In my latest appearance on AgWeb's Markets Now with Michelle Rook, I shared my perspective on the agricultural sector's landscape, including the corn, soybeans, wheat, and cattle markets. Watch the full interview here.
Michelle Rook: Welcome to Markets Now. I'm Michelle Rook with Darin Newsom, Senior Market Analyst with Barchart. We are seeing higher grains this morning, some pressure over in the livestock. Darin, let's start off talking about the grains. The rally that we're seeing this morning, how much of this is fund rebalancing, either hedge funds or index funds here, as we start a new year?
Darin Newsom: Yes, that's an interesting question, Michelle, because it certainly could be. The thing that we have to keep in mind, though, is that these same funds were already long, corn and soybeans at the end of 2025. We came into 2026, and they were still holding net long futures positions. One can make the argument that if they were rebalancing and they were moving over to other markets that potentially had a more bullish fundamental picture longer-term, then we would actually be seeing increased pressure. I think there's possibly some activity.
There's obviously some activity coming from the non-commercial side. If so, it seems to be under the guise, or it has all of the characteristics of commercial buying. To me, this argument makes just as much sense. We broke soybeans so hard over the previous few weeks, what, $1.50 or something like that, and we just dragged it down to levels that seemed to attract some light commercial buying. I know there's a lot of folks in the industry that get really excited, talking about how China is going to save the market, this, that, and everything else.
They're coming in as buying, woo-hoo, yay, hey. Let's remember, this is seasonal. This is what we tend to see this time of year. It's nothing huge. We've got light trade volume, both overnight and through the day sessions. We have seen the March-May spread lose some of its carry. We've seen basis firms. All of these things are indicating that there's been an uptick, a seasonal uptick in demand as China locks in some of its secondary supplies, still waiting for the next Brazilian harvest.
Michelle: Yes. They're getting close to supposedly 12 million metric tons. I think a lot of folks put them at 10 million metric tons. You're saying some of this has been some Chinese buying. Once they get to 12 million metric tons, will that completely shut off? Will we see lower demand?
Darin: The 12 million metric tons, it's a false number. There was never any potential deal. We have to remember, 12 million metric tons is about half of what the US shipped to China last year before everything fell apart again. It's not a big deal. No, I don't think the door is going to slam shut at 12 million metric tons. What we have to keep in mind is, when do the combines start running in Brazil? That's going to be what happens. That's going to be what determines when this demand goes away.
Michelle: Yes. No, you're right about that. That should be anytime here. Obviously, we've got to get these booked. The big question, will we be able to ship them, and will China not cancel some of those? Especially since we've got this Venezuelan situation, and we haven't really seen some retaliation from China, and so maybe were expecting that.
Darin: Exactly. Right. The retaliation is going to come again when China actually is certain of Brazilian production and has its hands on it, has it booked. This is what's interesting. We've got these sales starting to show up on the books, but there are no shipments. Very few shipments this year from the United States to China. This is by design because, as you said, the retaliation has been slow in coming. That's a business decision because you're not going to cancel until you know that your major supplier has the supplies. Then the cancellations are going to start showing up. I'm not going to guarantee it. You can't guarantee anything in the commodity business. I would say there's a very strong likelihood that's how this thing is going to play out.
Michelle: Let's talk about the Venezuelan situation. Obviously, a more stable government might mean some increased demand for ag products, but the real play here is really on the oil sector. We saw news this morning, the administration is going to get, what, 30 million, 50 million barrels of oil that they're going to be able to sell. What is this going to do for the marketplace, and what is it telling you about the administration and their plans?
Darin: The administration's plans is very clear. It wants the oil. It wants the money from the oil. That's the bottom line. As far as a leadership change in Venezuela, there's not. All we did was remove the head, and just another member of the same regime was put in place with the order to follow what it's told by the US. That's not a leadership change. That's not a change in how the countries run. It's just it has to take orders from the US right now. The US is going to take the oil. The US is going to take the money from the oil. That's the bottom line. We've seen it in other places. We've seen Russia do the very same thing with Ukraine. We've seen other areas, other parts of the world. We've seen this sort of situation. It's nothing new, and it's certainly not going to be a leadership change.
Michelle: Do you think that it eventually pressures crude oil prices, though, and we continue to see this glut of oil in the world, pressure prices?
Darin: I think so, but again, we have to look at what we've seen the last number of years. Except for the US, as the world moves away from petroleum-driven economies and more towards green energies and other energy avenues, particularly, let's say, in some vehicles and so on, then it seems like the crude oil markets, both the global Brent and the domestic West Texas Intermediate, have shrugged off these types of upheavals, of these geopolitical upheavals, all around the world. We continue to see the market really struggle trying to find any sort of upward momentum. Now that all of these barrels are supposedly going to be taken from Venezuela and sold on the market, we would expect the energy price to go lower. Now that's, on one hand, okay, maybe we can look for lower energy prices here in the United States, but we also have to remember that the US ag does have some ties to a stronger energy sector. If it just continues to weaken, that could be a problem as well.
