The current grain rally anticipates a Chinese/US trade resolution in two weeks.

Grain futures got a boost overnight as it appears we have a framework for a trade deal with China that hopefully will be agreed to later this week when President Xi and President Trump meet. The trade deal has soybeans doing the heavy lifting overnight, with thoughts that between 250-300 million bushels of demand will come from China before the Brazilian crop becomes available. It is not known yet whether this is a agreement (handshake) or a signed trade deal.

The strengthening cash market is offering broad-based support this morning as farmer selling remains subdued. Basis values have continued to tighten across both interior and export channels over the past week, with many expecting that trend to persist. A key driver behind this firmness is the continued underestimation by cash buyers of the U.S. farmer’s improved ability to store inventory. With enough bushels already moved and the promise of forthcoming government funding, selling interest has further diminished.

If the current rally in futures markets holds, additional movement will eventually emerge. But for now, farmers appear content to sit tight. The backdrop remains one of tight basis, limited country movement, and buyers forced to come to the table.

Meanwhile, the U.S. government remains shut down for the fourth consecutive week, and with no breakthrough in sight, expectations for the release of the November WASDE report are quickly fading. The absence of official data continues to reduce visibility in the marketplace, which is pushing trade participants to lean more heavily on anecdotal field reports, private estimates, and basis signals to gauge supply-side dynamics.

Pres. Meilei of Argentina had seen his party win a resounding victory in the midterm elections, allowing the administration to continue pushing through its radical overhaul of the Argentine economy. The US dollar and energies are in the red this morning, and gold is down nearly $100.00 an ounce as safe-haven buying subsides. Equities are set to make new all-time highs today, pulling additional money out of gold.

Cattle futures are set to open sharply lower again this morning after closing limit down on Friday, with expanded limits in effect today. Live cattle can move $10.75, and feeder cattle $13.75. Word over the weekend has it that Pres. Trump and Pres. Lulu of Brazil will be negotiating to possibly reduce the 50% tariff placed on their country back at the beginning of July. With Mexico pushing to get feeder cattle back into the country for the southern winter wheat pasture grazing from cattle north of Chihuahua, Mexico, and the prospects of Brazilian tariffs getting removed, the cattle trade remains under heavy pressure, as premiums from these two events are extracted.

Last week, cash trade saw live sales in the north at $238-239 off $1-2, while the southern trade was steady at $ 2 lower at $238-240. Cattle slaughter last week was at 567,000 head, up 20,000 for the week but 40,000 head less than a year ago. Cumulative slaughter for the year is now off 7%, the lowest since 2015. Box beef gained last week had select up $7.70 while choice gained $8.99. Despite all the headlines, beef supply remains short until it’s not. If tariffs are removed, Brazilian beef increases will take weeks to see, but the bloom is certainly coming off the market, with the market anticipating it on paper.

The cattle trade will be sharply lower this morning until we know the status of Sec. Rollins' stance on Mexican feeder cattle being allowed in from the northern portions of Mexico and whether Pres. Trump succeeds or not with Brazilian tariff rollbacks. If nothing is seen on these two fronts this week, this will allow for a recovery rally. The bloom has come off this market so rallies will get sold, as it still appears that Argentina will be granted higher quotas for beef.