Daily Market Cast: 5/18

Daily Commentary: Monday, May 18, 2026

Transcript

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Hey everyone, this is Allison giving you today's daily gray market commentary for Monday, May 18th. And gray markets gapped higher on the overnight and never really looked back during today's session. Risk premiums back on the board following fresh China headlines and another surge in crude oil here to start the week. So over the weekend, the Trump administration released a fact sheet stating China would purchase an additional $17 billion in USA goods over the next three years, in addition to those previously discussed $25 million metric tons of soybeans over the next three marketing years. So if those numbers become reality, annual Chinese purchases of USA goods could push back towards 30 billion. And that's something the market has not seen in years. So at this point, the market really doesn't care where the extra demand lands. It sees China potentially stepping back into the US market while also hinting at removing tariffs on other egg products. And that's enough. After aggressive fund liquidation late last week, today's trade just feels like a full reversal in sentiment. And crude oil only added another layer of support here. Middle East tensions remain elevated after President Trump warned Iran yesterday to get moving on negotiations or there won't be anything left. So that rhetoric is keeping war premium alive. And today we did see July trade to a high of 108 during the session. So overall, today here starting the week, the trade's being forced to reprice demand that's largely was largely wrote off late last week. So after the washout, fund liquidation, this really feels like the market suddenly remembering that China still matters, crude still matters, and there's still plenty of risk here left to both of those stories. But corn futures were sharply higher with the rest of the green complex today. China headlines, fund buying, energy strength all worked in the bull's favor. But the big story here is demand. Um, the market does not know how much increased Chinese demand will flow to corn yet. And today, honestly, it really doesn't care. Weekly export inspections already show corn demand running 29% ahead of last year, well above the USD's forecast uh for only a 16% increase. So any additional demand from China would only tighten that outlook further. And ethanol is also supportive. The US and Brazil are on track for stronger ethanol exports as global fuel buyers look for some alternatives amid the closure of the Strait of Hermaz. So reports do indicate U.S. ethanol exports are up 20% so far this year after record shipments last year. And again, there's been no date set for the U.S. Senate to vote on the E15, but that policy story also remains part of the broader corn support we're seeing here. Planting progress should show corn year 75% complete as of yesterday, essentially in line with last year's pace, but still ahead of the five-year average. So today, corn closed 21 and a quarter cents higher in July at 477. December settled at 498.17 cents higher. And soybeans traded sharply higher today following China headlines, even though the market still has plenty to prove. The White House factory created the spark, but there has been no official purchase confirmations yet, and that matters. The market is trading the idea of renewed demand, not next necessarily actual new purchases. And that's a bit concerning, especially as overall soybean export demand is not riding hot. Weekly export um inspections were reported near the low end of expectations today, with exports now down 22% from last year and still well below the USD's forecast of a 16% decline. So that means exports have to do some work here. Um and on top of that, planting progress should remain at a pretty good strength here. Um US soybeans are expected to reach 65% planted as of yesterday. Fast planting isn't necessarily bearish by itself, but it does keep the market from getting too excited, at least on some weather premium yet. Technically, though, the market still needs some confirmation as well. Last week's highs will be needed to be broken here to keep the uptrend intact. We'll see how the rest of the week goes. But um we did see July finish today at 12.13, 36 cents higher. November settled 30 and a quarter cents higher at 12.01. And we traded double digit gains today, but the story here is not as clean as necessarily corn and soybeans. Weekly export inspections were disappointing, they were actually below trade expectations, but still year-to-date inspections are up 11% compared to last year and above the USD estimate of an increase of 10%. But to be honest with you, today's numbers were not friendly. And the bigger issue that we're seeing here is price. Sources did report US importers are buying. Um, we're talking up to 120,000, 120,000 to 200,000 microtons of Polish billing wheat for summer shipment. So it's just a clear sign high U.S. wheat prices are pushing buyers toward cheaper supplies, and that is not a bullish demand signal. And weather also remains mixed. Uh, hard red winter wheat areas saw rain over the weekend, but most of it was light outside of some better totals in southern Nebraska and Colorado. So we suspect winter wheat conditions will hold at least steady near 28% good to excellent, while spring wheat planting should advance to around 73%. Technically, Chicago and Kansas City wheat both filled uh downside gaps during last week's break and have since actually turned sharply higher. So if futures can post a strong close here this week, traders are likely to view last week's sell-off as temporary liquidation rather than a firm change in trend. So July Chicago wheat did end the day 28 and three quarter cents higher at 664 and a half. July KC ended at 703 and three-quarters, 16 and 3 quarter cents higher. In July, Minneapolis closed 18 cents higher at 703 and a quarter. And the lean hog market continues to battle a very difficult demand narrative, and today's trade reflected that uncertainty. The biggest concern circulating through the trade is Mexico's suspension of U.S. breeding pig and pork overall imports tied to um Cedar rabies concerns. So while this may not grab headlines like muscle cut pork exports, it matters because every portion of a hog contributes to the overall carcass value. So when awful demand uh weakens, it pressures packer margins further and reduces the amount packers are willing to bid for live hogs. China remains an important variable here as well. Uh China's April pork imports were reported down 12.5% from a year ago, although year-to-date imports are still running 30% above last year's pace. So China also purchases a significant amount of OFA products. So any slowdown there compounds the issue created by Mexico stepping away from the market. So the broader problem for the hog complex is that packers are currently operating in negative margins on slaughtered hogs. So when packers are losing money, they typically respond by lowering cash bids to producers or reducing slaughter pace where possible. And that pressure is showing up in the futures market. Another headwind is the premium summer futures contracts are holding over cash lean hogs. Um, the market is pricing in a strong seasonal summer rally, but cash fundamentals have yet to fully support those expectations. So as long as futures remain substantially above the index, sustaining aggressive upside momentum becomes very difficult unless export demand improves or supplies tighten more noticeably. So June hogs were down 22.5 cents, closing at 98.525. August was off 92.5 cents, closing at 103.22.5. And the cattle complex started the session with some optimism, but the market lost momentum as the day progressed and futures faded into the close. One of the primary factors here limiting aggressive buying interest, particularly in feeder cattle, was the rise in feed costs. Higher corn and feed input prices directly pressure feed feeder cattle margins because feed yards must account for increased cost of gain. So the renewed discussion also around China and the US beef exports also provide only limited support. China's approval of additional beef plant registrations signals a willingness to resume or expand trade flows, but the market understands there's still several hurdles before exports materially increase. And one of the biggest concerns for me is China's strict stance on ractofamine and product production related protocols. So in the past, China has suspended or rejected shipments over residue concerns, meaning additional compliance procedures will likely be needed to finalize things here before we can see trade expand smoothly. And even if those regulate regulatory issues are addressed, traders remain skeptical that the US can significantly increase beef exports to China, at least in the near term, because domestic cattle supplies are already extremely tight. So this is why the market's reaction was relatively muted today. And while China news is supportive for a long-term demand perspective, traders appear to view it more as a psychological positive than an immediate game-changing export catalyst. So the mark the cattle market still largely revolves around tight supply, feed costs, cash cattle trade direction rather than expectations for a major surge in Chinese buying. So June cattle were off 52.5 cents, closing at 253.375. October was off 92.5 cents, closing at 238.95. May feeders were up twelve and a half cents, closing at 368.80. August was off $2.60, closing at $3.58.85. So again, if you have any questions, as always, feel free to reach out. Otherwise, have a great night. We'll talk to you again tomorrow.