Michelle: Okay. Let me go back to the corn and soybean market specifically. How much recovery do you anticipate we could see here? Could soybeans get back above $11 just because we got oversold? Can you get corn above $4.50 because we can't get above this 200-day moving average right now?
Darin: Yes. You bring up a good point, Michelle, with the 200-day. I've never been a big moving average person, but with this move to algorithms, and algorithms certainly have moving averages, volatility, and these sorts of things, momentum indicators built into their equation, so I have had to start looking at them more. I do think that's important. We can certainly see it coming into play, particularly in the corn market, some in the soybeans. I don't know about oversold and overbought. I don't know how much of that's built in, but it's probably some.
I do think it's going to allow the soybean market to run a little bit. Then we just simply have to apply Newton's first law of motion. The trending market will stay in that trend till acted upon by an outside force. We won't know when the outside force changes or when the fund money changes direction. The only thing we're going to be able to do is to see it when price direction finally looks to have turned the other direction, similar to what we saw last Friday in soybeans.
Michelle: Yes. When you get up at these levels, Darin, though, you start seeing farmers selling the [unintelligible 00:08:20] rallies, don't you?
Darin: We could see some, yes. We both know there won't be much. There'll be a lot of talk, "I'm going to sell at $11, I'm going to sell at $12," and we get to $10.99, and the orders are canceled. That's just the nature of the business. There will be some. There will be some sales made. I think the bigger fish is what's going to be, what do investors think? What does the non-commercial side think of this market? We know longer-term, fundamentally, this market doesn't have much to stand on at this point. If this rally right now is being led by non-commercial interest in non-commercial buying, just on short covering or whatever it might be, long-term fundamentals don't line up for a large rally, then yes, I think producers should be using it to get some 2026, maybe even some 2027 locked in.
Michelle: Yes. It feels pretty technical right now, especially in the wheat market, which we haven't really talked about at all, but there's a case where you could make where funds are very short and could be covering shorts, right?
Darin: Absolutely. It certainly could be the case. They've been short for a long time. Again, what's also interesting to hear is that we've seen a big swing in some of the cash indexes. They're still bearish, but they've been gaining ground on the futures, telling us that there is some immediate-term demand. We've seen the carry-in future spreads in some of the winter markets, in particular, start to get pulled out of this market. Again, we got through December, the old Krampus countdown that tells us don't be long wheat in December, but the minute we turned the calendar page, it seemed as if the wheat markets found some commercial buying, again, because the prices were depressed.
Now we'll see what happens. That being said, we do have the next crops already in the field in the winter markets. Now we get through the winter, and we start turning our attention to when they come out of dormancy, on how they start looking going into spring. All of a sudden, we're going to have plenty of supplies again.
Michelle: With the above-normal temperatures, though, that we have had in a lot of winter wheat areas, is there maybe a little bit of a concern about potential winter kill? Could we be putting a little weather premium in?
Darin: The only thing that I really wish is that I did have $1 for every time winter kill was brought up with winter wheat. I would be retiring with Mr. Buffett here in Omaha, and we'd be having a great time playing bridge.
Michelle: I know. Wheat has nine lives, right?
Darin: Oh, it does. Not only is it the cat, it's also the cockroach of the grain world. You can't kill it. It's going to take more than winter kill to kill winter wheat, which just, by the way, happens to have winter in it's name.
Michelle: Okay. Point well taken. Last question on the grains. In specific, the Supreme Court is supposed to rule on the IEEPA tariffs on Friday. What potential market impact will it have, or will it not?
Darin: I'm sure it should have an impact. Will it? I think so many markets are so numb, and knowing that any Supreme Court decision is either one, going to be completely ignored because we know the administration has no interest in following, acknowledging courts or Congress or anything along that line. Let's say by chance that it does pay attention to an overturn. It's going to be fought. We're still looking at a long ways away before anything actually changes. It should have an impact. Will it? I have my doubts.
Michelle: Okay. One last quick question. We're sitting back in cattle today, just a little profit-taking, you think, waiting for cash?
Darin: Absolutely. You hit the nail on the head, Michelle. They're waiting to see what develops in the cash market. The argument is, at some point, the cash markets are going to break, and it's going to pull the futures with it. It hasn't happened yet. We saw it, and it's bounced back. The key will be, can we get these cash markets, can we get these futures markets above 2025 highs here in early 2026?
Michelle: All right. The jury is still out on that. Thanks so much, Darin Newsom with Barchart. That's Markets Now.
On the date of publication, Darin Newsom did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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