Soybeans ended slightly higher Tuesday with corn and wheat lower. Cattle and hogs both soared.
Soybeans Show Resilience
Soybeans opened lower Tuesday but manged to close with slight gains. March soybeans were up 1-cent at $11.34 with November closing 4 cents higher at $11.17 1/2. Mike Zuzolo with Global Commodity Analytics says soybeans saw continued resilience due to strong demand including expectations of biofuels increases. “I think that’s the heart and soul of the soybean market for really the past three months, if you ask me, Michelle, and you can see that in the monthly charts. We’re
up about a .5% in meal year to date, but we’re up about 43% in bean oil at this stage. So the trade’s really betting on the come when it comes to the soybean oil demand.”
Strong Export and Crush Demand
Also driving demand on Tuesday was strong export inspections on soybeans at 44.2 million bu. which was up from a week ago. Zuzolo thinks China may have been buying extra soybeans and stockpiling since recent prices for soybeans are $35 to $40 premium to Brazil at the Gulf.
Plus the NOPA crush figure was a record for January at 221.56 million bu. Now, Zuzolo says that did come with higher soybean oil stocks at 1.9 billion pounds which is up 49% year over year. “And we’re looking at a situation where we’ve got the highest soybean oil stocks since April of 2023.”
However, with hopes for increased demand for bean oil under new 45Z rules and robust Renewable Volume Obligations coming in March for biomass based diesel it is still helping to support bean oil. Zuzolo does caution much of the optimism has been priced into the bean oil market.
China’s 8 MMT of Soybean Buys: Now or Later?
So far the soybean market has bought into the idea that China perhaps will buy the additional 8 MMT of old crop soybeans for this marketing year. However, Zuzolo says there won’t be any evidence of that or any flash sales while they’re on their Lunar New Year holiday. So will those sales come after the Brazilian harvest? Zuzolo is not very optimistic. “After reading the tea leaves on China and U .S. this past weekend, I don’t think the Chinese will buy one bean from us if we sell arms to Taiwan. I
think that’s what the phone call between Trump and Xi was about as far as the what the Chinese said. And President Trump said over the weekend, he would be making a determination on arms sales to Taiwan in the not too distant future. So I’m really
hanging my hat on that one feature as far as whether China continues a friendly trade regime with us or not.”
Funds Adding to Long in Soybeans
The funds, however, have been adding to their long position in the soybean market in a big way. The latest CFTC Commitment of Traders Report showed funds had bought over 94,000 contracts as of last Tuesday and are now long around 123,000 contract. So they’re of the belief that we’re going to get this extra 8 MMT of China business. So how much more could they add to their long position? Zuzolo says, “They could add a lot. I mean, I think there’s still roughly 90 to 100 thousand net futures and options from their big record late last year, mid last year. But I think they’ve come back to buying beans and selling corn. They’re doing that, I think, because they still don’t believe that the wheat low is in and that the wheat continues to drag on the corn.”
Brazil Soybean Harvest
Currently Brazil is harvesting soybeans but there have been some delays due to conditions being too wet in the North. That is also causing some quality concerns and slowing the second crop corn planting. Zuzolo says, “Yes, there is some concern. My understanding is it’s minor at this point. I think the trade is watching the harvest progress, though, in a week or 10 days from now, if it’s still an issue, then it becomes an issue. I think that’s worthy of the market’s attention.”
USDA Ag Outlook and Baseline Numbers
USDA will be releasing its baseline numbers at the end of the week at the Ag Outlook Forum and acreage will be the big key. While the trade has been whispering higher soybean, lower corn acres but what does Zuzolo expect? “My sense from other colleagues in the industry is we’re not really much above 85 million bean acres at this point. I think that’s a little bit fearful because in 2022, we did 87.5. 2024, we did 87.3. I’m at 87 .5 again for 2026 just because of rotation. Bean acres, I think, are going to rotate higher. I don’t think the trade’s really ready for that. Look at the bean corn ratio and the new crop. We’re at the highest since the middle of 2024, breaking through 2 two beans times the price of corn, Nov versus Dec. So I think the trade’s still on this mission to buy bean acres because they still feel like this renewable diesel is a story that has not been completely told yet. Here again, I think the baseline numbers are going to be extremely important for the USDA to bake some of that EPA number and increase into these numbers we see on Thursday.”
Corn Market Slides With Wheat and Argentina Weather
Corn futures were lower on Tuesday by 5 1/2 cents on the March and 4 1/2 cents on the December contract. Zuzolo says corn was drug down with wheat and some rain chances in dry areas of Argentina this week.
