Grains ended higher on Wednesday with cattle limit down.
Soybeans Rally as China Drops Tariffs
January soybeans rallied $.13 on Wednesday as China announced starting November 10 it would drop its 15% retaliatory tariffs imposed on U.S. ag goods March 4 for one year. Dan Basse, president of Ag Resource Company, says that was positive for the market and as a result funds piled back in to buy soybean futures.
U.S. Soybeans Still Face 13% Tariff Making Brazil Cheaper
However, China is still imposing a 13% tariff on U.S. soybeans as it did not drop the 10% April tariffs it put on ag goods. Basse says this makes U.S. soybeans higher priced than Brazil which is headwind for the market moving forward. “And that adds up to a $1.20 a bushel on U .S. soybeans coming in.”
As a result he says China has bought from 16 to 20 cargoes of Brazil soybeans for December. “That should not be happening, but it just shows you the availability of the Brazilian soybean crop. Our own analysis in my office in Brazil indicates that last year’s Brazilian soybean crop was understated, maybe by as much as 4 to 5 million metric tons.”
And he says Brazil still has beans to sell in December, January, before their new crop becomes available in February. “The Brazilian soybean market is in the ditch. I mean, everything out of Brazil is cheaper. By the time you get to January, there’s 70 cents a bushel cheaper than U .S. offers. As you get to February, March, and April, it’s as much as $1.20 to $1.30. So if I had that on top of the 10 % tariff going into China, the U .S. has a disadvantage of about $2.40 or $2.50 a bushel for the private user.”
China Buying Soybean Futures
The higher U.S. soybean prices are pushing China to the futures market verses buying cash according to Basse, which was the other push in the market. Basse says, “There’s also a lot of talk in the Chicago market that China may be buying futures, our way of, if you will, getting into the liquidity of the Chicago Board of Trade and establishing themselves as a buyer in the futures market, maybe more so than the cash market.”
This is also a bit of a work around by China he says, “If they started after the weekend of about the 23rd of October, most of us estimate that China may have bought 35 to 40 ,000 contracts of futures already. Again, the agreement was based on purchases, not shipments.”
Logistically there is no way for China to get 12 MMT of soybeans bought, loaded and shipped in he last two months of 2025. “China does not have to ship them by the end of the year. They would be shipped sometime in the 2025-26 marekting year, which would be ending in August 30th of 2026,” he explains.
Debate Continues on Details of the 12 MMT Purchases
Basse says there is still no confirmation from China that the Trump administration’s interpretation of the 12 MMT of U.S. soybean purchases is additional business verses 12 MMT total for 2025. China has already purchased nearly 6 MMT for the calendar year and may believe they have fulfilled half of the commitment. The U.S. math would put total purchases at 18 MMT for the 2025 calender year.
Commercial Considerations Clause
The other unknown is whether or not the China deal contains a commercial considerations clause like the Phase One deal that let’s China buy based on price and market signals. That will be in the deal that the two countries sign but Basse says its common practice for China to insist on that clause.
“Every Chinese agreement, even the Phase One agreement or going back to WTO, there’s, there’s a lot of these, what we call market consideration clauses. China adds them in almost every agreement that they have. And the clause says that if it’s cheaper somewhere else, I do not have to buy your soybeans. So, if soybeans are cheaper in Brazil, they can buy Brazilian soybeans. It doesn’t negate the tonnages that they still must participate out of the United States, but it does take away the immediacy of buying nearby. And I think that’s very important to understand and why I believe the vast majority of these shipments of China will happen in the summer of 2026, not in the December, January time frame.”
How Will USDA Handle China Demand in the November WASDE?
Basse says Ag Resource has lowered China’s soybean export demand to 12 to 14 MMT which means USDA will need to come down in their export estimates. Export inspections would also suggestion a revision lower. “Through the 30th of October, U.S. soybeans shipments are down 191 million bushels. We expect that by the end of November, they’ll be down approximately 300 million bushels.”
Basse says he thinks soybean ending stocks will need to be adjusted higher in the upcoming WASDE because of lower exports. ” My own estimate is that we are below 1.5 billion bushels just because of the loss of Chinese demand from September, October, November. Even if we pick up the 12 million metric tons yet in this crop year, I’m just not convinced that we’ll see an export estimate above 1.5. That means that USDA’s export estimate is overstated by about 220 million bushels.
That means even with a yield loss ending stocks will balloon above 300 million bushels. “My own ending stocks number is up around 470 million bushels. So, I may be on the higher end of that, but that’s because I’m also cutting exports to non -Chinese destinations because of the cheapness of the Brazilian market.”
Corn Following Soybeans and Wheat But Hits Resistance
Corn continued to see spillover support from the rebound in soybean prices and a higher day in wheat. However, the March contract is still hitting resistance at $4.50 and it will take some additional positive news in the November WASDE to help get corn through this chart area.
Wheat Gets Push From China Demand Talk
Wheat futures started lower on Wednesday but rallied back into the close following soybeans and with talk of China business. Basse says they are picking up reports that five cargoes may have been purchased as a goodwill gesture. Funds have covered short positions to also sponsor the rally but after a $.50 run Basse says the market will need to get through chart resistance to keep going.
Supreme Court Hears Trump Tariff Arguments
The Supreme Court started to hear oral arguments in the case against the Trump administration’s IEEPA tariffs and Basse says it seemed as though the court was more adverse to the idea of the administration using their emergency powers to impose tariffs.
“The question that stuck with me was that the Congress is the one that sets revenue, not the president. So again, one of the Supreme Court justices indicated that this is foreign revenue, not domestic. So if you look at the polymarket, which has been a prediction site that uses real dollars in people are betting, you saw that the chance of Trump tariffs continuing going forward without a adverse SCOTUS announcement was felt to 33%. So they’re giving it a one and three chance that Trump tariffs will stay as they are today.”
Cattle Futures Limit Down
Live and feeder cattle futures ended limit down and made new lows for the move on fund selling and long liquidation and will be under expanded limits Thursday. Basse says the chart damage may lead to additional selling Thursday under expanded limits. “I think people are very focused on President Trump’s action and saying, I will get the price of beef down, much like I did the price of eggs early in my administration. And that seems to be what the funds are fearing and they are exiting in style.”
That’s despite a relatively stable cash market as light to moderate business was reported in the North Wednesday with dressed deals at mostly $360, $2 higher than last week’s weighted average basis Nebraska. A light trade was reported in the South with live deals marked at $232, $4 below the prior week’s weighted averages.
