Grains were higher early Thursday with cattle and hogs lower.
Soybeans Continue Rally on More China Business
Randy Martinson with Martinson Ag says, “This is, you know, basically 8 million metric ton or roughly 294 million bushels of added demand that we were not expecting. I mean, USDA just lowered exports. They weren’t looking for this to come into play. And if it does, this adds to the demand picture, which will severely reduce our ending stocks estimate for soybeans. And that is helping to push soybeans to, you know, try to look at rationing demand at this point.”
So we were at 350 million bushels on inning stocks after the last report, what would this take us down to on ending stocks. You don’t put the whole 300 million bushels right on the balance sheets, do you?
No, I mean, I think you probably would come in and it’s likely to be somewhere around 100 to 125 million bushel ending stocks estimate. You know, you don’t expect to see it all being done in this marketing year. Some will probably drift over into the next. But for the most part, though, it will bring it down so that stocks get to be basically pipeline supplies.
If it’s true, because China has not confirmed it yet, and do you think it really will be old crop purchases, especially with Brazil’s cheaper crop coming online here?
You know, it’s going to be tough for it to be, I think, you know, old crop. I mean, I do think some of it will be, but you’re right. I mean, you know, Brazil’s got a good crop, a very large crop coming in, and it’s likely that’s going to grab the attention of China, at least through June, July timeframe. Maybe by then we could start to see a little bit of demand come to the U .S. So I would expect that if it’s going to be coming from, you know, purchases from the U .S., it’s going to come later in the summer.
So it would be new crop purchases?
I think it would be more new crop. I don’t know if we’ll be able to do it on the old crop side, but, you know, They 8 million metric tons, is that right? That’s exactly right. And they have been trying to get some pulled out of their reserves, but there’s not been enough to even pulling in the 12 million metric ton that they have purchased. So yeah, there is a little bit of a storage problem in China that hasn’t been resolved yet, and this will just compound it. And these would be all government politically motivated purchases. These would not be private entities, right? It seems like this is more political motivated. It does seem like this is more of a, let’s keep the U .S. happy type purchases.
Okay, so if that is in mind, you know, talk a little bit about if it’s all commercial considerations at this point, why we don’t have private sources buying, one, Brazil’s crop is cheaper, and two, the tariff’s still on, isn’t it? The tariff is still on? Exactly. And that’s where the cheaper beans would come in and make us a little more competitive.
So we weren’t expecting this additional business. The market wasn’t. So how high do you think soybean prices have to go now to price this in if it’s true?
Well, you know, we’re flirting with that $11 area. And I think we could possibly see $11.35 to $11.50 somewhere in that area. And at that point, then we’re
going to need confirmation or at least see some sign that China is also behind this and willing to backing the purchases. So I do think that we’ve got a chance to see a little bit more of a pop in this market, but we need confirmation as well.
Yeah, and you give farmers selling up at these upper levels. I mean, that was part of the reason we were up 50 cents at one point yesterday and ended up only 26 higher, right? Oh, most definitely.
Farmer selling is going to kick in. I mean, there was a lot of them that they’re, you know, if we could get back up close to $11, you take the, you know, the average basis off. You’re still looking, though, you know, $10, $10.50 beans. There’s going to be a lot of, I think, banker pressure even to sell just because it makes the balance sheets look that much better. Yeah, for sure.
Is there any, I guess, Argentina weather premium being put into either the corner soybean market? I know It’s really hard to tell right now, isn’t it?
It is, but I don’t think so. I mean, I think the expectation is just like we’ve seen in the past years. Argentina is suffering. Their crop isn’t doing very good. The conditions continue to drop, but Brazil’s is doing fairly well. They’re not seeing any trouble. They’ll continue to see their production estimates
increase. So the idea is that Brazil is going to more than make up for what Argentina is going to lose.
Corn was disappointing yesterday. You’ve got beans up 26 cents. Corn only ends a penny higher. Corn is following a little bit better this
morning, but it’s kind of been disappointing. Why isn’t it getting a bigger push or pull from beans?
I think a lot of it is, one, you know, they want to confirm that these, you know, bean purchases are going to take place. Two, you know, corn stocks
are fairly comfortable. And at this point, you know, we aren’t really worried or the end user isn’t really worried about where they’re going to get their next bushel. But if this does come in the play and China does buy this on our stocks for soybeans drop, we’re going to see acres switch over to soybeans for 2026, which is going to change the story for corn going forward, which would mean that corn would have to try to bid or try to hold on to some acreage.
