Sharply lower overnight grain trade on increasing rainfall potential.
Grain futures tumbled sharply lower overnight, as all weather models added some amount of rain to their respective 10-day forecasts, with the GFS remaining the wettest. Some light and unexpected showers were also noted across Iowa overnight which sparked further liquidation. There were a few T storms producing rain across W Minnesota, W Wisconsin, and Iowa overnight. Rain totals were mostly under .50″, but any moisture is welcomed. The coverage of IA rain is pegged at 15% of the area.
Along with the grain selling, there is a broad risk-off mentality with metals and a host of other commodity markets dropping lower as the US Central Bank turned more hawkish and rattled their rate hike saber as price pressures gained. Fed Chairman Powell acknowledged the growing risk of inflation and said that officials have begun a discussion about scaling back bond purchases. The policy maker's “Dot Plot” showed 2 US Central Bank rate hikes by the end of 2023. This news rallied the US dollar and produced selling across the world of raw materials. This is producing a bearish tailwind across the US ag futures markets.
Plains and W Midwest farmers reported acute stress on corn/soybean and spring wheat crops on Wednesday as temperatures soared into the 90's/lower 100's. The extreme heat and lack of soil moisture rolled corn tight and caused a wilting of soybean leaves. US corn/soybean/spring wheat condition ratings are expected to fall further when released on Monday by 2-4% in the GD/EX category. The importance of rain for Iowa, Dakota, Minnesota, Missouri, Wisconsin, and Michigan crops can not be overstated. The GFS model's 1.5-4.00″ of rain would be ideal for Iowa, but the Euro model's .4-1.25″ would fall woefully short. Our forecaster suggests that the GFS model is too wet, but the Euro is too dry. A blend of rainfall forecasts is the best solution amid all the uncertainty.
The primary weather forecasting models continue to struggle with a tropical depression developing in the Bay of Campeche. The storm has not formed yet, but the National Hurricane Center has raised the odds of formation to 80% in the next 48 hours (Friday) as the system starts to march northward later today. The system is forecast to form into a cyclone that makes landfall near New Orleans on the weekend. The strength, location and intensity of the storm will impact Central US rainfall for at least seven days and cause a relaxation of the Ridge/Trough pattern that exists currently. The overnight models have all trended a wetter, with the GFS 10-day rainfall solution attached. The GFS model is the wettest, followed by the Canadian and then the EU model. The GFS forecasts 2-4.00″ of rain for Iowa, Illinois and Indiana into June 27th. The rain would go a big way in denting the developing drought. The forecasts maintain dryness for the Plains, with heat offering a sharp fall in soil moisture. Which rainfall forecast is correct will have an impact on yield heading into July. The odds are that the mid-June Ridge/ Trough pattern returns across the US in July.
Another sharply higher cattle futures trade yesterday with a firm outlook again anticipated this morning, especially for feeders. On Wednesday in the S Plains, light cash trade was $122 or $2-3 higher than last week. Trade in Nebraska remained light but still $4 higher for the week at $124. Steady trade at higher prices is expected for the rest of the week. Boxed beef prices fell sharply on Wednesday. The choice cutout value broke $5.26, and select fell $8.32. For the week, the choice value is down $8.39, and select is down $15.25.