Grain markets ended lower on Tuesday but higher in cattle and hogs.
Soybeans Hit Resistance See Profit Taking, Farmer Selling
Garrett Toay with AgTraderTalk says after an over 35 cent rally off the recent lows the soybean market ran into some chart resistance on the November contract.
“We did, the bean market has been in a $10, a $10.30 type range, and that $10.30 area is acting as strong resistance. We
come in overnight, traded $10.38, which is a trend line off of the recent highs. And, you know, we rejected it,” he says.
However, the futures also saw a pick up in farmer selling at these price levels.
“So, I do think we saw some cash sales there. I do think it’s a testament of having target office in the market because these overnight markets set the highs and we’d never really retested them again during the day session,” he says.
Soybeans Chase China Headlines
Toay says the soybean market continues to chase headlines regarding China and Tuesday was no exception.
At a lunch at the White House with Republican Senators, President Trump told them there is no guarantee he will meet with Chinese President Xi Jinping at the end of this month. He added he still hopes to meet with Xi in South Korea but “you never know in this business.”
“Yeah, around midday, President Trump suggested that the meeting with Xi won’t happen. I think that ultimately we’re
going to see, you know, some meeting take place at APEC,” he says.
Toay says Treasury Secretary Scott Bessent has continued to indicate that lower level talks are ongoing as a prelude to the meeting between the two leaders.
“I did see that, you know, Secretary Bessent had mentioned that there was a relatively hostile trade negotiator from China and that he has since been relieved of his duties. So I think both sides are trying to work to get a deal done.”
Spreads and Basis Firm
Despite the selloff in the soybeans the spreads and basis levels firmed up which is telling Toay that we are into the last 25% of harvest and farmers have been storing soybeans, not selling off the combine so the market is trying to spur some farmer sales.
“We had wide board carries. We had wide cash carries. The market was telling you we didn’t want the beans. And I think the farmer successfully stored those beans. And now the end user is a little bit under bought. So what they’re trying to do is get these beans moving. We saw spreads move last week and narrow, and I think that spurred some commercial beans,” he explains.
Corn Hits Resistance, Farmer Selling Picks Up
Corn futures set back after a five day rally also hitting resistance on the December charts around $4.25.
Toay says that is also where some farmer selling has picked up where it equates to about $4 cash corn in some areas.
Corn saw some pressure from reports the American Petroleum Institute said it opposes legislation to expand year-round sales of E-15.
Outside Markets Spillover
He adds that especially corn and wheat looked like they were reacting to macroeconomic influences.
A strong U.S. dollar index and a wicked selloff in gold and silver also spilled over to pull down the grain markets according to Toay.
“Yeah, it certainly feels like the currency influence with the dollar rallying,” he says.
Can Cattle Recover With Plan to Lower Beef Prices?
Live and nearby feeder cattle futures were up for a second day still trying to recover from the melt down on Friday in response to President Trump’s plan to lower beef prices, followed by news of possible Argentina imports.
Toay says the market has digested the bearish news.
However, Tuesday on CNBC USDA Secretary Rollins said the administration plan aims to ease supply constraints and boost processing capacity. Also, the government will embark on “a pretty big” initiative to open additional lands for ranching in a bid to bring down beef prices. She said while President Trump is in talks with Argentina regarding beef imports, any purchases from the South American country “wouldn’t be significant from the U.S. point of view.”
Toay adds, “I think most beef producers would like to see some guidance as far as what the plan is going involved, whether it’s
going to be frozen beef imports or there’s some suggesting some live imports, that sort of thing to rebuild the herd. I don’t think anybody’s happy about it domestically. But, you know, I think ultimately, you know, we’ve digested the initial shock.”
The futures are trying to recover but to negate the reversals from last week may be difficult with the market uncertainty created by the unknowns of the administration’s plan to curb inflation.
Can Higher Cash Help?
The $5 higher fed cash trade was supportive to live cattle futures and feeder cattle are also holding due to the strong cash market.
He says if cash can continue to advance this week that may be enough to help retrace at least part of the losses on the futures board.
“It’s quite possible but I think a lot of these seasonal headwinds have already kind of developed,” he adds.
Lean Hogs Bottoming?
Lean hog futures posted triple digit gains Tuesday.
Toay says the market was over sold and due for a correction and should hold with the discount the nearby December contract is holding to the cash index.
“We held those lows from August and September around $82 on December so that’s positive,” he says.
