Grain Overview
The overnight grain trade is lower despite seeing some mild strength early, as yesterday’s crop ratings kept corn at 61% GD/EX, while soybeans slipped 1% and are now at 62% GD/EX. With ratings well under last year, along with corn and wheat being under the five-year average, it still did not inspire much buying interest, as index funds are waiting for the release of the WASDE crop report on tommorow before extending more market length.
Weather conditions across the Midwest are forecast to improve, but at this time it is doubtful that bushels are being added (except for beans). Export demand remains active, and a weakening US dollar will be beneficial for additional sales. Corn export inspections were above estimates yesterday, proving the USDA will have to deal with its old crop carryout number, which is much lower than being advertised. Interesting how they pulled this off last year as well, but had the cover of a big corn crop to delay the revelation of it until September 30. It won’t be as easy this year.
Numerous details come into play on Wednesday, besides rectifying old crop demand and upcoming new crop demand prospects with the European corn crop being such a wreck. There is also a wide variance in yields from the beautiful-looking Central Midwest compared to the Western Corn Belt, where over the last decade North and South Dakota have picked up prominence in total bushels, along with Kansas. These three states, along with eastern Colorado and Nebraska, have taken a beating on yields compared to last year, when the country as a whole had minimal regional problems. If last year’s corn crop truly was just above 186 BPA, comparatively, it will be difficult for the USDA to push something higher than 182 BPA this year in the August report.
Finally, FSA data that will be incorporated is the wildcard. Opinions vary on whether corn acreage will be slightly higher or lower, with the general consensus being that bean acreage could increase by several hundred thousand acres.
Amongst all this, we still have two wars raging in the world that affect grain production and movement. Large supplies of fertilizer in the Persian Gulf have remained constrained since March. What has transited out of the SOH has not seen ships rushing back in for new supplies. Then we have the Black Sea region, which has seen the start of the wheat export season begin like a pinched garden hose, with current prospects of it being fixed minimal. Pres. Trump has sent an envoy to the region for talks, but this is the same group that has failed to solve the Iranian war crisis.
You may not want to talk about it, but the reality is energy prices remain elevated, fertilizer supplies are restricted, and large stocks of wheat and corn are finding themselves unable to move at a time when milling stocks are going to be needed. West African and Middle Eastern nations will need grain movement to occur within weeks, not months. Their stocks can only last so long before they hit critical levels.
Speaking of critical levels, the Strategic Oil Reserve is within 4-6 weeks of being unusable. This has been the relief valve for the lack of oil movement out of the SOH for the US and Europe, where we have been selling supplies. Seasonal bearish attitudes toward grain pricing are trying to remain in place, but how do you say it? Things are about to get spicy.
Cattle Overview
Yesterday’s cattle trade had live cattle generating strong gains as Choice boxed beef values climbed $7.06 to $371.42, while Select disappointingly drifted $1.53 lower to $350.84. Procurement for Labor Day has begun, and behind that will be stocking for school lunch programs, with schools getting underway over the next several weeks as summer vacation comes to an end.
Feeder cattle had the front two months trading softer, flipping the bull spreading we had seen for numerous sessions, as disappointment in the declining feeder index had August stalled just above 350, with the one-day index coming in near 351. Feeder sales reports note that high heat and extremely dry conditions are limiting demand for calves currently, especially unweaned calves.
Last week’s demand for cattle was explosive, with volume revealed to have jumped by 68,000 head to 104,000 head collected, which was the second-largest weekly volume since June 2023. With contract cattle now available to packers this week, they may back off a bit, with the cash trade possibly drifting lower, which the August live cattle contract, deliverable as of yesterday, is trying to reveal.
Spot September feeder cattle have wound into a rattlesnake coil over the last seven sessions and have defined resistance at 349.50-350.00, with support at 340.00-340.75. Everything inside that $10 bracket at the moment is a minefield.
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