Grain and cotton markets continued to fall on Friday, following a second day of selling and fund liquidation after the recent China summit. Cattle futures moved higher amid ongoing tight supplies.
The market downturn came as traders removed what analysts described as a “China premium” from grain and cotton prices. Shawn Hackett of Hackett Financial Advisors said the lack of concrete commitments on agricultural purchases at the summit contributed to market uncertainty. “I just think the concept here was that most people believed, including myself to some extent, that we were going to have some tangible, concrete evidence of increased purchases of other ag products whether it’s corn, whether it’s cotton and such forth. We just felt that for him to go out there and come back empty-handed was not a likely scenario and he came back the way it looks pretty empty-handed without anything tangible anything concrete,” Hackett said.
Despite statements from USTR Jamieson Greer about China’s commitment to buy billions in agricultural goods over three years, traders are looking for specific proof of sales before responding positively. Hackett explained: “It needs proof. It needs to know how much of which markets. When are those purchases going to start in earnest? Is it going to be a quarterly thing? Is it going to be just an annual thing? Can they do it whenever they want? So much of that has to do with what’s the appropriate pricing discovery mechanism for today based upon the nature of these purchases.” He also noted that during previous trade agreements like Phase One, exact quantities gave clarity on supply-demand equations.
Recent price movements suggest much of the rally leading up to this week was due more to expectations around trade than weather or geopolitical factors. As Hackett put it: “And given the way things have played out…it’s becoming clear that a lot of that late rally we saw leading into this meeting was more about the trade premium than anything else…the market got surprised in misdiagnosing what the premium was coming from.” He believes most heavy selling may be over but says speculators are unlikely yet to abandon long positions due partly to early growing season uncertainties.
Hackett pointed out technical trends remain intact despite sharp reversals: “It’s a strong reversal but if you look at the up trends…we’re still holding those up trends even after today but barely meaning we’re at a point where if we’re going to maintain any technical credibility, we need to dig our heels in here.” Other factors include ongoing global tensions—such as conflict involving Iran—and rising energy costs which could support commodity prices longer term.
Near-term weather is expected by some analysts—including Hackett—to improve conditions for planting in parts of Texas and southern states: “Good rains in Texas, the deep South, [and] Southeast areas…No doubt that weather in next couple weeks is going be quite productive.” The wheat market has already priced in poor crop news with no further major gains anticipated unless global circumstances change significantly.
Looking ahead, Hackett remains optimistic about grain prospects for 2027 due largely to projected El Nino patterns improving U.S. crops: “Our view is we have this significant El Nino weather pattern coming…which means very good crops.” On cattle markets he added: “We don’t have the animals…unless Mexican border opens up or Brazilian tariffs are cut it’s hard see how you could get big break.”
AgWeb authors publications on topics ranging from commodity markets updates like these events through farm leadership strategies; presents awards such as Top Producer Awards; partners with organizations like American Soybean Association; influences farming culture by promoting leadership programs; functions as subsidiary Farm Journal; reaches agriculture professionals via online content; aims supply farmers essential news resources—all according to its official website.
