Upcoming Northern Plains rain leads lower overnight session.
Grain futures opened lower last night, led by the Minneapolis wheat contract. As needed, 1-2 inches of rainfall is forecasted later this week for the Northern Plains, Upper Midwest, and Southeastern Canada. Additionally, warmth due by midweek accelerates row crop emergence and growth rates moving forward. In such a low volume trading contract for Minneapolis wheat (near the end of the night session July Minneapolis wheat traded 2,414 contracts, compared to Chicago trading 15,300 contracts), Minneapolis wheat dropped almost 40 cents before recovering almost half the losses by morning. Row crop prices were lower in their wake, but as morning came, old crop corn and soy contracts firmed amid the ongoing scramble for nearby supply origination.
There have been regional declines of 5-15 cents from early May's peak but basis across the heart of the Midwest, with spot corn/soy bids at $.40 over for May-June delivery. Basis gains are also occurring away from major processing markets as commercials seek supply farther afield. Weather drives price, on the margin, but record soy crush and corn exports, along with a steady uptick in weekly ethanol grind boosts the rate of physical supply disappearance well into late summer. The current break only exasperates old crop supplies into September 1, as end-users can buy futures and demand delivery later this summer.
The major forecasting models are in solid agreement with respect to a broad Trough/Ridge pattern being established in North America within the next 48 hours.A broad Trough/Ridge pattern will be established by mid-week, and this upper airflow funnels much better rain chances into the Central & Northern Plains and Upper Midwest May 20-25. Cumulative totals are pegged in a range of 1-2″, with heavier localized totals possible in pockets of eastern North Dakota. This pattern will boost temps in all regions, with highs in the 70s to blanket the entire Central US by Tues/Wed. A pattern of lite but lingering rainfall eases dryness across North Dakota and Southern Canada. Rainfall of 8-12″ is needed to end severe drought entirely across the Dakotas and Canada. Still, on the margin, a measure of weather premium extraction is expected until totals are experienced later in the week.
Cattle futures closed lower late last week in the broad commodity selloff. This week, there are reports that include the Livestock Slaughter report, which will be released on Thursday, and the Cattle on Feed report due out on Friday. Additionally, traders are watching for a top in the beef market and how that will impact live cattle trade. Negotiated cattle trade last week was generally higher. Cattle the Southern and Central Plains brought $119-120, and cattle up North sold for $120. However, the disconnect between the cattle and beef markets deepened. The cash beef trade had the choice cutout $11 higher last week at $317, and the select value was close to $7 higher at $296. Estimated slaughter margins rose for the 8th consecutive week, gaining $60/head to $784. With large available supplies through early summer, June live cattle will struggle on attempts to rally into the one 19.00-121.00 range.