Grain futures firm despite Trump's tariff talks.

Grain futures started mixed overnight, but we saw wheat and soybeans advance in a “sell-the-rumor, buy-the-fact” type mentality as the evening progressed. Late in the day yesterday, we got our first shot of tariff talk from President-Elect Trump since the election. Trump posted on his Truth Social website that it was time to start tackling the tough issues, first targeting China and what he says is their lack of effort to stop the flow of fentanyl into the US. Trump says that he will enforce a 10% tariff on all Chinese goods imported into the US until Chinese officials do something to stop its flow. According to experts inside the transition team, Trump has a multipronged plan to stop the flow of deadly fentanyl, with the tariff threat the first step. Soy oil prices jump sharply overnight, as it limits the used cooking oil imports from China, which would diminish due to the tariff taking a profitability for exporters. The rise in soybean oil helped soybeans rally from overnight opening losses.

After Pres. Trump said he would target China with an additional 10% blanket tariff, he turned his attention to Mexico and Canada. There, he said he would apply a 25% tariff on all goods until they do what it takes to stop the flow of “drugs and migrants.” With both countries our top trade partners, it is difficult to see direct or complete follow through, but in 2019, when Trump wielded a similar threat to Mexico, they sent members of their National Guard to the border, and we saw a sharp drop in illegal inflows. Canadian officials said they would work to start negotiations quickly, while China and Mexico so far have been silent. Marketwise, wheat is stronger overnight, with beans up a bit though running into early morning selling and corn down a touch.

Canadian exports of spring/durum wheat and oats into the US would be impacted. The most important terms of a balance sheet impact would be oats. The US is expected to import 74 Mil Bu from Canada this year, of which around 30 Mil Bu would be hit with tariffs under normal future monthly trade flows. The US 2024/25 ending stocks are forecasted at 30 one Mil Bu, so the 25% tariff would raise prices to US old consumers. Canadian wheat and durum imports are forecasted at 120 Mil Bu, and the tariffs would impact an estimated 40-45 Mil Bu. The US wheat balance sheet impact is modest, admitting an abundance of HRS High-protein spring wheat. Overnight wheat futures did rally, but sustainability will need to be seen by an uptick in exports from the US to keep the balance sheet on the drifting side.

On the Russian/Ukraine war, rumors have been circulating for a while now that there may be some type of secret peace negotiation taking place, but from the look of it on the battlefield, that is not the case. According to the Kyiv Independent, the advancements into Ukraine made by Russia since the start of November are the greatest seen since the beginning of the war in 2022, with over 232 square miles of Ukrainian territory captured by Russian forces. Meanwhile, overnight, Russia launched a record number of drones, sending 188 into Ukraine, with Ukrainian forces only able to take down less than half. The drones again targeted infrastructure, with reports that upwards of 70% of citizens in Ukraine’s western region are without power as of this morning. Also, the Russian ag minister is proposing a new duty calculation for Russian sunoil exports based on the sharp price rise and ongoing inflation pressure for Russian food prices. Look for Russia to dramatically slow its sunoil trade.

Export inspections were at the higher end of expectations for corn, soybeans, and wheat, with all three above last year’s shipping pace. Soybean shipments are now up 12% year over year, with the USDA anticipating an 8% increase, while corn shipments are off to a relatively strong start as well; with lots of talk, the bulk of our corn export shipments will be seen between December and January. Wheat shipments were also solid and were well above last year’s pace. A slower pace of buying by the world’s end users has been seen lately, though, as they are thought to be relatively well covered through the start of the New Year.

Nearby live cattle futures closed lower on Monday, while feeder cattle rose sharply after a dramatic opening. News of Mexican screwworm cases will pause Mexican cattle imports for at least 30 days. We typically import 100,000 feeder cattle from Mexico a month. Box beef prices had seen substantial gains, with Choice picking up $2.30 and Select up at $1.67. The early cash trade outlook is to be steady this week.

The November Cold Storage report showed that at the end of October, US beef stocks rose 5% from September 2 432 Mil pounds. This was the 2nd consecutive month higher, confirming a typical August low, also the smallest seasonal low since 2014. Compared to year ago, be stocks were down 3%, marking the 21st consecutive month of year-over-your declines. Seasonally, stocks tend to rise in the fourth quarter and peak in December or January. The November WASDE report estimated that December beef stocks will be down 4% from a year ago and would be the tightest in a decade. Nearby live cattle futures did stall at the anticipated resistance in the 189-190 range. Support is 186.00 for February cattle.