Ag markets were mostly higher Wednesday except wheat.
Soybeans Make New Highs for the Move
Soybeans rallied to new highs for the move on Wednesday with the help of an over $7 rally in soybean meal. Arlan Suderman with StoneX says the market is still pricing in optimism about China and biofuels. “Those two things are going to dynamically impact, we think, one way or the other, those expectations, either falling short or really boosting them. And I don’t think we’ve really, I think we’re probably priced in something in the middle right now. But the optimism continues to be there. The specs are afraid to be short until we see that.”
He says the final RVO proposal is expected to go to the Office of Management and Budget any day now. “But then that starts a clock ticking. They could take up to 90 days. We expect it to be about three weeks plus or minus. That puts it after the planting intention survey has been completed.”
The trade deal with China, March 31st is a day when Trump goes to China. It’s usually when they want to really trumpet the deal they have. So that would be after the deal, after the planning intention survey as well. So we could have two factors that dramatically impact planning intentions take place after the survey, meaning we’ll have to wait until the June 30th survey to have a good feel on acreage this year. But that’s the nature of the beast this year. It’s going to keep us up in the air. We anticipate both of those will be positive for soybeans.”
Do We Get a Deal in Writing at the China Meeting?
He says the trade deal may be positive for other commodities as well, maybe even corn. “It’s not really being factored in by the market right now, but we’ll have to watch.” The question is will there be a deal in writing at that meeting?
“Great question, and I’m going to say no. We didn’t have a deal in writing from the October 30th one, but yet China still bought. What that tells me is being in writing is less important right now to Xi Jinping than actually having President Trump’s favor to get concessions from him. If you look at the price of U.S. soybeans today landed at the port in China, there are $1.30 to $1.40, depending on whether they come from the PNW or from the Gulf, more expensive than Brazilian soybeans. So the crushers aren’t going to be the ones buying. They’re value buyers based on price. It’s all government buying, and then they would have to put it in reserve.”
He says if they are willing to pay that price, the Chinese must want something. “What we would anticipate that being would be changes in President Trump’s policy to give easier access to the vast U.S. consumer market, encouraging more foreign direct investment, and access to the advanced chips that we produce here in the United States that they need. If he can get enough concessions from Trump on those things, he’s willing to pay a small price of another $1.30, $1.40 for soybeans.”
Is China Buying the 8 MMT of Soybeans?
Suderman says so far there is no evidence of it. “There has certainly been talk of it, but based on our cash sources in China, which I just confirmed before talking to you, they’re right at just a hair over 12 million metric tons. That’s the cash sources that have been pretty accurate all the way through this so far. So we don’t have any hard evidence. I would expect that they would do that, though. I would expect them to buy ahead of the announcement like they did in October, but we just don’t see the evidence yet.”
SCOTUS Ruling on Tariffs Take Away U.S. Leverage?
With SCOTUS declaring the IEEPA tariffs illegal will that take away the leverage the U.S. had to get China to buy the 8 MMT of soybeans? Suderman says not in this case. “Ordinarily, I’d say yes, but in this case, I think President Xi’s internal problems within China are the primary driving factor. If that were not the case, President Xi would be more interested in playing hardball, and it would be more of a factor. But in this case, I do not think it is. So this is a window of opportunity. That window will close, maybe 12, 15, 18 months from now, but for now, I think we have a window of opportunity.”
Will Soybeans Take Out the November Highs?
Soybeans are getting within striking range of the November highs. But will it be a buy the rumor sell the fact reaction like we saw last fall? He says, “We really could. Remember in October, the announcement was made October 30th, China had already started buying. We peaked out on November 18th. We could very well see something similar this time around as well. “
Ag Markets Have Tariff News Priced In
Suderman says the other ag markets have the tariff news already digested. “What I had said from the start is this is probably going to be a non -factor for the commodities, for the most part, a few smaller commodities affected, but for the most part, is a bigger issue for the financial markets, particularly if the Treasury Department has to come up with all the refund money. But the refund policy is going to be tied up into court so long now. It probably end up being a non -factor. And most of the trade deals, as I expected, are holding in place. India is dragging its feet now. It wasn’t totally completed. Maybe Europe is the same thing. but otherwise things are holding together pretty well.”
Corn Follows Soybeans and Meal
Corn futures ended higher following both beans and meal, but we keep running up into chart resistance. “Both U.S. and Brazilian farmers selling whenever we get to the top of that range, until we can bust through that at some point if we do, and then they’ll say, oh, let’s wait for the next leg.”
Could China Buy Corn?
He says to break out of its range the corn market will need a catalyst. “One possible catalyst would be if there were be, would be a significant amount of corn in that China trade deal. I’m not forecasting that, but I can’t rule that out.”
Wheat Down a 4th Day
Wheat was down again Wednesday on profit taking, plus the weather is removing risk premium. “Yeah, the weather’s looking better for the dry southern plains and Central Plains, some good rains expected in many of those areas. It’s tough to be long when it’s raining in the Plains.”
Cattle Up with Higher Beef
Cattle futures were up on Wednesday on fund buying and the surge in boxed beef prices. Yet the market can’t take out the February highs. “We got up there high and then we collapsed lower. We tried to fill that gap and we’ve been building back on it. We’ve been slowing the chain speed, finally got the pop in the product market that the packers were hoping for. And that has the feeders feeling like they’re in control to get steady to firmer cash prices again. It’s been the cash dragging the board with it. It’s demand for protein.
Trump Wants Lower Beef Prices
President Trump spoke about lowering beef prices similar to eggs in his State of the Union address but Suderman doesn’t think he fully understands or grasps the dynamics of the beef market. For the cattlemen, it’s all being driven by demand. We talk about tight supply. Beef supplies are actually about 8 tenths of a percent higher this year than last year because of record imports, which we just got updated data on, record carcass weights, and so beef supplies are there, but the consumer keeps driving that demand and driving prices higher.”
Hogs Higher a 7th Day
Lean hog futures were higher again for a 7th day and the deep deferred contracts are hitting new contract highs. He says this is fund buying plus ting from this demand for protein. “We did see the funds liquidate positions and then realize, oh, we’re undervalued, brought it back up. We exceeded the 50% retracement, and so that brought in some more buying today. We’re seeing overall the production pretty close to what USDA quality hogs and pigs reports suggest it should be. And exports have been performing well. So some decent fundamentals there.”
