This is the SFN Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
This market has a way of making everyone feel foolish. After Monday’s blistering trade to new highs in soybeans, I wrote that I was surprised to see such a huge reaction to a few cargoes of soybeans. It turns out it was way more than just a few cargoes. The total reported this week so far from USDA has been more than 1.5 million metric tons, or more than 55 million bushels, of soybeans bought by China. This is even more impressive when you consider the fact that South American beans are cheaper landed in China than U.S. beans right now. So all these purchases are for political reasons. That is still a long way from the 12 million metric tons that Trump and Bessent promised China would buy by the end of the year, but the market is interpreting that as real progress with China — or at least an attempt by China to buy goodwill instead of further escalating tensions. The 12 million metric ton figure before the end of the year has still never been confirmed by China. There was also a notable shift in comments by Bessent last week that was interpreted as walking back that total.
The market is going to continue to be subjected to a tremendous amount of headline risk going forward. This was very evident on Tuesday this week. After running to new highs on Monday, the market fell off sharply on Tuesday on headlines that the Trump administration was considering delaying the cuts in incentives for imported biofuels. There were some loopholes in the previous rules that incentivized faking used cooking oil and importing it from China, among other things. Congress recently passed legislation reducing and limiting the tax incentives that foreign feedstocks for biofuels are eligible for, which makes U.S. soy oil and ethanol more competitive. But U.S. refiners and oil industry representatives have put pressure on the administration to delay the implementation of the new rules by arguing that it would increase costs and tighten fuel supplies. This was reported by Reuters on Tuesday, and immediately soybean oil futures dropped like a rock and pulled soybeans down with them. Earlier this year, the administration had pitched a proposal to dramatically reduce the value of credits for biofuels that were either foreign-made or contained foreign ingredients as part of President Trump’s “America First” energy agenda. If true, the report by Reuters seems to indicate a complete reversal of this. We are also still waiting on EPA’s finalized biofuel blending targets, decision on year-round sales of E15, and how to handle the small refinery exemptions. The recent moves by this administration seem to be favoring big oil over biofuels and farmers, so not many have high hopes for the long-awaited rules.
The market is also watching South America planting progress, which has reached 70% complete in Brazil overall. There are some trouble spots, but overall the weather is good enough to not give the market too much to worry about right now. But there is still a long growing season ahead.
Markets are going into holiday week and first notice day for December contracts next week. Holiday markets can be volatile due to low volume, and we have a lot more headline risk right now. Get price targets in mind and orders working in case something happens.