Pres. Trump announces "Celebration of Agriculture" day for March 27
After the broad selloff on Wednesday, futures found their footing overnight, with agriculture joining the steadier tone. Soybeans absorbed the worst of the damage in the previous session, falling hard enough to lock limit, which now widens today’s trading band across the soy complex. That takes the soybean daily limit to $1.05 per bushel (which will likely not be utilized today). Corn and wheat were pulled lower as well, though neither market stretched to its maximum move. Pres. Trump announced that he will hold a “Celebration of Agriculture” event to announce the RVO/SRE reallocation mandates on March 27. Soybean oil responded favorably overnight on hopes of a favorable package. (5.4-5.6 billion RIN blending package).
Much of the pressure yesterday appeared to be tied to position squaring and profit-taking, but soybeans faced an added headwind from fresh uncertainty surrounding U.S.-China talks. Concern grew after indications that a Trump-Xi meeting could be pushed back, and President Trump later said the delay was tied to his focus on the war in Iran. That has traders increasingly uneasy about the outlook for Chinese demand, particularly the extra 8 million metric tons of U.S. soybeans the White House had previously indicated China would purchase. Of course, the most bearish of advisors out there suggest China will be lucky if they ever buy four MMTs, forgetting Trump’s ability, and China knows that until he is not Pres., they have to abide by the verbal agreements they had agreed to. So it's just a matter of time before we see the old crop soybean buying.
The geopolitical backdrop remains a major source of stress. Washington is struggling to build broader support for its actions involving Iran, and even confidence around secure shipping through the Persian Gulf is being questioned. At the same time, rising gasoline and diesel prices in the U.S. are starting to show up in consumer behavior. That is not an encouraging development with the peak summer driving and grilling window approaching.
Outside of those political risks, the broader supply story has not shifted much.
Brazil’s soybean harvest continues to advance, while safrinha corn planting moves forward despite delays. Arguments over the final crop size are still far from settled and are unlikely to be resolved until the harvest is much further along. In corn, that debate could easily last into late summer. Even as more analysts express concern about Brazil’s slow safrinha planting pace, most still expect production to exceed USDA projections.
Demand remains one of the more supportive factors in the grain space, especially in China, where crop quality continues to be closely watched. Domestic use of both corn and soybeans remains strong, thanks to favorable processing economics. Ethanol margins are sitting around 20 to 25 cents per gallon, while soybean crush margins are near $2.35 per bushel, both levels pressing toward the highs seen last summer. US corn sales are already at 80% of the USDA's estimate through September 1. Granted, sales will naturally fall off in the summer, but we still have strong bookings that will materialize in April and May.
The grain trade is in flux right now since crude oil has fallen below $100/barrel. Chinese buying is in question for now. But if the Strait of Hormuz is not opened in the next two weeks, the reality of reduced fertilizer for the remainder of the safrinha corn planting and for North American needs that have yet to be secured, new crop production yields will need to be questioned, though there is no historical data to compare against. It’s basically people’s opinions and AI guesswork.
Yesterday morning, with the stock market higher in crude oil softer, live in cattle futures wasted no time in opening firm and posting gains throughout the session. After becoming tightly oversold, discounts to cash talk push feeder cattle back to 350 with April live cattle plugging their gap at 234 before closing just shy of it. The cash feeder index continued its softening and was off $1.30, closing at $357.05. With the March feeder cattle contract set to expire next week, the convergence continues.
Box beef prices continued to gain, with choice rising above $400 for the first time since last September, up $4.74 to $402.66. Meanwhile, select was also higher by $2.97 at $394151. The packers have recaptured profitability with last week’s $5.00 lower negotiated trade, along with the resurgence of box beef. On the charts, April live cattle have 234-235 as primary resistance, and if overcome than the next major resistance point is again near 240. April feeder cattle have last week’s recovery high near 351.50 as initial resistance, with primary resistance at 357-358.