Trade Summit Disappointment Sparks Sharp Selloff in Grain Markets

Disappointing news from Sec Bessent that current Chinese purchase agreements would still be in place with no additional corn or bean sales during the trade meeting,  started an avalanche of selling, with beans posting sharp losses. Corn and wheat followed the bearish news as bulls had been aggressively buying beans lately on the expectation that good will purchases would be seen signed this week. With the funds heavily long in corn and beans, the path of least resistance was lower in all ag markets, as the US export footprint will not be expanding because of this meeting. While there is one day left of meetings and negotiations, it is clear that the main purpose of this trade summit was for US based industries that do business in and with China, which propelled the US equity markets to more record highs.

News and Notes:

- Wetter weather is coming to the WCB to help with the crop’s early development while most of the Corn Belt is in great shape. SA weather is also a non-factor as Brazil approaches early safrinha pollination with less than 20% of the crop in a dry pattern.

- The daily November bean chart is on Page 2 and shows today’s collapse after the April’s sharp rally. The good news is that the market was significantly overbought and today’s panic selloff corrected that while the other positive highlight is was the daily lows hit the 20-DMA (red line) and closed well above the daily lows and the support at the 20-DMA. The funds were long a huge 1.3 BBU going into today but sold roughly 100-130 MBU to trim some of the excessive length. The problem still remains that if the funds decided to go flat the market, another 1-1.1 BBU could be sold. Beans are now on the slipperiest slope if US corn acres are shifted to beans because of high fertilizer costs and China continues to buy most of their beans from Brazil.

- Weekly export sales were unimpressive across the board as corn sales were half of last week while beans and wheat felt the pain from being the most expensive options in the world. With today’s gut shot from the trade meeting, there is not a clear path on how the US can recapture a larger share of the world business.

- The US House of Representatives did pass a bill to allow year-round E-15 sales, which is an important step in making it law. The House version of the bill will not go to the Senate for debate and changes. There is no timeline for any Senate vote, but this is most progress in finally passing year-round E-15 that we have ever seen.

- Thanks to Helena Agri for making the FieldLink podcast available for distribution as this week’s podcast focuses strictly on the markets, marketing strategies, and the potential fallout now that the trade summit proved disappointing. Please listen to our 43-minute discussion.

Optimism quickly turned to pessimism and the trade was never given the opportunity to sell the fact, as the fact ended up being that US ag was closer to the bottom of the agenda rather than the top. The next big potential development from the summit is some partnership to help convince Iran to re-open the Straits, which would also be bearish raw material prices as crude would quickly reset on an opening of the Straits. With the next major USDA report not until the June 30th  quarterly stocks and planted acreage report, rallies over the next 5-6-weeks will be difficult to sustain with no major US weather issues in the forecast and USA cash prices above other world exporters heading into atypically slow seasonal export period. The trade meeting offered a ray of hope for many US ag markets, but none of them benefited from the negotiations. There is no doubt everyone is disappointed, but counting on the government for help has always been a risky proposition.