However, corn also hit significant chart resistance. “I really do think the charts are big right now, Michelle, because we’ve gone up against major resistance in corn, beans and wheat at around $4.35, $4.45 on the corn, $11.35, $11.45 on the soybeans and $5.35, $5.45 in the soft red wheat. Just to give you an idea what that means is in wheat at $5.35 to $5.45, we haven’t seen a weekly close above $5.45 since October, 1st of October of 2024. In soybeans, I show we haven’t seen a weekly close above $11.45 since the 1st of July of 2024.”
Lots of Headlines
So he says there will be a great deal of data to digest this week in the grain markets including Iran talks and the SCOTUS ruling on IEEPA tariffs. So he’d like to see those resistance levels taken out.
Wheat Falls on Weather, Hits Resistance
After higher weekly closes the wheat market also hit chart resistance and saw pressure from a higher dollar and lower crude oil. However, it also removed some weather premium. “We aren’t worried anymore about a Black Sea freeze as much as we did when we came away from the holiday or before the holiday because we had some private estimates stoke up the Russian 2026 crop essentially upwards of close to 90 million tons. And I think that just took away the tailwind of the potential that the Russian crop is hurt at this stage. But we’re still dealing with multi -month highs in wheat and corn coming out of the Black Sea, we’re still dealing with a major war. I think this wheat really does translate back into Russia because of the rubble and because wheat and crude oil are both such big Russian commodities.”
Higher Dollar, Lower Crude Oil
The higher dollar and lower crude oil also weighed on the grain complex according to Zuzolo but especially wheat. “So I still think wheat and crude oil are very much attached to the hip at this point.” That is serving as a headwind for the grains. “A very important piece of the puzzle was this weekend with Secretary of State Rubio’s speech at Munich, he really allayed and eased the fears of, I think, the world financial market of the U .S. going in a loan. This seemed to me to bring in some dollar short covering. We really need to watch to see if that’s a key, because like those technical resistance levels at the end of the week, I really want to see that crude oil higher and that dollar weaker again to be able to give us some support as we see South America harvest and as we get ready for the springtime here.”
Markets Await SCOTUS Ruling on IEEPA Tariffs
News sources indicate a possible SCOTUS ruling on tariffs by the end of this week. So what is already programmed into the market? Zuzolo says, “What we saw when President Trump put on the tariffs, generally speaking, was a sharply lower dollar and a sharply higher stock market. If the SCOTUS comes in and says, you can’t do this and you’ve got to unwind it, that’s the first thing I’m going to be looking for is a reversal of those two major themes.”
Cattle Make New For the Move Highs
Cattle futures made new highs for the move again in some of the contracts pushed by the higher cash trade. The five area weighted average steer was at $245.62, up $4.31 from the previous week. “Yeah, it really came around. It wasn’t going to go anywhere. And it’s counter seasonal, too, to see this kind of a jump. Nice to see the feeders underneath us as well with strong cash in the country, as well as a break back down towards that $4.25 level in lead month corn. So I think the funds were back in on the long side of feeder, short side of corn.” I would add one other to Michelle at
Fill the Gaps?
Will futures continue to fill the gaps and retest the October highs? Zuzolo says, “The next technical level to be watching for me is going to be around $247 to $250 plus against that February contract to see if that stops the move up or whether we’re going to go ahead and go on higher on some more bullish news.” Those are the all -time highs from October. “That’s what broke our back in 2015. And yes, there’s a lot of differences. Yes, we have a 75 -year low in the cattle market, but we had a 63 -year low back in 2015, but it was the domestic consumption that really hurt us. So if the dollar goes up and the stock market goes down, I still feel like those are really worthy material pieces of the puzzle worth hedging paper to Protect you from a 10, 15 % correction. We could go all the way back down to $320 feeders and hold an uptrend line. So that’s the kind of numbers we’re talking about here.”
Hogs Recover with NSIS Line Speeds
Lean hog futures recovered with higher cattle, short covering and USDA’s announced adoption of faster NSIS line speeds at pork packing plants. “Ireally think that the latter was the big thing. I think, again, the technical seemed to hold late last week.
Everybody, I think, was watching that. But when USDA proposed this modernization on modernized lines, adding chain speed to the pork and the poultry lines in the factories they can, I really think that helped because that just means more consumption, more available product out there on the pork for the shelves, for the consumer. That’s net net positive when you look at the ag economic supply demand fundamentals.”
