The grain trade presses the week's highs at the end of the week.

This morning’s grain trade shows follow-through buying from yesterday’s strong price performance. Soybean oil supports soybeans regarding the strength maintained in Malaysian palm oil. Yesterday morning’s export sales figures put the week’s corn buying activity above what traders expected, with 1.7 million metric tons, or 67 million bushels sold. This was a noticeable jump from the last few weeks, with Mexico, Japan, Unknown, and South Korea as our biggest buyers. This week’s sales put us 8.5 million metric tons or 335 million bushels ahead of last year’s start, with the program off to its best start since 2020/2021, when China surprised us with a massive purchase jump.

So far, this year is different from 2020/21 in that China has limited confirmed corn purchases in its name, while sales to unknown have jumped 4.5 mmt or 177 million bushels from last year. Traders continue to debate who Unknown is, with thoughts it could be the European Union, after a poor production season there and across the Black Sea limited the availability of high-quality corn across the region. Yesterday’s soybean sales came in at the higher end of trader estimates, with China as the biggest buyer, followed closely by Unknown and then Spain. Traders say Sinograin, one of two Chinese government entities responsible for sourcing and storing grain, is actively booking beans out of the United States through April, with thoughts they will continue to buy from the US until spring because the beans store better.

Private crushers in China are moderately buying Brazilian beans after already having booked a significant amount of new crop beans ahead of the growing season. Basis has fallen recently across Brazil as the value of their currency has dropped and traders work to determine what that means for values. Brazilian farmers are now watching out of control inflation pinch their margins, something that is slowing the pace of farmer selling to a certain extent, even with the better than average start to the production season.

Wheat sales were also on the higher end of expectations, with Mexico, South Korea, and Unknown in the top three. Wheat sales continue to improve, with the start of the season the best in a handful of years. Regarding wheat, traders will watch the Russian selling pace after the New Year when new trade restrictions come into effect. A report circulated yesterday that Russia’s wheat crop is off to its worst start on record, with over 35% not even emerging at the beginning of the winter season. While fall conditions have a very limited impact on yields, with spring and finishing weather the actual driver, the lack of emergence is concerning and raises the likelihood of abandonment.

This morning’s monthly non-farm employment data came in close to expectations, at 227,000 jobs versus an estimate of 214,000. Unemployment is at 4.2%, up from 4.1% last month. The dollar is softer this morning by $0.19 at 105.22, and the trade still believes they will get a .25% rate cut in the December Fed meeting.

Cattle futures again tumbled sharply on Thursday, with a soft opening anticipated this morning. Price premiums have been added to the feeder cattle market lately after the shuttering of Mexican feeder cattle imports and concern over future US/Mexican livestock trade. But in the near term, it’s become difficult to sustain momentum amid seasonally risky prices with such significant index fund ownership that it is subject to profit-taking before the low-volume Christmas holiday season kicks in. Contracts were heavily overbought early this week, and fund length is close to the 2023 summer high. Record open interest is still held by 2019 when fund length hit the hundred and 50,000+.

Structural cattle supply issues have not been solved yet, but the inability of the market to score new highs this week is problematic. Index fund length as of Thursday evening is estimated to be in the 107-110,000 contract range for live cattle, nearly unchanged from last week. Profit-taking could continue into mid-December as there is a projected lack of central US winter storms. Evidence from long-term climatologists supports a rather cold January, which will be challenging for weight gain, and then supportive to February at the end of the year.
Fed cattle broke chart-based support yesterday in the 187.50 range and could target 184.50, the November lows to find chart-based support.