ALL ABOUT CHINA
MARKET UPDATE
You can scroll to read the usual update as well. As the written version is the exact same as the video.
Timestamps for video:
Overview & News: 0:00min
China Meeting: 2:45min
Corn: 8:05min
Corn Charts: 12:20min
Beans: 13:50min
Bean Charts: 16:50min
Wheat Charts: 18:10min
Cattle Charts: 19:40min
Want to talk?
Office: (806)484-1214
Futures Prices Close
Overview
Grains lower across the board in a pretty quiet day following yesterday's big moves up.
Nothing too interesting happened today and the market has been fairly boring since that USDA report. As we are still trapped inside the ranges from the USDA report day with zero fresh news for bulls or bears to chew on. We've essentially been completely sideways for over a week now.
All eyes are going to be on that China meeting in two days, which could finally help give this market some further direction and a break from the range.
We're also going to be getting that USDA quarterly stocks report next week that can shake things up in a big way as well.
So the market has been quiet and trapped in a range, but those ranges will likely break soon one way or the other with the headlines and events we'll be getting over the next week.
Outside of China and the USDA, we continue to see back and forth headlines from the Iran war and over in the Black Sea.
Today Trump said that he believes an agreement with Iran will be reached after the mid-term elections.
Iran did propose to re-open the Strait of Hormuz within 7 days if the US starts taking steps to lift it's blockades of Iranian ports and halt military operations around the waterway.
This isn’t the first time we've seen peace talk headlines, so we'll have to see what happens.
But crude has been starting to take a decent hit from the recent highs, so the market seems to believe a path to end the war and open the Strait is "possible".
That would be one potential negative factor for the grains if crude continued to see pressure.
Simply given the high time frame correlation between the two.
As corn and crude are seeing one of their largest divergences we've had all year long.
In other news we saw Ukraine's President says that Ukraine is ready to make an unconditional ceasefire.
Which helped add some pressure to the wheat market today.
Things really haven’t cooled down in the Black Sea despite the market removing the premium.
So that does make you wonder if the wheat market is still under pricing the export situation over there and the impacts it could have. As I don’t personally think the longer term total impact has been priced in.
Harvest Delays?
One reason behind yesterday's strength was partially due to some harvest delays.
As it has been incredibly wet this month.
Here is the precip rankings for September.
You have a huge chunk of the corn belt all receiving top 10 most rain they've ever had for September.
But it's too early to say if this is going to lead to any real issues or not or mean anything at all.
It does look like it should start to dry out in the central to eastern corn belt.
Here is the outlook for the next 7 days.
Short term, the wet start has been slightly supportive, but I don’t see this as being a bullish factor down the road that concretely changes anything fundamentally.
China Meeting
Yesterday's rally was also largely about optimism heading into this China meeting.
The US proposed extending the China trade truce by another 6 months, and China is pushing for a longer truce extension.
Who knows what this meeting will bring.
The biggest question for grains is:
Will this meeting provide anything that the market has not yet priced in? Will it keep the bulls fed?
China agreed to buy $17 billion worth of non-soybean ag products every year over the next few years.
If you prorated that number, it's closer to $10 billion for 2026.
But China has not bought much. They've bought some sorghum but we haven’t seen much else.
They've only bought around $4 billion of non-soybeans this year. However, since the agreement in May they've only bought $1 billion. So if they are going to meet that goal, they'd have to pick up the pace extremely fast. Or the goal may seem rather lofty.
This is a lot harder to track than their soybean purchases, as it’s harder to track dollar amounts rather than metric tons.
But this is going to be a big item the market is watching.
Will we get any additional clarity on this? Will it still happen? If so, what will it include?
There were several rumors out yesterday that corn was higher because of optimism around China possibly buying. Others speculated that China was buying corn futures ahead of the meeting. I don’t know how much I buy into that, but that was the rumor. It's also impossible to track if China was buying corn futures or not.
The market wants to see China confirm something in this meeting and provide more details.
Now from an economical standpoint, does it really make sense for China to buy our corn now?
Actually no, not really anymore.
China can buy it's own corn a lot cheaper than it can buy ours and ship it over. With shipping and high fuel costs and tariffs. Mathematically corn just isn’t very attractive and it would make more sense for them to buy other ag products.
