Policy Shockwaves Spark a Turnaround and a Glimpse of Hope

Turnaround Tuesday turned into a much wilder day than expected but lived up to its name with most markets erasing Monday’s losses or gains with the world equity markets sharply lower despite a shocking news story to scare traders. The big news of the day was 170-pages of guidance from the US Treasury on 45Z tax credits which sent bean oil sharply higher to give beans strength through the day as this begins to give clarity after 2-years plus of delays. The 45Z model could open the door for more domestic crush facilities and bean crush to help manufacture more sustainable aviation fuel, biodiesel, and ethanol for export, which opens doors that restricted supplies curtailed over the last decade. Another potentially positive event was the framework for a bigger trade deal with India with the promise of $500 billion in Indian imports of US energy and ag and the end of the escalated tariffs of the last year. Neither of these events will shift the immediate direction of the markets like a hot/dry summer weather forecast, but it does begin to open opportunities for more domestic demand.

News and Notes:

• SA weather was not a part of today’s rally as forecasts are still in line with the non-threatening forecasts of the last several days. If the rain falls as forecast in Argentina into mid-month, the market will not need to keep what little weather premium has been added in early 2026.
• The December daily corn chart is on Page 2 and shows today’s retracement from Monday’s losses to move back into the $4.55-$4.60 range of technical support and resistance. Old and new crop corn have been range-bound for the better part of the year outside of the surprises from the January report and a few odds and ends in 2025. When corn (more than most markets) defines the supply and demand dynamics of each new cycle, the markets tend to be very dull unless there is a major weather problem in Argentina or the US. Corn is rarely as susceptible to the volatility we are seeing in beans or wheat, and until we know the US spring corn planting weather to divine the acreage number, the markets are unlikely to be too explosive. The only wildcard is if, BIG IF, Congress actually passes a bill that mandates year-round E-15, as Trump alluded to last week.
• Cattle’s upward momentum continues unchecked as all the signs of classic bull market are intact. If the markets are lower early, they rally into the close and if they rally early, there has been no meaningful long-term pullback. It cannot continue forever, which has been a popular thing to say about rising cattle prices for the last 5-years, but there are no signs of a technical breakdown.
• After last week’s trade deal between India and the European Union, the US trade team cranked up their efforts and got the US/India trade deal to completion. The working framework was announced today with more to come in the months ahead. The bones of the agreement released today will be lowering current tariff levels and India stop buying Russian oil and replace it with US oil which rallied crude over $2 a barrel at one point today. Details were sparse but US ag exports were included as part of the $500 billion in Indian imports, which also helped today’s rally. The problem with India, although they are the world’s most populated country, do not import beef, are self-sufficient in wheat, but may need some beans and corn to feed their expanding poultry industry. More as this story develops.

It is confusing how Washington works most days, but it is harder to understand when the low hanging fruit of passing year-round E-15 was bypassed to finally develop a 45Z program that had been delayed for at least 2-years by the Biden administration and also largely ignored during Trump’s first term. But, where profit margins have fallen to in the last 3-years, addressing the loss of China’s business to Brazil and sharp increases in world production competition, bi-partisan renewable fuel mandated programs will be the key to sustainably higher prices and on-farm margins. There is a long way to go and many hurdles, like time, environmental battles against new crush facilities and blending plants, but the last week has produced a ray of hope in an otherwise dark financial period for US ag.