Turn-around Tuesday after large Monday losses.
The inevitable Turn-around Tuesday arrived overnight after Monday's large declines. The bounce continues this morning despite significant losses showing up in equities and weakness in energies after Monday's massive profit-taking on improved Midwest weather, which was triggered by the overbought status of the market last week. Reevaluation is returning as Brazilian forecasts continue to destroy yields. Brazilian corn crop estimates continue to decline on the historic drought (AgRural knifed their Brazilian 2nd corn crop estimate to 65.1 MMTs from 73 MMTs with an all-Brazilian corn crop of 95.5 MMTs), and Northern Plains weather remains concerning. Also, there is a prospect that the May USDA crop report could hold a bullish surprise on the corn and soybean balance sheets and ending stocks.
The NASS weekly crop report offered that 67% of the 2021 US corn crop, and 42% of the soybeans, and 70% of the US spring wheat crops were seeded. Yet cold temps delayed emergence with just 20% of the US corn, 10% of the soybean and 29% of the spring wheat crop pushing above the ground. Notably, 80% of the North Dakota topsoil moisture was short to very short, while Minnesota was 44% and NW Iowa 61% short or very short on topsoil moisture. The Western US drought appears to be spreading eastward from the Dakotas. And weather forecasts have returned the potential for arid weather lasting across the N Plains and the NW Midwest for another 10-14 days.
The overnight US weather forecast has pushed southward the prospect of heavy rain from E Texas and the Gulf States where soils are already saturated, and flooding will result from 3-6.00″ of rainfall. The forecast for the Northern US Plains and the Northern 1/3 of the Midwest is back drier. The Dakotas, Canadian Prairies, and the Northern 1/3 of the Midwest (including the Northern half of Iowa) will hold a below-normal rainfall trend into May 25. None of the models offer much rain for the N Plains, the Canadian Prairies or the Northern 1/3 of the Midwest. This area will continue to struggle with short soil moisture, with an estimated 67% of the US covered with some degree of drought. This is well above the landmass covered by drought in 2012, 1988 or 1983 in a comparable week.
Cattle futures had a robust day yesterday on the June contract, rallying for the 4th day in a row, with June cattle getting very close to now technical resistance at 119.00-121.00. The drop in corn prices helped boost feeder cattle which will get checked today. Deferred live cattle need to remain firm in their recovery to offset corn reevaluation on a new crop recovery. Cash markets were quiet on Monday while the beef rally continued. Boxes of choice beef rose $3.23 to $309, and select beef gained $3.49 to $294.
44% of the US pastures are now rated as poor or very poor. This was a slight improvement from a week ago, but still the worst condition rating since NASS began reporting conditions in 1995. By state, the Dakotas are by far the worst. 75% of pastures in North Dakota and 50% of South Dakota pastures were rated as poor or very poor. That compares to an average of 15-17%. 46% of Texas pastures were poor or very poor, which is the worst since 2013. Better rains are needed soon, or herd liquidation will accelerate.