However, just because it normally wouldn’t make sense, in the grand scheme of things, China is more focused on other trades such as AI. So you can’t rule it out. If China buying some corn helps China secure something else, I am sure they'll do it in a heartbeat despite it not being economically favorable. It could always be a political buy.
The corn market doesn’t need China to have a bullish story.
We already have one.
But it would of course just add to the bullish narrative if China did decide to buy some corn, given that we have record demand without any China.
More demand than we had last bull market. In the last bull market, that demand was almost entirely led by China buying.
The yellow bars are exports to everywhere but China. We have completely shattered that record the last two years.
China agreed to buy 25 MMT of soybeans.
Which the market already knows about.
And it's looking more and more likely that they will live up to that goal, as we've always thought they would.
So we have to question, what could they say that drives this market higher or lower?
Are they simply going to reiterate that China will meet that goal? Or will we get any further details at all?
As repeating the same promise does not necessarily give the market a new reason to rally.
For the market to get super bulled up, we might need something for bulls to chew on.
One obvious risk has to be that this is a buy the rumor sell the fact type of event.
Which is not uncommon at all for these meetings. We have seen just how sensitive beans can be to China headlines.
Here is the soybean chart overlayed with the China headlines.
The last two meetings were October and May.
We tend to rally going into these meetings. Then if the meeting disappoints, we see weakness.
The May meeting was originally scheduled for March. That meeting got delayed, and we saw a limit down day that day.
We then recovered and rallied going into the May meeting.
That May meeting then did end up marking the highs, as the meeting provided no further details on soybeans.
After the meeting in October, the market continued to rally for a little longer. Because this meeting had a different outcome. Where we received actual new numbers and clarity as to how much China would buy.
The market then topped in November when we saw China buy their very first flash sale of soybeans. Which would be another case of a buy the rumor sell the fact, just in a different path.
So expectations matter. What has the market priced in?
I do not see this meeting having a "bearish" outcome where our relation with China goes sideways and they stop buying soybeans, but that doesn’t mean it has to feed bulls either if we don’t get anything new.
I guess we will just have to wait and see how it unfolds and if it adds fuel to the fire or not.
Who knows what the meeting itself will bring.
However, as I've talked about plenty of times, the USDA has not priced in the full 25 MMT on our balance sheet.
There is a 300 million bu difference between how much the USDA expects our exports to grow vs last year and how much more China agreed to buy vs last year.
(USDA has exports +165 million vs last year)
(China will buy +478 million vs last year)
That is a pretty large disparity. Meaning we might have to ration non-China demand if China lives up to the goal.
A possible long term thesis:
You also have to ask yourself, what if China isn’t buying because Trump is making them?
What if China has agreed to buy all of these products because they see future supply risks?
China is smart. I just thought I'd throw that out there.
As that adds to the long term bullish thesis for grains as whole.
Today's Main Takeaways
Corn
Fundamentals:
Short term, is there some risks?
Of course. As I've been talking about the last few weeks, I am still cautious up here short term until the market gives me a reason to think otherwise.
However, long term I am still very bullish.
Personally, I'd say there is around -30 cents of downside risk from here shorter term, but over +$1.00 of potential upside from here longer term.
So I believe the upside does outweigh the downside especially long term.
We currently have the tightest US situation since 2022. Aka the bull market.
That's clearly not bearish.
We have a world situation that continues to get tighter.
The tightest in over a decade.
The trend for this crop is clearly lower.
The new crop carryout has continued to get tighter and tighter every single month.
Small crops get smaller. Not bigger.
Over the last several months, I had always talked about how there were possible paths for a sub 10% stocks to use.
That time has finally arrived..
We have a 9.7% S/U ratio today.
There are still plenty of ways this balance sheet could get even tighter.
If yield drops further. Say 177 for example. That gives you a sub 9% stocks to use ratio. Which is well into bull market territory tightness.
Let's say the USDA bumps old crop exports by another +100 million, which I think is possible. That alone drops it down to 9%.
Export sales for corn are well below last year. Which has some people concerned. That is a valid reason for concern.
However, you do have to note that our export inspections are well ahead of last year, and well ahead of the pace needed to meet the USDA's target. Which is a great sign.
(Chart Credit @drbrock37 on X)
Did you know.. we could have the 2nd largest crop on record this year.
Yet.. have a bull market.
How is that possible?
Demand is purely that strong.
