Grain trade starts the week sharply lower.
Grain futures opened lower Sunday night on rain showers that were dieting southern Brazil and Argentine crop areas and a threat that Pres. Trump was going to impose tariffs on Columbia as that country and turned away to US plains that carried undocumented migrants. The trade improved moderately overnight as the tariff threat was removed as Columbia quickly cut a deal with the Trump administration to allow flights to land. What was at risk was 1.2 MMTs of US corn along with 500,000 MTs of US soybean meal and 38,000 MTs of soy oil that would’ve been held up if the US/Colombian migrant dispute had not been resolved quickly. Prices still continued to soften in the early morning trade as the reality is setting in that at the end of the week, we will have 25% tariffs being put on against Mexico and Canada along with 10% on China if they do not produce a fix for the leaky borders and fentanyl trade.
China will go on holiday this Wednesday as it starts its Lunar New Year festivities. Southeast Asia will celebrate the Year of the Snake for the next week to ten days. Northern Brazilian harvest will begin to expand, but Chinese demand for world grain/soybeans will dramatically wane during the holiday.
The stock market is sharply lower this morning, with NASDAQ futures off 4%. A China start-up called DeepSeek launched an open source/large language AI source, claiming that it was developed in less than two months on a $6 million budget using lower-cost chips. The meager costs/chips are providing pause to US AI ambitions that are far more costly. Investors are rethinking China's stunning AI progress. Nvidia lost 14% of its value overnight.
Showers and thunderstorms died Argentine crop land on the weekend, providing some needed rainfall. It’s estimated that 40% of Argentina’s corn/soy area picked up more than 1.00″ with showers falling across Buenos Aires this morning. A more normal Argentine and S Brazil rainfall pattern looks to be head, which should help stabilize crop losses and possibly improve yield potential. The northern Brazilian soybean crop is slowly maturing due to the lack of crop stress. Central and northern Matto Grosso are reporting better than trend yields.
Live and feeder cattle futures marked a phenomenal week last week with substantial gains, with a firm outlook anticipated this morning from Friday’s friendly construed Cattle on Feed report. Last week’s negotiated fed cattle market had sales in the north $6-8 higher at $210-212, and dressed sales were $6-8 higher at $328-330. Some late-week sales in Iowa were quoted as high as $332-338. Meanwhile, live sales in the South were initially $1 higher in Texas and Kansas, but some late Kansas sales were quoted as high as $208.
Cattle slaughter last week totaled 599,000 head, down $4000 from the previous week and 16,000 fewer than a year ago. Despite the lighter slaughter rate, box beef prices were lower for the week. The choice cutout value was down $6 for the week, while select boxes were nearly $4 lower. Friday’s COT report for the week ending January 20 showed that funds bought 1045 cattle contracts against commercial selling of 5093. The fund length of 148,466 contracts was the largest since April 2019 and within 6000 contracts of that record. The market is looking for a high that starts to quality demand.