Grain and cattle markets end lower Monday, hogs higher.
Soybeans Close Below $11 on China Skepticism
January soybeans were lower on Monday and closed below the $11 market. Alan Brugler with A&N Economics, Inc. says the market continues to be plagued by uncertainty over China’s soybean purchase commitments. While the White House and Treasury Secretary Scott Bessent have said China will be buying 12 MMT by the end of February there is skepticism. No deal has been signed by the trading partners and there are doubts about the framework with the slow pace of buying.
“China is buying. I do think that logistically, we could support six or eight million tons of shipments in January and February and Brazil would offset by about the same. However, China is dealing with a pretty big pile they’ve got to move right now. You’re seeing some auctions by Sinograin to get rid of some of their old inventory. They will sell over 512,000 metric ton. So the market, I think, is just said, hey, we’re skeptical about whether they’re going to make the numbers, particularly before the end of February.,” he explains.
As a result, he says the funds or managed money are bailing out of their longs or we assume that. We won’t have the Commitment of Traders data updated for quite a while.”
China Buys 4.85 Million Bu. of U.S. Soybeans
USDA did report in a Monday morning flash sale that China did buy 132,000 MT or 4.85 million bu. of soybeans. Brugler says that puts total purchases by Cofco at 2.8 MMT based on the daily announcements, but clearly well under 12 MMT. So the market will need to see some much larger purchases before it can move back higher.
Where Do Soybeans Find Chart Support?
January soybeans according to Brugler, put in a head and shoulders top just under $11.80 and have now broken the neckline on that formation. “We clearly now point to $10.60 for the next area of support,” he says.
Corn Follows Soybeans But Still Range Bound
Corn futures followed soybeans lower on Monday without much fresh news but have held up rather well considering the falling soybean market. He says while export inspections have been running at a record pace at nearly 1.5 million tons a week but it isn’t enough to stay above resistance at the 200-day moving average on the March corn chart. That’s because the ending stocks are still projected over 2.15 billion bu. and Tuesday’s WASDE is unlikely to drop carryout under 2.0 billion which is a headwind. So he thinks corn stays range bound. “We’re kind of stuck in the trading range between, say, $4.24. That’s the rising regression channel and the low $4.40s,” he explains.
December WASDE on Tuesday
Grain markets also saw some positioning ahead of the December WASDE report on Tuesday. However, it is unlikely to provide any market moving changes for the grain markets, according to Brugler, because historically USDA does not adjust supply in this report, only demand. The domestic balance sheets will stay relatively unchanged he says, so if there are any changes it would come in global numbers.
Trade Aid on the Way
USDA announced $12 billion of trade aid Monday afternoon but Brugler says whether or not it has a market impact will hinge on the details of how those payments will be calculated and which commodities are affected.
Cattle Futures Take a Break
Cattle futures were mostly lower on Monday as live and feeder cattle futures hit key moving average and 50% retracement levels. Brugler says the markets were pushed by sharply higher cash last week, up to $225 and $226 on a live sale basis in the South, and are now overbought. Brugler says it is possible the market could retest and take out those chart resistance areas and move up to fill the gaps, especially if cash can remain strong. The five area weighted average came in at $221.21, up $9.68 from the previous week.
FOMC Meeting This Week
TheFederal Reserve’s Open Market Committee (FOMC) meeting runs Tuesday and Wednesday of this week and the markets are pricing in a 90% change of a 25 basis point cut in interest rates. However, Brugler says the market is already looking ahead and displaying an inverted market curve with longer term rates moving higher. Fed Chairman Powell’s comments at his press conference may lean more hawkish on U.S. monetary policy—namely due to worries about sticky inflation. News Monday that U.S. producer inflation reports for October and November that were expected to be released later this week have now been delayed until January threw more uncertainty into the present U.S. inflation situation