We built all of that demand with cheap prices over the last few years. A case of cheap prices curing cheap prices.
We are not yet at prices that incentive less demand.
So long term, I think demand will ultimately have to be rationed via higher prices.
Demand doesn’t magically disappear for no reason.
Then you have the inflation story.
This chart that compares corn to inflation should be all you need to know about this topic.
Long term, I would have to assume that inflation is going to keep rising. As a result, input costs go up, the price of grains goes up, and the cost of everything goes up.
Then once inflation has done enough, and we see demand start to be destroyed and the end of the bull market.
But for now, I do think the bull market could very well be just starting.
The funds are record long.
This could offer some short term risk as they could look to take some profits.
But overall, I do not see them going anywhere soon.
They are long for a reason.
Just because they are record long doesn’t mean they have to automatically puke out of that position.
There have only been 2 other times the funds got long over 400k contracts of corn.
2010 and 2021.
Both times they held on to that long position for 2-3 years.
Corn posted new highs for the year in September.
Do we ever top out in September?
The answer would be no, not in at least the last 20 years.
The last two times we posted our highs after August were 2010 and 2020. In which a bull market followed the next year.
Here is a chart comparision for 2026 vs 2020 vs 2010.
The charts do look pretty similar as well.
All bottomed right around the same time and headed higher the rest of the year.
Since the bull market happened the following year.
Here is Dec-27 vs 2021 and 2011 for reference.
We have a ton going for this market.
You've got the supply story and yield debate.
You have record demand.
You have not only a tight world situation but now a tight situation in the US.
You have the inflation story and macro headlines.
There is simply a lot of potential in this market long term. And long term I think we go higher.
That doesn’t mean there are not short term risks at all, because there is. A bull market doesn’t have to go straight up and we are in harvest.
Guys that need to move stuff off the combine, we had that sell alert on Sep 2nd for you to be proactive and manage that risk. For you others, simply waiting for the next opportunity and seeing if the potential unravels.
Corn Charts
Dec Corn Daily Chart:
We are somehow still trapped inside that range from the USDA report over a week later.
We have gone absolutely sideways.
That $5.28 level is still the key level we need to see us hold.
We bounced there once again yesterday which was great to see.
If we are unable to hold there, it opens plenty of downside risk. As there is a massive volume gap lower.
You could argue this is all just a simple bull flag up here.
But in all reality, you can’t get excited until we break above $5.50. As we are simply range bound here. Everything in this range from the USDA is simply noise.
Get above $5.50 and we likely start the next leg higher.
Break below those recent lows and it opens the flood gates lower.
If we get a break down, I think it'll be bought and I ultimately see higher prices down the road. So I'd view it as an opportunity.
But short term, I am still cautious unless we break out of this range and post new highs.
Weekly Chart:
You cannot look at the weekly chart and tell me you are bearish on corn over the next year.
We had a massive breakout from a 3-year long consolidation period.
That is not bearish.
And I think we have a decent shot at $6.50 sometime as I've mentioned before.
Soybeans
Fundamentals:
Short term we will have to see what China brings.
But let's look at the funds.
They are also record long soybeans.
I showed that the funds can stay long corn for a long time, but what about soybeans?
If we look, the funds are actually rarely short soybeans.
They only get short soybeans during a bear market.
They were short from 2014 to 2020. Then once again they got short in 2024 up until late last year.
During a bull market, they tend to stay relatively long.
For example, that stretch from 2008 to 2014, they were long soybeans for 6 years.
In the 2020 bull market they were long for around 3 years.
The last two times they were this long?
2012 and 2020.
Outside of China, the other big factor that's coming up is the Brazil growing season.
It has been confirmed that this is the strongest Super El Nino ever.
(Chart Credit @kanbwx on X)
So it will cause some crazy weather disparity around the world.
For Brazil, a Super El Niño tends to make the northern area of South America very dry. But for the southern area and Argentina, it tends to be very wet.
So this could definitely cause some issues for Brazil's soybean and corn crop.
Like we've talked about plenty of times before.
If Brazil has a hiccup it's obviously a big deal for the soybean market.
They are the worlds leading producer.
And they have been pretty consistently growing record crops.
But even with Brazil's record crops.. the world balance sheet has continued to grow tighter for soybeans.
What happens if Brazil has an issue?
You'd have to assume this world story gets even tighter.
