Grain Spreads: Fund Liquidations

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Commentary

Soybeans worked gradually lower throughout the session today as managed money liquidation pushed futures to fill a gap that had been in place in the January futures chart since late October. The bean market extended the recent decline on a lack of morning flash sales to China and perhaps a lack of crop stress in Brazil, despite coming down into an important support area.  January futures settled at 1062.75, which means the gap from 1063 to 1070 is successfully closed. With this chart objective complete, the market debates where we head next. Argentina's oilseed workers announced a 24-hour strike starting on Thursday and meal prices found support on the news early in the session but went negative on the session. Bean oil is sharply weaker on crude oil pressure and a general risk off tone. March beans are now below the 1076 gap and a close below 1070 would be a bearish technical sign. However, initial downside objectives have been reached and risk/reward for shorting at this level looks poor in my opinion. What isn’t being discussed is that we don’t have a full accounting of how last year’s crop finished due to the government shutdown. That next government report is not until Monday January 12^th. I wouldn’t be short into that report. But that’s three weeks away. Grains look gloomy now, but after this long liquidation runs its course, in my view it will be time to get long. Interest rates and changes at the Fed will press the Dollar making US commodities more attractive in 2026. China is releasing old beans out of their reserves to make way for the 12 million metric tons they have agreed to purchase prior to the close of the 25/26 marketing year in late August. So far, they have purchased 6 MMT or about half the commitment for future shipment. The key though is will they continue to show up on the inspections as to actually taking the beans. We will be posting a 2026 outlook shortly accompanied by gameplans for both livestock and grain.

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Sean Lusk

Vice President Commercial Hedging Division

Walsh Trading

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