But you’re going to have to lose a lot of corn acres here to make a big, big difference in the balance sheet, right?
You would. I mean, you know, right now the estimate is 95, you know, that I think is looking at us dropping, you know, three to four million. It would have to be closer to five million to make a big change. But then again, if we start, if we can get that E15 going and at least see that pickup in, you know, a
majority of the states, that would help chew through some bushels as well. Yeah. All right. The other thing we should talk about is like you said corn might
estimate was that their corn production was going to be higher. So yeah, there is some concern right now that their corn isn’t quite matching what they need and they’re going to have to bring some in. And there is some hints, of course, of corn demand improving and rumors that China was buying. So yeah, I think there is some, you know, by the time we get into, I think later spring, we’ll see a little bit more of corn demand going towards China. All right.
So China is the one thing that could probably or possibly finally get us out of this trading range in corn, but it’s a long shot, huh?
It’s a long shot, but yeah, China’s usually the answer to the problems just because of their huge demand.
Speaking of that, China bought some wheat and the weekly export sales switched over from unknown. So they’re kind of looking at that. Do you think we’ll get any more purchases out of them on the wheat side?
Boy, you know, you’d hope so because wheat really does need to see something to help prop it up. I mean, it’s been kind of disappointing. Right now we’ve been pulling weather premium out, even though we’re seeing conditions drop in the winter wheat region of U .S., you know, not enough to make a big difference at this point. And so, yeah, wheat does need something. And again, a little extra demand out of China would certainly help. But the dollar has gone back a little bit higher. So I don’t know if that’s part of the story, or is it just back to this whole global supply situation? I think it’s more of the global supply situation. I mean, you know, when you look at the major exporting countries of the six of them, all of them had record crops last year or close to it. I think only Russia was the only one, and Ukraine were the only ones that didn’t. So that, I think just that that’s kind of the wet blanket on the wheat market is just huge supplies. So you mentioned maybe corn eating to buy some acres, because or could go to soybeans once they get grazed out. So that’s certainly an alternative.
Weekly exports this morning, we should talk about that. We’ve kind of backed off a little bit on everything, haven’t we?
We have. They were disappointing. I think corn was at a marketing year low or soybeans. So it was a disappointing export sales estimate. Yeah, I should ask you, as far as the exports, if China comes in and buys this, that gets rid of that 20% gap that we’re running for total export sales on soybeans versus last year that we’re under?
Yeah, it would definitely help tighten that up. And we have been, you know, and you look at the numbers, you know, we started off with a lot bigger
deficit for soybean sales compared to last year. And we’ve tightened that up already as we’ve gone through the marketing year. So it has improved. It’s still quite a bit less than last year. But China comes in and buys us. I think we have been virtually get to be close to last year’s pace. Gotcha.
Cattle market’s been on a rage, new highs for the move, even on the open this morning. And then we quickly turned lower on, let’s talk about this plant in Greeley, Colorado. What’s the news there?
Well, they did, you know, they haven’t been, they’ve been working without a contract, you know, workers’ comp, you know, so they voted to strike last night. So now, right now, 99 % of the workers said they would support going on strike. That means now that they’re going to go to JBS and say, hey,
let’s get some sort of a contract done so that we can continue to working, or we will do a walkout. And I think that’s putting some pressure in on the market. Right now, I mean, as you mentioned, I mean, the fundamental reasons for this market to stay strong are still there. I mean, tight supply, strong demand, strong cash. It’s going to take something like this, though, that could upset it like we saw, you know, a few years ago.
Yeah, we keep talking about Black Swans. I just got back from CattleCon and lots of people worried about black swans. I thought it was going to be the border reopening to Mexico or NWS or something like that. But a plant closure, at least this is going to be if they can get back to work, it would only
be a temporary situation though, right?
Correct. And they’re hoping that they don’t see any disruption. And that’s why they’re going to JBS saying, hey, this is on the table now. So let’s get a contract together and move forward so that we can keep the plant rolling. But yeah, there’s going to be some sort of a black swan that’s going to come in and upset the cattle. I do think we could touch the old contract highs, but at that point, I think the inflationary type pricing and high price for the consumer is going to come back to haunt the cattle again. Yeah.
But if we get higher cash this week, I’m not going to rule out that we’re going to be back higher again. This market’s continuing to do that, isn’t it? It’s very resilient and it does at full force.
