Overnight grain trade consolidates recent sharp advance for the week. Strong weekly chart closes are in the works if the trade just consolidates this week's excitement.

The grain trade consolidated yesterday's sharp gains, with mixed trading overnight. The night session trading was lower, but by morning, soybeans reached new highs above Wednesday’s spike high. The grain trade consensus again remains overly pessimistic about Trump’s announcement of 8 MMTs of soybeans being purchased by China for old crop status. The general trade consensus again is the opposite of what was proven in December/January.

Last fall, when the 12 MMT Chinese trade deal was announced, the Bears' response was that it would not be completed, and if it were, it could take well into next summer. It was also feared that China would not want to pay the $1.00 premium to Brazil beans. The complaint also, at the time, was that there was no signed trade agreement. What happened? China paid the premium over Brazilian beans, completed the transaction within 60 days, and executed the deal on the basis of nothing more than a verbal acknowledgment. Despite bearish commentary for many market advisors, the grain board continues to acknowledge that China is coming, and it may not just be for beans; it will be interesting to find out that China may have an interest in corn or wheat as well.

The part that is difficult for some to accept is that China is a communist country and does not necessarily have to think with the same mindset on what is right and wrong. But it makes sense to lose $300 million buying 8 MMTs of US beans to continue to appease Pres. Trump so he doesn’t impose the $90 billion in tariffs back on their country. This is the hurdle that the negative consensus in the grain trade must overcome again. Let us just call it Trump Soybean Deal 2.0. In South America, despite some rain in Argentina this week, conditions continue to deteriorate. For the fifth week in a row, crop ratings in Argentina have declined, and this week the bean crop has declined from 47% good/excellent to 40%. Again, there are rains forecasted for the area, as have been for weeks, that something is on the way within seven days. Southern Brazil is starting to dry out, with roughly 45% of the soybean crop flowering in Río Grande do Sul.

Yesterday, the cattle market saw a sharp decline in board trade, despite the cash market action remaining unknown. The story on Wednesday afternoon was a packing plant in Greeley Colorado could be shut down by a strike that was voted on by their union, but negotiations continued and are ongoing. Yesterday afternoon, big money news that a trade deal was going to be signed with Argentina to confirm 100,000 MTs of beef into the US. Recall last fall in October, what started the break in the cattle futures was the talk of Argentine beef going from 20,000 MTs up to 80,000 MTs a year. This trade solidifies that deal but as an extra 20,000 MTs for a grand total of 100,000 MTs of Argentine beef.

Yesterday’s cash feeder index gained $0.59 and is at $375.16, and now carries a sharp premium against the board, which does its own thing. Boxed beef values did slip yesterday, with choice off $0.77 and select down $1.72.

The lines in the chart are obvious. 232 is the level April cattle must hold on a closing basis, while March feeder cattle have the critical 15-day MA at 362, with a close below 360 a sell trigger on the board. Today’s action will define whether the broader uptrend on futures stays intact or if index funds go into liquidation mode to put their equity elsewhere.