The world story has a very high correlation to soybean prices as we've discussed multiple times in the past.
We have a US balance sheet that has +6 million more acres than it did a year ago.
Yet.. somehow the balance sheet is still tighter than it was last year.
Because of demand.
That is not a bearish sign of things to come.
So we have China buying the most beans they've bought since the last bull market.
Crush demand is at a record.
We have a Super El Niño that could impact weather around the world
You have the inflation story.
We have a US balance sheet that might need to ration demand at some point.
The funds are record long the entire soybean complex.
So there is clearly a ton of upside potential in this market.
Fundamentally, I see several reasons why this market should and can go higher long term.
However, this meeting with China could of course offer risk if bulls are not fed here short term.
We are right up near contract highs heading into a hyped up meeting. Something we have seen before.
I did also want to note that seasonally the end of September and into early October is one of the most bearish times of the year for beans.
Obviously doesn’t mean we can’t keep pushing higher from here. Just a reason to be cautious if you are someone short on time.
If you know you are short on time, it makes sense to do something to manage that the short term with the China meeting and potential harvest pressure. Hence that sell signal on Sep 1st for those in that situation.
If you've got time on your hands, the last thing I want to do is be oversold heading into next year.
Soybean Charts
Monthly Soybean Chart:
This chart is very bullish and you can’t tell me otherwise.
Every time we've seen a monthly close above $12 (let alone $13) we have seen a move to $14 or higher.
We just saw that happen for the first time in years.
So I see plenty of upside.
Nov Beans Chart:
Still completely sideways. Still trapped in the USDA day range.
We have rejected those contract highs several times now. So it's clear resistance. Meaning if we break above it should accelerate further upside.
On the other hand, if we break the recent lows there is zero support stopping us from getting a big leg lower. As we have a huge volume gap lower.
So patiently waiting to see what direction the market decides to break.
We should know soon with all of the headline movers coming up.
One reason I am cautious is the indicators.
We have bearish divergence on the RSI. Prices posted new highs while the RSI is struggling to move higher. A potential sign that upside momentum is slowing down.
We also saw the MACD cross bearish for the first time since that July correction.
Wheat
Dec KC Chart:
Zero things to update on wheat here as we continue to grind lower.
I think we getting close to a bottom but have not seen any confirmation.
I still expect us to find a bottom in this blue box from here down to the 61.8% retracement at $7.67.
That's the most common retracement.
That's the highs from July.
We have a big volume shelf there.
This box is usually where the market makes a decision.
If we find a bottom in this box, I think it'll set up for the next leg higher in the wheat market.
Weekly KC Chart:
Pull backs happen in bull markets. They can big.
I outlined all the pull backs from the last run.
There are several times the wheat market dropped over -$1.00 before continuing higher.
It's usually a stair case up, and an elevator down for wheat.
Even if we dropped down to $7.30 it would still be viewed as a simple re-test of old resistance. I would only start to be concerned if wheat started to break below that level.
Monthly Chart:
I think the next leg has a chance to give us $9.00+ wheat down the road.
Just like every other bull market in wheat has seen.
Corn + Beans + Wheat Chart:
I've shown this chart several times before.
Short term, we are waiting for China and simply lack direction.
Long term, you can’t look at this chart and tell me grains don’t have a ton of potential.
Cattle
Oct Feeders Chart:
Bullish divergence marked the August lows. Hidden bearish divergence marked the recent highs last week. Currently, there is no divergence.
Last week we rejected right in that key resistance area we talked about managing risk in.
Yesterday we bounced right where we needed to in that golden zone.
We need to continue holding that zone to prevent another leg lower.
If we are able to hold, we do have a potential inverse head and shoulders bottom pattern in place. But we would need to break above those recent highs for confirmation. If we can do that it would offer further upside.
Oct Live Chart:
Pretty similar here.
We rejected that resistance and golden zone up to the August highs.
We've now bounced right where we needed to in the golden zone to the downside.
That box is going to be the must hold level to prevent us from testing the lows.
At the same time, if we are able to bust those recent highs it should spark another leg higher.
Want to Talk?
Our phones are open 24/7 for you guys if you ever need anything or want to discuss your operation.
Jeremey & Office: (806)484-1214
Sebastian: (605)280-1186
Email: sfrost@dailymarketminute.com
Hedge Account
Interested in a hedge account? Use the link below to set up an account or give us a call.