Overnight grain trade mitigates losses from tariff application over the weekend.

The grain trade opened lower overnight on the implementation of the trade tariffs against Mexico, Canada and China. Losses were less than anticipated, especially for soybeans, when considering the improving weather in Argentina. The trade improved overnight alongside outside markets like energies and metals, as it was announced that Mexico did not tariff our corn and China and did not tariff soybeans. We may be seeing China prepare for talks this coming weekend, possibly continuing phase 1 buying that they reneged on in June 2021.

Friday’s commitment of traders report showed that managed money had moved their long position in corn to 350,721 contracts, up 39,043 contracts in the prior week, which left corn susceptible to losses last night, but support did develop in the perceived support zones of 472-474 while soybeans also found legs at 1032-1035 per the Weekend Hedger report. Soybean longs had grown to 56,496 contracts which was a gain of 16,166 contracts. Meanwhile, the wheat trade is still overly crowded short by managed money to the tune of 110,782 contracts, that is a gain of 18,990 contracts.

Pres. Trump is anticipated to speak today with the leaders of Canada and Mexico to discuss the fentanyl, immigration issues that are at the forefront of the tariff applications. NEC director Kevin Hassett said that this is not a trade war, this is a drug war. Meanwhile China seems to be working towards resolution on issues that Pres. Trump has brought to head, as they did not apply tariffs to soybeans immediately, while Mexico as well did not tariff US corn imports.

Soybean recovery strength overnight was enhanced by the sharp rise of soybean oil versus meal losses to the crush spread, with canola currently heavily tariffed in the US. The bean trade is also looking for more details on how China may implement Phase 1 buying.
Overnight wheat losses were mitigated as French Milling Wheat firmed, lifting spring wheat higher in the session while the winter wheat contracts posted penny losses. Cold temperatures look to descend again mid-month into the Plains states, but there is the prospect of some moisture.

Friday’s Annual Cattle Inventory report is considered neutral to friendly to trade, as estimates and actual numbers were pretty close. The herd is placed at 99% of year ago with the calf crop at 99% of year ago. Indications put feeder cattle $0.50-1.00 higher on the corn weakness. Last week’s cash feeder index posted a new record high at $381.

The fed cattle trade was higher in all areas last week, with sales of $6 for the week at $208. Sales in the north were at $210 and dressed at $329. Mexican feeder cattle are expected to be allowed into US ports of entry sometime this week. It’s anticipated that 207,000 head of feeder cattle have been invoiced before tariff application. The remaining feeder cattle supplies will see the Mexican cattle owners take the brunt of the tariffs when purchased. This will result in the flow of feeder cattle into the US returning to pre-November levels by the end of the month.