Soybeans slid Tuesday with corn and wheat higher. Cattle corrected lower with hogs in the green.
Soybeans Fade But Carving Out a Low?
Soybean futures were unable to extend gains on Tuesday and instead faded into the close. The market is still oversold after a $1.20 correction from the November highs so is the market trying to carve out a low? Dan Basse with Ag Resource Company is not optimistic. “I’d like to say yes I don’t want to be the downer in the room, but unfortunately I still believe there’s some downside risk maybe to about $9.90 or $10.10. That kind of gets us back to where we started this rally in the middle of October, when, of course, we started to focus more on the US-China trade deal.”
Big Brazil Crop Coming
One of the biggest reasons Basse is not inclined to think the soybean market can find its footing is because of the big Brazilian crop as private estimates this week put production at over 180 MMT and his office in Brazil is projecting 181 MMT. “The weather down there has been very, very good. A year ago we had a lot of problems down in Rio Grande do Sul and Santa Catarina, where we lost six or seven million metric tons due to drought. This year, not the case. That area has been blessed with an abundance of rain. So as we look at the country as a whole, there’s not many concerns today. And so big crops are made by consistency of yield. That’s what we think we have in Brazil, 181 catches us. That’s up ten million metric tons approximately from last year’s harvest.”
Will China Buy 25 MMT in 2026?
That may also temper what China buys from the U.S. in 2026. He says, “If they have that big of a crop they will be more aggressive, forthcoming. And again, China’s within two to three million metric tons from finishing up their purchasing up to twelve million metric tons. Will they be there longer term? That’s a question to market will be asking.”
So what is China’s commitment to buying 25 MMT in 2026? The two parties have not signed an agreement which casts doubt on if there is a longer term deal. Basse says his sources in China cannot confirm any purchase agreement beyond the 12 MMT. “I think there there may have been a handshake, an agreement for the 12 MMT which the Chinese and us have completed, but looking at 25 MMT for the three years. Beyond that, I’m uncertain. And so, like I said, the Chinese are telling me they do not know of a commitment the United States. The White House brief said there is a commitment, and we’re kind of caught in between. So I believe the market’s going to take a show me mentality, a Missouri mentality.”
China Purchases Political
So far the soybean purchases from China have all been political purchases, not commercial purchases as Brazil soybeans remain cheaper than the U.S. Basse explains, “These are commercial purchases. I’m estimating that China, on each million metric tons that it buys, is losing somewhere between $35 to $45 million. So they are losing money. The Chinese are anxious to get these soybeans moving to them. They’re selling reserve stocks to make room for them.”
So far the purchases have all been from Cofco and Sinograin as Basse says private Chinese crushers are buying in Brazil and will continue to do that. The question is does china continue to buy for the reserve? Basse says, “I’m doubtful of that. So I’m fearful that there may be six or eight months in between when we finish 12 MMT and when the Chinese return for additional purchases, probably for late summer or early fall, and a new crop position.”
Biofuels The Only Hope?
Basse says right now the best hope is biofuels, but its not an immediate or lasting solution especially with EPA delaying the Renewable Fuels Standard Renewable Volume Obligations to 1Q of 2026. “We need to find a strong commitment of EPA to possibly an expanded RVO on Renewable and biodiesel of 5.7 billion gallons and then full reallocation of SREs.”
January WASDE?
The other possibility for the bulls is the January WASDE. However, Basse thinks for soybeans even with a lower yield, USDA may have to lower exports. “U.S. soybean sales to date are down 471 million bu. My export estimate is down a little over 400 million bu. at 1.47 billion bu. That’s 165 million bu. less than USDA.” That means ending stocks need to go up to 470 million bu. on beans.
Corn Tug of War
Corn continues to see a sideways market with a tug of war between record supply and record demand. “It’s been a fistfight in corn. If we get a drop in supplies, that will give us a rush to give us possibly new highs and a push above $4.50 to $4.60, that resistance zone in March corn. But if we get a yield that maybe only drops one or two bushels an acre, I’m afraid we’re going to drift down.” He adds that corn export demand is so strong because Ukraine has exported 7 MMT less this crop year to date, so that demand has been pushed over to the United States.
Wheat Puts in War Premium
Wheat was higher for a second day with end of year short covering and the market may have been adding some war premium with Black Sea tensions high. “The market has digested the big world wheat stocks. I think what’s unknown, however, is the politics and the geopolitical threats, to infrastructure within Ukraine exports,” he adds. He says if there is some damage to Ukraine ports wheat could see a 20 to 30 cent rally but the abundance of supply globally is going to cap that rally.
Will Grains See Fund Investment in 2026?
With grain at historically low prices will it attract new fund money in a new year? Basse says he’s worked with some hedge fund accounts, “They’d like to be investors because they see prices as relatively low. But I think they’re looking for a fundamental or technical trigger for them to do that. So at the moment, I believe that many of these folks will stay on the sidelines remembering that this is a midterm election year.” That means the administration will try to keep food prices and inflation low and fund managers don’t want to get ahead of that.
Cattle See Profit Taking
The cattle market saw profit taking after running into chart resistance. Basse says, “We’ve had a nice run off the lows.” He thinks beef prices will cool after the first of the year as consumers shift from expensive holiday beef cuts to more hamburger. “However, as we think about the supplies, we are seeing that the cattle inventory and likely the breeding herd will be up slightly. That cattle inventory report is not that too far away, so traders are trying to look forward to that position accordingly. Today we still don’t have any evidence that the border along the Mexico will be opening anytime soon. But again, the administration is trying to get beef prices down. They haven’t succeeded very far or very much so far. We’ll see how this all goes forward. But that is in the back of the minds of cattle traders and keeping them from becoming too rambunctious with their horns to the upside.”
Light Cash Cattle Trade
Cash cattle trade was light on Tuesday with some $229 in Kansas which is $1 to $2 higher than last week’s weighted average. In the North dressed prices in Nebraska were $356 to $357, steady to $1 lower.
