Grain markets closed higher on Tuesday. Livestock futures were lower except for back month live cattle.
Soybeans Hit 1-Year High
Soybean futures hit new highs for the move and 1-year highs in the January contract as the market continues to trade a China deal that includes soybean purchases.
Brian Grete, Senior livestock and grain analyst with Commstock Investments, says he thinks the China deal is nearly priced into the market.
“I think a China deal is priced in where they’re going to buy a significant amount of soybeans. We’ve heard that from U .S. officials, trade officials. And so we better get that deal done on Thursday,” he says.
What Kind of China Deal Does the Market Need to See to Push Higher?
When it comes to a China deal, Grete says the devil will be in the details.
“We better see some pretty significant purchases because significance is kind of one of those words that’s like good or whatever words. It’s all relative. And so we need to see something happen kind of hearing around 10 million tons possibility for early in 2026 as likely purchased by China. And we’ll see if it lives up to that,” he explains.
However, he says the rally in the soybeans is being fueled by money flow. “So, while the fundamentals do come into play, as long as the funds are willing to pump money into the long side of the market, there is more upside. But I think you’re going to need two things. You’re going to need China buying actively and significant purchases if you want to use what U.S. trade officials have been talking about and funds continuing to pump money into the long side of the market from a short -term perspective.”
Is China Soybean Business in USDA’s Export Estimate?
USDA’s export estimate for soybeans for the 2025-26 marketing year currently sits at 1.685 billion bushels. So is any of the Chinese business programmed into that figure?
Grete says USDA only used what they knew about export business the September WASDE and so the Chinese business may not be part of that estimate.
Could China Buy Corn or Wheat in This Deal? Are They Buying Soybeans?
Grete says that’s possible but a long shot. “I don’t think China needs corn right now, they probably don’t need wheat either. So, soybeans are the headliner here,” he says.
He doesn’t think China is buying soybeans under the radar either like they did in 2018 when the government was shut down and there were no flash sales being reported by USDA. “They’re telling the buyers to be quiet and not do anything until the deal gets done.”
January Close to $11 a Pricing Opportunity
The January soybean contract is closing in on $11 and some of the back months have exceeded that level which are a pricing opportunity according to Grete. He says the U.S. only has a short window to sell soybeans to China in December and January and so farmers need to take advantage of the rally before China turns back to South America.
“So, if you’re profitable on this rally, definitely need to be selling. If you’re close to profitability, but still a little bit underwater, probably need to make some sales as well and try to build a better price as we move forward through the remainder of the marketing year,” he adds.
Corn Follows Soybeans But Fails Technically
Corn futures have been following the rally in soybeans says Grete and have seen some fund short covering. However, the December contract filled the gap area on the charts left on July 3 and then closed below that level which is not a good technical sign. “I don’t think it has enough legs to stand on its own and lead a price rally. This is a soybean led rally,” he says.
With only 25% of the U.S. corn crop left to harvest Grete says the rallies may also be capped by hedge pressure especially as finding room for the last of quarter of the crop will be difficult with many farmers storing both corn and soybeans this fall.
Wheat Sees Short Covering
Wheat futures were higher in all three classes chasing the soybean market and seeing short covering as the funds were near record long just a month ago in the market. Grete says wheat needs to see soybeans continue to rally to keep the momentum going. “I think that wheat falls clearly in the same category as corn. It needs help from soybeans to continue higher. So as long as soybeans continue to lead to the upside, those other two markets will actively follow,” he says.
Cattle Futures Close to a Low?
Cattle futures ended mostly lower again except for deferred live cattle contracts but at least feeders closed off expanded limit down status. So is the market getting close to a low?
Grete says, “The longs that needed to get out of the market look like they’ve gotten out so the funds may be about done liquidating in the live cattle, the feeder cattle may have a little farther to go.”
He says fed cash trade was only about $2 lower last week with the 5-area weighted average at $237.89 but early sales this week have been lower at mostly $360 dressed and $230 live in the North. The cash feeder market has also crashed at livestock auction barns. “So the market is trying to re-calibrate,” he says.
Cattle Producers Upset
The selloff by the speculative traders has been mostly a function of fear of the Trump administration’s plan to lower beef prices and so cattle producers are upset that government interference was responsible for topping the cattle market.
“President Trump’s initial comment on Tuesday was that, you know, maybe the cattle producers, cattle ranchers are doing too well. And then he rescinded that a little bit and backtracked and said he wants to bring down beef prices without hurting the rancher. And so we’ll see. I don’t know where it all leads. It sounds like maybe they’re going to go after some concentration within the beef packing industry,” Grete states.
However, the fear of reopening the border to Mexican feeder cattle imports or lifting the tariffs on Brazilian beef also added to the concerns with key meetings scheduled for this week on both topics.
Lean Hogs See More Pressure
Lean hog futures were sharply lower on Tuesday with continued technical selling and lower cash values weighing on the market. While the futures discount to the cash index is getting wider it doesn’t seem to be providing support. “I think the trader will remain very comfortable at big discounts in the futures until we see some stability in the cash index and the pork cutout and we haven’t seen that yet.”
Grete says seasonally the cash and futures markets work lower this time of year and currently the discounts are not unusually large, so there could be more downside risk in the market.
