October 27 Comment

After a weekend of trade deals with key countries and the expectation of a positive meeting outcome from Thursday’s meeting in South Korea between President Trump and Chairman Xi added to the bullish enthusiasm for massive gains in beans with wheat posting double-digit gains with corn grinding out smaller gains. Since April and the start of the tariff war, prices had been in a steady down trend aided by record US crop conditions and potentially record yields before the strong last two-weeks of across-the-board rallies. Other markets were equally as volatile with gold and silver posting sharp losses on the rare earth mineral deals with several SE Asian countries while cattle were gain limit down on the threat od expanding beef imports from Mexico and SA. On the positive side, the thawing of the trade war sent the Dow, S&P and NASDAQ to new all-time highs and expectations for two Federal Reserve rate cuts in 2025, had investors piling into equities. The raw material and equity markets will continue to be absurdly volatile.

News and Notes:

• There are no meaningful changes to either the US or SA weather forecasts into month end with both Argentina and Brazil continuing their perfect mix of rain and warm temperatures to finish planting.
• The Dec corn and Jan bean daily charts are on Page 2 and shows today’s dynamic trade and the continuation of the rallies that started earlier this month. From the monthly lows to today’s highs corn has rallied 22-cents while beans are up 78-cents. Since there are no world weather issues cutting potential yield and US yields are still reported as lower than the August estimates but still larger than projected total use. Fund short-covering was a major feature of today’s rally with the funds estimated to have bought back about 100 MBU of their bean short, 50 MBU of their wheat short but only 30 MBU of their corn short position. Beans are the crop at the center of the trade deal with China but the bean rally to new 16-month highs only dragging corn up to new one-month highs clearly defines the market that will be most influenced by the trade news.
• Get used to seeing the names Jameson Greer (lead US trade negotiator), Treasury Secretary Scott Bessent and of course President Trump pop up all over social media for the next several days as they meet and negotiate with their counterparts from China. This is the highest-level trade meetings between the US and China since the Phase 1 and Phase 2 trade delas were signed in late 2019.
• The cattle market was actually the most volatile of all the markets today, as last Friday’s limit down closes and the weekend news of more progress with Brazil and Argentina on relaxing tariffs with more cattle and processed beef imports in the coming year. The seasonal re-opening of the Mexican border for feeder cattle also applied pressure. Technically bot live and feeder prices have gone up so far that any correction could take prices down another $10-$15 without breaking the uptrend. A strong US economy, falling interest rates, job retention confidence and record highs in the major equity indexes will add support for cattle demand once this technical meltdown ends.

So much happened today, I decided to add an extra chart and a few more notes on how all of the market movement and international news may fit together and end up affecting your bottom line. The first is that bean sales were made for both 2025 and 2026 to reward the substantial rally that is not a product of unexpected new world usage, but rather just a shift of supply from the US to Brazil. The point of this comment is always to try to give an unemotional take on price movement and how to take advantage of trends and/or large volatile moves like today’s and it is a concern that this could become a “buy the rumor” sell the fact rally in the days ahead. Please make sales as this rally is a gift that has added about $35 to $45 an acre to a 200-bushel corn acre and nearly $35 to $40 an acre for a 50-bushel bean acre. That is money was not expected two-months ago and can go a long way to helping meet cash flow needs into year end. There is no positive news from Washington about re-opening the government which only further delays yield updates and any government assistance program that may be coming. My bottom line for these rallies is that they are not new long-term trend changes, just a rally from a speculative community caught on the wrong side of today’s news. Catch up on sales and if you are worried about limiting upside and running out of bushels, we have several option strategies to protect both the upside if you have to sell out and the downside if you want to set a floor but retain ownership for any potential upside from a weather pattern change in SA in early 2026.