Tuesday's overnight trade was mostly firm.

Grain prices started Tuesday higher, with wheat and corn recovering slightly from yesterday’s heavy losses, while soybeans are still firm but well off overnight highs. Late yesterday, Argentina’s newly elected government temporarily suspended its grain export register. President Milei is expected to communicate his economic plans further soon.

Argentina has halted ag export registrations, which is what it does ahead of monetary policy changes. It is not an indication of any abandonment of ag export taxes, but the population of Argentina now awaits what Pres. Milei will do with any policies on the table that he wants to revise. Farmers are hopeful that he will keep his campaign promise to cut or end ag export taxes, but Argentina needs a means to pay back its IMF $44 billion loan. Pres. Melei is well trained in finance and economics due to his background (quite interesting if you review his background) and is not a fool in what needs to be done to achieve his stated goals.

At the end of its economic policy meeting overnight, China announced that it would step up policy adjustments to support a 5% GDP rate and boost demand in 2024. No specifics were announced on how they will stimulate economic growth and consumption, but following the ending of Covid restrictions last February, China has been struggling with the fall in raw material demand. Equity markets strengthened on this news that a large property developer that was feared to default on bonds made good on its loan payments. Later this week, the Biden administration is anticipated to announce if the sustainable aviation fuel made from ethanol can qualify for billions of dollars in subsidies that are available under the Inflation Reduction Act passed in 2022. Ethanol’s inclusion as a SAF feedstock would be a boon for the US ethanol industry.

Weather in South America shows dryness expanding in northern and eastern Brazil, which is putting premium back into corn and soybean futures. A few showers fell across N and C Brazil overnight with totals traces to .8”. The coverage of rain was disappointing, especially since it’s now the normal monsoonal season. High temperatures ranged in the 90s across N Brazil. The 10-day GFS model, which is the one that remains the most accurate, has scattered showers impacting in N Brazil at times with accumulations of .50-1.75”, which is not enough to satisfy daily temperatures that are in the 90s/lower 100s. Rain again is offered in the 11-15 day period, but the timeframe of the forecast always remains too wet when it’s weeks out. Confidence in any widespread rains in northern Brazil remains low. A worrisome drought is taking hold in N Brazil and looks to extend into January, causing crop yields to fall.

Live and feeder cattle futures pushed higher Monday after an erratic opening but settled on the highs of the session. Meanwhile, negotiated fed cattle markets and the plains were untraded with fed cattle supplies thought to be lower across the 6-Area region this week. Slaughter margins are holding near 3-month highs at $126/head for the last week. Box beef values started higher for the week, with choice gaining $2.52 while select was higher by $1.64. The fourth quarter seasonal beef rally has not occurred, and since the start of November, the choice cutout has lost $12, and select was down $19. Ironically, even with a large break in price, cutout values are at record prices for the first half of December.

Record low feeder inventories will have fed cattle supplies and beef production on the decline in the year ahead. Long-term technical support may have been built on the February cattle in the $162 range, with important lows forming here now for live and feeder cattle futures. We anticipate that lows that were put in last week are the lows for the washout, as open interest for the index funds is now down to less than 20,000 contracts, minimizing their impact of unloading any remaining positions unless they are going to hold and possibly reestablish some longs. One of the strongest up-seasonals in price for cattle is in front of us from December 7 into the end of the year. This is similar to grains peaking after 4 July and declining into August.