Grain and cotton markets ended mostly lower on Tuesday, except for soft red winter wheat, while livestock markets saw hogs decline and cattle rise. The movement comes after an early-week rally driven by news that China would buy $17 billion of U.S. agricultural goods annually through 2028, in addition to committed soybean purchases of 25 million metric tons.
The significance of these developments lies in the uncertainty over when and how China will begin these purchases. Brian Grete with CommStock Investments said the market is waiting for more details and confirmation from China before moving further. “I think that the market’s just kind of waiting at this point in time, waiting on details to come on, more details on the trade side of things and or any confirmation from China on some of those purchase levels,” Grete said.
Traders are also watching for possible rollbacks of tariffs by both countries. “One of the other uncertainties is whether this will be open to commercial-based purchases by China,” Grete said. “And the key to that is whether there will be tariff rollbacks. The Foreign Ministry said that there would be some tariff reciprocity, but we shall see. If the U.S. takes off the 10% fentanyl tariff on China, then they’ll roll back their 10% on soybeans.” He added that U.S. soybeans are currently less competitive than Brazilian ones due to price differences.
Grete addressed questions about whether U.S. agriculture can supply enough products for China’s needs: “Absolutely… So whatever we’re talking about, whether it’s corn, wheat, sorghum, meat products, it’s going to take all those to get to that $17 billion beyond the soybeans.” He also discussed potential changes in global trade flows as a result.
Market participants are looking for clarity regarding marketing year versus calendar year commitments after previous confusion over timelines: “We don’t know if it’s calendar year… but markets work on marketing years,” he said.
U.S. corn planting was reported at 76% complete and soybean planting at 67%, both ahead of five-year averages—a factor putting additional pressure on prices according to Grete’s analysis.
Wheat conditions remain poor with only 27% rated good-to-excellent nationally; Grete noted these are among the worst ratings since national weekly ratings began in 1986: “Those are the second worst since USDA has been doing national weekly ratings since 1986… only 1989 was worse than this year at this point in time in mid-May.” This could lead to high abandonment rates in hard red winter wheat states.
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Looking forward, traders continue monitoring money flow into grain futures contracts along with upcoming government reports such as Cattle on Feed data later this week.
