Grain and hog futures ended lower on Friday with cattle higher.
Soybeans Crash as China Meeting Canceled
Soybeans ended 15 cents lower on Friday as trade tensions escalated with China.
Jim McCormick with AgMarket.Net says it started with China putting restrictions on rare earth mineral exports and levies on U.S. ships coming into Chinese ports, plus sanctions on a U.S. chip maker.
President Trump responded in a Truth Social post saying “there seems to be no reason” to meet with Chinese leader Xi Jinping. He added quote, ”One of the policies that we are calculating at this moment is a massive increase of tariffs on Chinese products coming into the United States of America. “ end quote.
The soybean market reacted negatively as it was pinning its hopes on a trade deal that included purchases at the end of October when the two leaders met at the APEC summit.
“And the fact of the matter is most of the market took that very bad as corn, beans, wheat, it all went down. The stock market had one of its most ugly days in very long time as the market is very nervous that the trade war with China, instead of cooling down like we thought just a few days ago, it’s heating up,” he says.
China Deal Pushed to 2026?
The reality is this could push a deal with China into 2026 and McCormick thinks China is stalling hoping President Trump’s tariffs are ruled illegal.
“The Supreme Court is having a hearing, I believe, on November 5th to decide if these tariffs that President Trump has put on, not just on China, but essentially all our trading partners, if he technically overstepped his legal bounds to do it. And the argument is that Congress is the one that puts tariffs on, not the president. So a lot of countries, I think, are just kind of a little bit of playing the waiting game,” he explains.
McCormick thinks many of the other countries the U.S. has negotiated trade frameworks with have held off finalizing those deals also waiting for a ruling from the Supreme Court.
Soybean Export Window Was Already Closing
McCormick says for the market to expect a China deal this soon was somewhat unrealistic as it took several meetings and several months to come to an agreement during the last trade war.
Even if soybean purchases were announced at the end of October, the U.S. has already lost China business as they normally start buying beans mid-September through mid-January.
McCormick says this means the U.S. export portfolio to China would have already been cut substantially.
He thinks China will have a difficult time getting through to the South America’s next crop season unless they dip into their reserves but he thinks they may be prepared to do that.
“And I would argue that they’ve been building the reserves the last couple of years, because I think ever since, you know, the first trade war, I think they have been preparing for this potential conflict that President Trump would get reelected. So like I said, I think, unfortunately, they can withstand this fall and not buy our beans,” he explains.
Without a China Deal Do Soybeans Fall Below $10?
With no China deal or U.S. soybean purchases he thinks soybeans could fall below the $10 mark on the nearby futures.
“I think if you take the long -term trend line supports off of the kind of the summer lows that crosses there right around $9.90, that I think is going to be the major, I think you will find a lot of technical buyers trying to defend that price level,” McCormick says.
While other countries have partially filled in the export gap left by China and the crush industry has also helped, it won’t be enough to make up the entire shortfall.
Soybean Basis Levels Firm
The good news is with soybean harvest wrapping up in some areas cash basis levels have started to firm up.
Plus, more farmers are storing beans this fall, especially in the Northwest Corn Belt, which is also improving basis.
Corn Follows Soybeans Lower, Sees Harvest Pressure
The selloff in soybeans spilled over to negatively impact corn which was down 5 cents on Friday and 6 cents lower for the week but McCormick says the market also saw harvest pressure ahead of the weekend.
He says the problem now is trying to find storage space for both stored soybeans and the big corn crop.
“We are looking at a total supply of corn that is 1.5 billion bushels bigger than we did a year ago. And, you know, quite simple, that’s a huge crop to put away,” he adds.
Yet global corn stocks continue to tighten and demand has been strong so he’s hopeful for a rally longer term.
Wheat Revisits Contract Lows
Wheat futures made new contract lows again in all three classes with spillover pressure from lower corn and soybeans but McCormick says the large global supplies continue to press the market.
He says the appreciation in the U.S. dollar index this week has also been a headwind for the wheat market.
Feeder Cattle, Deferred Live Cattle Hit All-Time Highs
Both feeder cattle and deferred live cattle futures hit contract and all-time highs on Friday after early weakness.
December live cattle futures were up $8 on the week, with January feeders up $22.
McCormick says higher cash and cutouts and the tight supplies of feeder cattle continue to push the market.
Fed cash cattle Friday developed in parts of Nebraska at $362, $2 higher than last week’s weighted averages with some $234 to $235 live prices, up $4 to $5. The South ranged from $230 to $235.
The only thing that could break it is a slow down in consumer demand in his opinion.
Lean Hogs See Fund Selling, China Concerns
Lean hog futures made new lows for the move with additional fund selling pressure and long liquidation after closing below key support on Thursday.
However, the stalled China talks also weighed on the market as higher tariffs continue to keep China out of the export market.
