Argentina cuts export tax by 2%, weighing on the morning grain trade.

The morning grain trade is on the defensive after yesterday’s December WASDE report showed a friendly number on corn, by increasing exports by 125 million bu, and cutting ending stocks with that increase. Yet the weight of wheat and its 901 MMB carryout, along with soybeans continuing to watch South American weather, keeps the market on the defensive.

Wheat is struggling after Argentina cut its export tax on grains, soybeans, and soy products by 2%. With the wheat harvest underway and exports underway, this has the most immediate impact on wheat.

Yearly corn exports are now forecast at a record 3.2 bbu, and despite thoughts that demand is front-loaded, sales are not slowing and remain nearly twice last year’s pace. Given the disruptions to Black Sea logistics and quality issues with China’s crop, US corn exports may actually increase. The fact that US soybean carryout held steady rather than increasing was also a plus.

Of course, in the USDA’s infinite way of getting things wrong on balance sheets and the world believing them, they’ve completely glossed over the production problems in China, Russia, and Ukraine. To add insult to injury, they ignored the fact that Brazilian demand for domestic use continues to surge. I picked up on Twitter an interesting tabulation showing that, in Brazil today, you can buy and hedge steer for a 30% return under standard assumptions. Brazilian corn is more expensive than US corn that is being exported. In the US, if you buy a feeder calf today, you’re looking at $10/CWT loss on paper.

Another embarrassing glossed-over stat from the USDA is that China, which experienced a massive drought in core provinces, saw 8%+ above-normal temperatures and 30–50% below-normal precipitation. If this were in the US, where we have much more advanced farming techniques than the Chinese could ever hope for, the USDA would show a 10% swing in US production during the same period. As we enter 2026, it’s hard to believe China will be buying wheat in excess of the 10 MMTs it agreed to under the WTO.

John Deere, IH, the fertilizer industry, and the seed companies should be pleased to have access to the $12 billion farm payment plan agreed to yesterday. The USDA will implement it in the same old-fashioned way, and we will likely see input costs become even more burdensome over the next six months.

The Federal Reserve will announce its interest rate decision at 1:00 p.m. CT today, and it is widely expected to cut rates by 0.25 basis points. Expect this Fed blueprint at today's meeting: a rate cut, hawkish rhetoric about “responding to inflation,” and a focus on bank reserves as the reason the balance sheet will begin expanding again. And won’t be long, where gold, silver, and bitcoin will look so expensive, that index funds will start looking at grains as an investment choice for a “thing” to own.

Yesterday’s cattle trade was volatile with early strength met with midday selling. However, a continued increase in the feeder index helped buoy feeder valuations later in the session, though prices still reflected a second consecutive day of losses since last week’s push to 340. Yesterday’s feeder index has now hovered around 345, making it difficult for feeders to maintain a corrective state for very long.

Yesterday, the choice cutout value slipped $0.14, and the Packers have seen their slaughter margins fall precipitously last week to $54. Some deliveries were posted against the December cattle overnight, which may cause a softer start. A close below 225.00 on February cattle would create a deeper correction. Meanwhile, feeder cattle attempted a 25% correction yesterday to 330-331, which would provide near-term support. A lack of weakness in feeder cattle today will see upside price momentum return, targeting a trade inside the gap to the 340-348 range on the continuation chart.