Grains ended slightly lower on Tuesday with cattle and hogs higher.
Grains Slide Further on Year End Positioning
Grain markets all closed lower for a second day this week on follow through technical selling. Rich Nelson with Allendale, Inc. says there is a general lack of news for the markets so some of the pressure is coming from end of the quarter and end of the year positioning by traders. “So we’ve got two weeks of holidays here. We’re at end of the quarter end of the year. A lot of reasons to take off risk for these markets in general. Along with that we also have some light fundamental news changes.” he says.
South American Weather Favorable
As especially the case for corn and soybeans the markets are also drifting says Nelson due to the lack of weather concerns in South America. Brazil has seen favorable weather and even the dryness in Argentina is starting to ease. Nelson says, “One of the news stories which has been removed, which have been lightly supportive, was this Argentine dryness story. Three weeks in a row, Argentina has seen normal to slightly above normal rain.”
Brazil’s production estimates, at least on soybeans, continue to creep higher and are now are even above 180 MMT. “USDA is not that much lower than everybody else. They are a little bit on the corn side. But for the most part, this market is not finding a rally story from South America. And typically, January and February are the two big months for yield determination for corn and soybean yields down there for sure,” he adds.
Soybean Exports Lagging
Despite more flash exports sales on Tuesday soybeans continued fall. USDA reported daily flash sales of 5.0 million of soybeans to China and 8.5 million bu. to unknown destinations for the 2025-26 marketing year on Tuesday morning. However, soybean exports are still lagging compared to a year ago. “As we head toward this coming USDA report the agency could lower yields but will probably lower exports a little bit here for soybeans and raise domestic crush,” he says.
Currently, he says soybean exports are down 94 million bushels verses USDA’s current projection. Nelson says Allendale project exports down only 30 to 40 million bu. in the January WASDE. He says it’s not because of China but because of other buyers with Brazil soybeans priced below the U.S.
Still, Nelson doesn’t think U.S. soybean prices have to fall much further. “However, on the quite positive side, we feel that these prices have moved quite a bit lower than economic value. And even with our ninety four million bushel cut to exports lately offset by lower yields and also raised domestic crush, we actually would argue like the higher prices are still due in these months ahead for soybeans as well. “
Corn Falls After Testing Resistance
Corn futures were also lower on Tuesday with soybeans and wheat and a higher dollar. However, Nelson says the market went up atnd tested the top side of the trading range on the charts and failed and is now retracing. “We had that attempt here in recent days at trying to break out of of prior highs. We’re not able to do it. We came within just within a nickel of those prior highs.”
Argentina Corn Crop Risk Fading
Nelson says the market may have a difficult time retesting those highs in the short term with the removal of risk with the improved Argentine weather. “It’s actually more important for corn than soybeans, considering the fact that, Brazil’s first crop of corn is relatively small. So I think we can argue that corn probably took the Argentine weather change a little worse than soybeans.”
Corn Yield Lower in WASDE
Nelson says they do find some reasons for higher prices starting with the January WASDE mainly due to a yield cut. “Yes, we’re looking at a yield cut. Maybe exports unchanged or maybe slightly higher on this specific report. So we do look like we do look for this general discussion on ending stocks to drop from roughly2 billion bu. will be down into the high 1.8 billion bu. or low 1.9 billion mark in a month or two,” he explains. That should push prices back to the $4.60 level for March and May.
Wheat Follows Corn and Soybeans Lower
Wheat futures were lower again Tuesday following corn and soybeans and with a higher U.S. dollar index. Nelson says the bearish market mentality is also coming from Russia’s higher wheat export forecast in coming months. He says, “Keep in mind here they were relatively weak exporter in recent months. So we do have that looming bearish issue.”
Plus he says there is a lot of focus on the feed value of wheat in relationship to corn. “As it stands right now, it’s going to take probably higher corn prices to justify a higher wheat prices.”
The wheat market is also numb to the Black Sea tensions. “Whether we have a war the market is still getting Russia and Ukraine exports, and with no war. The market’s still getting, Russia, Ukraine exports,” he adds. This comes even as Russia stepped up attacks on the Odesa port complex.
Live Cattle Futures Stuck, Feeders Breaking Out?
Live and feeder cattle futures were both higher on Tuesday. Still, the live cattle have been unable to take out key resistance on the charts while Nelson says March feeder cattle futures filled the gap area. As a result he thinks the market will stay sideways.
His concern regarding live cattle futures is the drop in wholesale beef prices again last week against the back drop of slightly higher cash prices and negative packer margins. “So far,we do have adequate supplies. Keep in mind here right now, weights finishing weights are running about 3% over last year. This comes on top of the fact that slaughter levels are only down 2% to 4% versus last year, so actual beef production has really not been hit in recent weeks specifically.”
Cash Cattle Trend This Week?
Cash trade averaged $229.33 last week, up $1.36, but on very light volume. Will that trend continue as packers buy for a full kill week next week? Nelson says he’s expecting a mixed trade and packers aren’t likely to be too aggressive. “Maybe light support here for the South. Maybe, lightly negative for the North,” he says.
Lean Hogs Rally Despite Drop in Cash and Cutouts
Lean hog futures were higher Tuesday despite a sharp drop of $1.40 in the lean hog index and lower cutout values. Nelson says it was an impressive move considering the expansion indicated in the Hogs and Pigs Report. “Slaughter rates for the month of December overall, they are holding USDA’s view of a revision for higher supply. So the bear argument has some legs right now.” Yet, futures had the second best close of the uptrend, which Nelson says is positive.
