Universal deflation common theme overnight.
Major deflation hit everything under the sun last night, as agricultural, energy, stock indexes and cryptocurrencies were universally sharply lower. The only thing higher last night was a moderate bounce for the US dollar off of a challenge of the lows of the year yesterday. This afternoon is the release of the Federal Reserve minutes from their last meeting. There seems to have tension building that there may have been discussions of an interest rate rise coming sooner. Since the release of the inflationary CPI last week, commodities across the commodity spectrum (lumber limit down for the 7th session in a row yesterday), including stocks have been struggling. It's almost like a subliminal fear that the Federal Reserve is on the verge of changing its tone that it may raise rates sooner than 2023.
Wheat futures suffered the classic wheat tour selling, as yield observations offset the crop condition rating report on Monday. The northern leg of the 2021 Kansas Crop Quality Tour reported an average wheat yield of 59.2 BPA compared to last year's 46.9 BPA. This yield would be the best for Northern Kansas, dating back to 2000. 171 fields were scouted, with participants calling this week's rain as timely.
As grain futures tumble, China continues its large weekly corn loading based on vessel counts. It is appearing that China will ship out most of their purchases, which places considerable demand pull on the Central US cash corn market. Even though there is apparent weakness in the futures, the cash market will find extreme interest from the rising Chinese loading and improved ethanol grind rates. Continued cash basis pushes will be commonplace continuing into June despite futures weakness.
China's live hog futures fell nearly 5% overnight to the lowest level since the January launch of the contract on improving pork production. The falls in cash pork prices helps confirm that China's hog herd is expanding. The trade can debate the size of the expansion, but the falling pork price structure argues that China's hog herd and demand for feed will expand well into 2022.
A strong Trough/Ridge pattern has formed across the US with the mean Trough position over the NW US. A Ridge holds over the SE US, which acts to push Gulf upper air moisture into several fronts which will pass over the eastern edge of the Trough. The mean position of the Ridge retrogrades west with the entire pattern to de-amplifying beyond May 24th. This produces a zonal pattern with near to above normal temps and near normal rainfall in the 10-15 day period. This is an active weather pattern for the Plains and the Western Midwest. There is a rain chance almost anywhere in the Central US for the next week. Lite showers are dotting Illinois, Nebraska, & Oklahoma this morning.
Cattle futures closed higher yesterday on optimism that more Chinese buying will find its way to the US, with Argentina banning beef exports for 30 days due to runaway inflation. Initial cash trade got underway on Tuesday. Cattle in Texas sold $.50 higher from last week at $119-120, with comparable prices reported in Kansas. Cattle in Nebraska and the W Midwest traded steady with a week ago at $120. Similar trends are expected to hold for the rest of the week's trade. The boxed beef rally is unrelenting. The choice cutout gained another $3.72 on Tuesday to $323.34, and the select value was $2.16 higher at $299.05 on tight supplies due to diminished chain speeds and labor issues.