The US and China agree to lower tariffs.

A volatile full moon session marked the start of Sunday night trading. Grains opened sharply higher but were quickly met with renewed selling pressure from bearish sentiment. This pushed wheat and corn back down, while soybeans nearly returned to unchanged before rebounding sharply higher into the morning. The reversal followed news of easing trade tensions. That same news sent gold tumbling by over $100 an ounce and lifted the Dow Jones more than 1000 points on optimism that a breakthrough might be coming to resolve various deadlocks.

As the week begins, it appears the United States and China reached a weekend agreement to reduce reciprocal tariffs, with China lowering its rate to 10 percent and the US maintaining a 30 percent level. The US will leave in place a 20 percent tariff on Fentanyl as part of a 90-day period during which a more complete trade deal is to be negotiated. While this does not end the trade war, the outlook is notably more positive this morning than it was last Friday. Markets responded with strong gains in the major indices and the US dollar, along with a rally in crude oil. Soybeans emerged as the primary beneficiary of the trade developments, and red meats may follow if the global economic outlook improves. Also over the weekend, Secretary Rollins again halted all imports of cattle, bison, and horses from Mexico due to the continued spread of the new screwworm, which Mexico has not yet contained.

US planting progress is expected to show a strong increase from last week, even in areas affected by heavy rain. With planting well underway, growing season conditions will now have more influence on price discovery. Focus is turning to the Western Corn Belt, where warm and dry weather is expected. The May WASDE report will also be released today at noon Eastern time. No major changes are anticipated for old crop carryout, while the only notable adjustment to the new crop outlook is a projected 550 million bushel increase to US corn carryout. Unless the WASDE report contains surprises, market movement today will likely be driven by any new trade updates. Estimates for current planting progress suggest corn seedings are at 65 percent and soybeans at 47 to 48 percent through Sunday. Wheat crop ratings are expected to improve by another one to two percent in the good to excellent category, bringing them close to 53 percent.

It was an extremely hot weekend in the Northern Plains, with temperatures in the mid-90s expected to persist for another two to three days before rain arrives midweek and a significant cooling trend takes hold, bringing highs down to the 50s. This cooler weather is forecast to extend into the Lake States over the weekend before another warm-up next week. Meanwhile, in China, dry weather is expected to return across the northern wheat and corn regions for the next ten days. China is almost certain to enter the wheat market later this year. The main question is which source they will choose, but any such purchase would likely support global wheat prices by tightening world supplies.

Live and feeder cattle prices are expected to open sharply higher this morning due to a combination of supportive news. Over the weekend, Ag Secretary Rollins ordered the immediate closure of the Mexican border to cattle, bison, and horse imports. New contract highs are likely with the stock market staging a sharp recovery on renewed optimism over trade developments between the US and China.

Last week, boxed beef values posted solid gains, with choice cuts rising by $3.07 and select cuts climbing by $5.82. The only time beef prices were higher was in 2020 during the pandemic. Despite the strength in beef prices, estimated slaughter margins are deeply negative at around $60 per head, the worst since April 2015. Like the grain markets overnight, cattle could also open sharply higher, experience a pullback, and then depend on sustained buying interest to hold morning gains.