Grains ended higher on Thursday with livestock mostly lower except nearby live cattle futures.
Soybeans Hit New Highs for the Move
Soybeans futures hit new highs for the move on Thursday as Greg McBride with Allendale, Inc. says there is growing optimism about a trade deal with China that will include soybean purchases.
President Trump sounds more confident of a deal at the APEC Summit next week and Treasury Secretary Bessent is meeting with Chinese officials in Malaysia on Friday as well.
How Much Could China Buy?
The export window for selling U.S. soybeans to China has been closing and trade sources indicate they need soybeans for the December -January period before Brazil’s next crop is available.
That leaves about six weeks for the U.S. to make those sales and get product shipped.
McBride says China bought over 800 million bushels of soybeans last year and with what they bought from Brazil and Argentina the U.S. may only be able to sell them 100 to 250 million bushels of soybeans.
Ballooning Soybean Ending Stocks
He doesn’t think other countries can back fill the 500 million bushel plus gap that will be left with a smaller China soybean program.
“So if we’re still deficient on that by 500 million bushels the USDA is going to have to recognize that and start to incorporate that into their export number on the on the balance sheets obviously we don’t have the government working uh at this time to put those numbers out but that is something that you would expect them to make an adjustment on when we do when they do get back to work,” he explains.
He says soybeans yields can offset some of that but he doesn’t think the yield loss is enough to be significant so that means ballooning ending stocks.
“I think if you’re talking about maybe lowering the yield and lowering your overall production, well, you’ve already seen acres come down a couple of times. We’re roughly around 80, 81 million acres, whatever it is, but the yield is probably still going to be stuck somewhere around 50 or 51 bushels to the acre, which is, yeah, it’s down a couple of bushels, but that’s not going to offset 500 million bushels that you might lose from China.”
Soybeans Hitting Next Resistance Areas
McBride says Thursday’s close in soybeans was strong but soybeans have had a 50-cent move and running up into chart resistance.
“If you’re using the November contract, it’s about $10.65, $10.70, go out to the January, put it up to about $10.75 to $10.85. That’s the upper end of the range,” he explains.
Corn Makes New Highs for the Move But is a Follower
Corn also had gains on the day and made new highs for the move closing the December at $4.28 and above resistance but McBride says it was a reluctant follower of soybeans, wheat and even the rally in crude oil on Thursday.
He says the futures are running up into stiff chart resistance again and that is limiting upside.
“We keep hitting that $4.30 resistance. There’s a gap above us at $4.32 3/4. The resistance above that kind of comes in at some old lows right around $4.40.”
To get above those levels he thinks it will take proof of strong demand or lower yields, or both.
“We know the export demand is really good, but we have a huge crop out there. And you can tell me that the yields are coming down, I believe you. It’s probably closer to 182 or something like that. It’ll still be a record yield.”
Plus corn is still trying to digest the extra 200 million bushels in the quarterly stocks.
“So now all of a sudden, instead of talking about a 1.9 or a 2.0 billion carryout, we’re talking somewhere between 2.15 and maybe 2.35 billion on the carryout,” he adds.
Wheat Sees Short Covering a Second Day: Head Fake?
Wheat ended higher in all three classes for a second day but McBride attributes that mostly to short covering.
He says the bulls will want to make a case that a bottom is in and the market is going to run but he is concerned about the lack of follow through.
Cattle Struggle to Recover With the Headwind of Trump’s Beef Plan
Feeder cattle futures ended lower with live cattle seeing gains in at least the nearby contracts.
McBride says feeder cattle futures saw follow through selling after limit down closes on Wednesday.
Pressure this week has come from President Trump’s plan to lower beef prices and buy Argentina beef with Ag Secretary Brooke Rollins confirming the U.S. would be raising their annual beef quote.
McBride says increasing Argentina’s beef quota from 20,000 MT to 80,000 MT would have a very insignificant impact on beef supplies, accounting for less than 1% of consumptions.
“80 ,000 metric tons is 176 million pounds. So they bought from us last year 99 million pounds. We’re talking about an additional 77 million pounds.”
The bigger impact could come from lifting Brazil’s additional 50% tariffs on beef imports.
Cattle Top In?
So is the top in the cattle futures? McBride isn’t so sure because he says the fundamentals are still strong in the cattle market including cash.
He chalks this up to profit taking and says the feeder cattle have had a history of correcting and then making new highs as well.
“I certainly think that we’ve got some, maybe some bottom picking that’ll happen over the next few days or a couple of weeks, and then we’ll start to see this market come back. The thing that you have to remember in the supply side of things is the supply tightens in the fourth quarter for this cattle market. So we could be looking at a market that’s just kind of priming itself for the next run up,” he adds.
