The grain trade is soft after yesterday's poor close.

This morning’s grain trade is softer after yesterday’s poor closing, erasing early morning gains. The US dollar is firmer again this morning, trading above 106, while South American FOB soybean premiums continue to look to be in retreat ahead of their respective large crop. This Friday’s US Labor Report will have an impact on the US dollar and how the Fed will view its interest rate policy, which will be announced on December 18.

Yesterday the ERS reported that US net farm income will decline 6.3% to $140.7 Bil dollars in 2024 primarily due to sliding row crop prices. Better than initially forecasted yields did help underpinned row crop farmers to some extent, but since the 2022 high, US net farm income is down $52.4 Bil dollars or 27%. One take is it’s thought the banking industry may force farmers to sell more old crop before putting together new operational loans for 2025 in the coming months.

The European Union approved the delay in implementing its new deforestation regulations, as expected. The start date for large companies is slated for the end of 2025 and for smaller firms, in the middle of 2026. There had been talk that we could see special zones of lower deforestation risks created, but it appears that that verbiage did not get added to the final measure, as it was approved yesterday.

Domestically, the uncertainty surrounding 45z and whether we will get clarification on the final rules before the biofuel blender credit expires at the end of the year remains, with conflicting reports released yesterday. Early in the day, Reuters reported that the Biden administration would not release the rules before he leaves office, citing three anonymous sources. Later in the day, S&P Global contradicted the report with the US Treasury Department Spokesperson, Michael Martinez, saying that the department fully intends to issue the guidance before the end of the administration.

The lack of clarity has kept domestic traders of soybean oil on the sidelines, with some biodiesel and renewable diesel producers saying they will go to hot idle while they wait if the margins look bad. This lack of domestic demand has made US soybean oil incredibly cheap compared to competing world vegetable oil values, and it is part of what has supported a strong export program. If we were to see guidance issued soon, it would likely push the domestic soybean oil user to cover their physical short, which could create an incredible vacuum in the cash market when it comes time to compete with the export book.

Domestic corn prices in China are continuing to fall as warmer than normal temperatures and a wetter than normal crop at harvested creating some quality concerns and pushing bushels into the market sooner than normal. Temperatures are expected to cool soon, helping to alleviate some of the concerns, but traders have said COFCO has opened additional storage facilities to try and get the bushels into commercial/government hands before it goes completely out of condition. The crop is also said to be as big as anticipated, helping to keep prices capped and, in the short term, likely to keep China from importing significant volumes unless they find a need for blendable supplies.

Live and feeder cattle have futures pushed higher again on Tuesday, recovering from their liquidating break on Monday. January feeder cattle returned to their major resistance at $260 while the cash feeder Index gained $2.25 to $259.38. This marked a 5-month high. Continued strength in the cash in nearby feeder markets leads the strength, especially in the April and June fed cattle prices.

Initial bids for this week’s cash trade are steady in the South at $190, with offers at $192-194. Yesterday afternoon, box beef was reported lower, with Choice losing $ 3.63 and Select off $1.67. Index fund buying in the last 10 weeks have been near record large, a close above $190 is needed to trigger additional technical buying. Support has developed on the February contract in the 187 range.