower on hogs, but I’m seeing another wave higher into the June time frame, the strong seasonal end of Memorial Day. And so I’d be friendly, hogs on this break. I mean, we’ve kept people hedged, but if a guy wanted to lift a hedge or roll up or buy some calls against those, I think we’re getting close near the time to do that. I like the seasonal into June, and I think hogs do have more ups than them for a new high just after this break is over.
