Grain markets closed mostly lower on Tuesday, with cattle mixed.
Soybeans See Profit Taking
Randy Martinson with Martinson Ag says the grain and oilseed complex saw general profit taking after hitting overbought territory. This comes after all of the grains, except hard red spring wheat, posted higher monthly closes.
Soybean had over a $1.15 rally in the last three weeks attempting to digest the trade deal with China and their return to the export market. January soybeans ran into stiff chart resistance at $11.35 and failed ending lower by double digits.
Martinson says there was also some additional farmer selling in soybeans.
China Hasn’t Lowered Tariffs on U.S. Soybeans
Chinese government owned grain entities like COFCO and Sinograin have reportedly bought seven cargoes of U.S. soybeans so far for the reserves.However, crushers are still waiting for China to drop the March 4 retaliatory tariffs U.S. soybean imports they agreed to in the trade deal struck last week in South Korea.
“So right now, they’re not getting the go ahead from the government, China’s government to go ahead and buy yet. So, I do think that there is a little bit of disconnect there from what we’re hearing from the U.S. government and what China’s saying.”
China Buys Brazil Soybeans
In the meantime, China has reportedly bought 20 cargoes of Brazilian soybeans over the weekend at lower prices than the U.S. and 10 of those were for December delivery.
Martinson says this brings into question whether or not China has a commercial consideration out clause in the deal struck with the U.S. similar to the Phase One deal.That won’t likely be known until the pact is signed but will be the key to whether or not the purchases are binding or if they can buy Brazilian beans instead if they are cheaper.
China Deal Confusion
Martinson says there is still confusion about whether or not the !2 MMT of U.S. soybeans China has committed to buy are for the 2025 calendar year or yet in November through January.“So that’s the other part that needs to be cleared up, according to Martinson, “And we’ll see that in the details of the trade deal.”
Can the U.S. Ship 12 MMT of Soybeans in Two Months?
Logistically most of the soybeans bought by China in the next two months will come from the Pacific Northwest and ultimately the Northwest Corn Belt states.Martinson says there was some buying by elevators before the trade deal was announced which showed up in the stronger basis levels. “I think that was going to the export market but we need to get a lot more aggressive to get those bushels out of farmer’s hands,” he adds.
If China Buys 12 MMT Do U.S. Soybeans Need to be $12?
Martinson says soybean prices rarely spend time in the $11 range and so if the January contract can get above $11.35 resistance it is likely the market could rally to $12 quickly.However, he says it will be dependent on seeing more proof of Chinese purchases.
If China buys all 12 MMT of U.S. soybeans the next two months he thinks prices could go above $12.“Because it’s going to be in a short term it’s going to be aggressive buying because they’re looking at you know taking South American beans here very soon well they’re even reported buying some now.But by the time we get to January they’re going to be buying pretty much exclusively South American beans, so we need to make these sales quick and that’s going to cause i think the market to jump,” he explains.
Another catalyst would be confirmation of lower yields in the November 14 WASDE, which could pull ending stocks below the current 300 million bushels.Martinson thinks soybean yields need to fall by around two bushels, which could put carryout down to around 200 million or lower.
Corn Futures Also Correct
Corn futures were lower following soybeans and saw profit taking after running into resistance on the December contract at $4.35 which Martinson says also coincides with a 50% correction on the charts.
He says the last 15% of the corn harvest is slowly coming in and with most of the storage already full there is likely some hedge pressure hitting the market.
StoneX also released their corn yield estimate ahead of the November 14 WASDE and increased corn yield .1 bushels to 186 bushels per acre.
Wheat Awaits China Business
Wheat futures paused early Tuesday on general profit taking after winter wheat contracts had rallied over $.35 the last couple of weeks and with spillover from lower corn and soybeans.
However, the market was able to rally back higher and bull spreading was evident which could be export demand. China importers were in Monday looking to buy U.S. wheat for the first time in over a year. .Yet, confirmation of purchases may be needed to extend the rally beyond technical resistance according to Martinson.
Risk Off Outside Market Influence
Grain markets also saw spillover from the outside markets which exhibited risk aversion on Tuesday.The stock market set back with Wall Street experts saying the equities were getting frothy and were overdue for a correction.
Markets Await Supreme Court Hearing on Tariffs
On Wednesday the Supreme Court will hear arguments regarding the constitutionality of the Trump administration’s tariffs.While a decision may not be immediate the market will be closely following the questions presented by the court for direction on the outcome.
