Risk of trading to end the week with the weaker US dollar.
A weakening US dollar overnight has gold and silver racing higher, with the risk on mentality in place. Corn, soybeans and wheat are all higher on the week, as we come to a close, typical for a bull market that comes under pressure in the early part of the week. Firming US cash corn/soybean basis and cold/dry N Plains and Midwest weather have pushed prices higher overnight. The extended range GFS/European weather models continued the cool to cold temperature trends for the Central US into early May. Late season snows are flying across the W Plains with a few reports of sleet. Low temps in the mid to low ’30s are widespread across the Central US, and the trend of overnight lows in the ’30s is forecast to continue into late April. The outright chill will retard seed germination and emergence.
Most N Midwest and N Plains farmers are waiting to seed crops when the weather forecast warms to more seasonal levels. The market fear is that seeding is being pushed back into the closing days of April and May. The Northern Plains drought will be nudging south and east amid the lack of 2-week precipitation. Dry soils will accelerate seeding when it warms up, but the lack of soil moisture is concerning for traders with the North Dakota drought already scoring records for duration/depth in mid-April. US old crop supplies are tight and offer no supply cushion, while adverse weather diminishes the odds of seeding expansion in the fringe Central US crop areas. With 2021/22 US corn/soybean stock/use ratios forecast at a near-record low, there is no room for anything but normal or highly favorable weather.
China reported a massive 32% gain in Q1 2021 pork production to 13.69 MMTs – the best in 2 years. China’s hog herd increased to 416 Mil head at the end of March, a 29.5% on the year as China pours massive investment into its pork industry amid its battle with African Swine Fever (ASF). China’s pork prices are falling under the weight of the production, with values down 40% this year. The extra hogs need extra corn/meal amid last year’s ban on food waste feeding.
A below-normal rainfall trend will hold across Central Brazilian winter corn areas for the next 2 weeks. There are clear indications that the tropical rains are seasonally retreating north which will usher in the dry season in early May. Any rain that falls in the next 2-3 weeks will be extremely important to sustaining winter corn into the reproductive period that runs from late April into June. Next week’s late week system looks to produce .25-1.00” of rain. The problem is that until then, the prospect of rain is limited to .1-.7” on coverage of no better than 50% of the crop area that won’t produce much benefit. High temps hold in the 80’s/90’s – accelerating the drawdown in soil moisture. The time for rain is immediate with corn under acute stress.
For the 6th day in a row, cattle futures closed lower yesterday, with live cattle recovering well off the lows late in the session. The cash cattle trade for Thursday was firm. Cattle in TX sold steady for the week at $120, while sales in KS were $1 higher at $120-121. Top prices were paid in NE, where cattle sold steady to $3 higher at $123-126. The boxed beef rally resumed with choice boxes gaining $3.71 to $276.62, and select was up $1.12 at $268.43. Beef export sales slipped to a 7-week low of 35 Mil Lbs last week, but exports increased to a 6-week high of 42 Mil Lbs. Export commitments are record large and over 1 Bil Lbs. 15% of total export commitments are to China with record purchases.