Export sales are delayed until Friday morning.

After a weak overnight session, this morning’s grain trade has found firming in row crops. Weakness developed as confirmation from yesterday about issues we discussed in Tuesday’s comments regarding possible restrictions on Brazilian bean importers were taking place. Five separate exporting entities, including ADM Brazil and Cargill Brazil, cannot receive phytosanitary certificates for soybean shipments into China. According to the documentation received, officials cite ‘chemical contamination’ and the presence of insects/pests as reasons behind the lack of phyto issuance. According to Brazilian officials, the poorer-quality shipments were a short-term effect of the end of the old crop season. They say they fully expect the suspension of imports to be lifted by the first part of March.

Overnight, there were rumors that additional suppliers would be added to the list of suspended entities. If true, it would become a bit more difficult to believe there wouldn’t be a disruption to trade, especially if the situation were to extend beyond the first part of March. However, with a lack of clarity, the market will likely ignore additional developments unless we start to see a return of private crushers to the US for bean supplies. With crush margins for US beans harmful though, it is more likely private crushers will look to tap into the reserve beans the Chinese government is said to be preparing for auction.

While parts of Argentina and Southern Brazil are expected to see their growing conditions improve and their regional production outlooks stabilize, some problem areas must be closely watched. Central and Northern Brazil should see reasonable harvest progress this week, with the forecast looking much warmer and drier. Growers will be scrambling to harvest what they can, as the forecast brings back heavy rain and cloud cover next week. Reports of damaged beans continue to grow, with one farmer group saying the problems are far more significant than the market is currently recognizing. The slow harvest pace and heavy rain are beginning to weigh on safrinha production potential, with second-crop corn planting running around 10% behind average. In Argentina, the core of the country’s corn production is expected to remain drier than the rest of the country, and this will also remain something to watch.

The fact that President Trump had frozen the distribution of Inflation Reduction Act funds in an executive order on day one was also seen as a negative influence on the market yesterday. Traders feel the administration will not be friendly to renewable fuels, saying the stoppage of funding would impact the 45z tax credit. Considering we still do not have clarity on 45z or the actual distribution of funds currently, it’s not quite the demand mover folks may want it to be. However, given that President Trump and his administration will be negative toward renewables, this was seen as another sign of the industry's impending fight. Republican allies of Trump’s fought back against the shutdown of funding, asking for greater clarity, in which the administration said it was more directed at electric vehicle charging grants and other allocations tied closely to the “Green New Deal.” Many hope to learn more about the administration’s approach to renewables during the USDA Secretary’s confirmation hearing, with clarity needed.

Due to the Martin Luther King holiday on Monday, the USDA will release its weekly export sales report on Friday with the CFTC Commitment of Traders report on Monday. It will be keenly watched as to what managed money has done in the corn long situation as it is likely approaching historically high levels. Corn open interest is also near record high, while little option volatility does not indicate a US supply worry. China will be out on a 7-10 day holiday for their Lunar New Year holiday late next week, which will curtail the soybean purchasing program from Brazil. The Puranaguay discount versus the US Gulf has widened out to $1.20 as the harvest starts across Mato Grosso.

Live and feeder cattle futures pushed sharply higher on Wednesday, with a firm start anticipated this morning. Live cattle rallied $3 in the nearby and more than $2 in deferred futures contracts as the outlook for higher cash trade is anticipated this week. February cattle cleared $200, and contract highs were set across the board. Feeder cattle futures also scored even more substantial gains with January feeders breaking above $277 before next week’s expiration. Live and feeder cattle futures are now all at historic highs.

Negotiated fed cattle markets are still quiet, while small numbers reportedly sold in the South at $202. However, asking prices are quoted at $5 higher in the South at $205 and $6 higher in the North at $210. The January Cattle on Feed report will be out this Friday afternoon at 2:00 PM CT, with an average estimate for December marketings of 101%, a placement rate of 100%, and a January 1 feedlot inventory of 99%.