Spring wheat leads overnight strength.

Row crop prices were mixed overnight with again strength in expiring old crop July contracts for first notice day and weakness on the new crop with the prospect of improved Central US rainfall. The spring wheat futures moved back to yesterday's highs again, as the worst drought in a decade shows no sign of ending across the Northern Plains and the Canadian Prairies. Prominent grain analysts are now cutting North American spring wheat crop estimates by 60-80 million bushels. They are also using elevated HRW wheat feed demand, which is starting to tighten up the US 2021/2022 wheat ending stocks numbers. Wheat futures appeared to have bottomed at the beginning of harvest for the winter wheat contracts and are building a base, as spring wheat is becoming the start of the lifting phase for wheat prices.

Also of concern is that combined soybean acres of the Dakotas and Minnesota are at 20.5 million acres, equal to that of Iowa/Illinois. Corn for the Dakotas and Minnesota planted 17 Mil acres as of the March 31 acreage data, equating to 19% of US total acreage. A 10% yield loss in corn/soybean crops in the Dakotas/Minnesota would produce a US production loss of close to 300 Mil Bu of corn and just over 100 Mil Bu loss of soybeans, a sizable amount. This would have a new crop carryout near 1 Bil Bu with soybeans below an impossible pipeline carryout of 120 Mil. A 10% Dakota/Minnesota crop loss is significant to US corn/soy end stocks and future CBT prices. And this assumes that every other Central US state can produce at their state averages.

The overnight forecast models are similar in their depiction of the US weather pattern, but they vary in the details of rainfall. And all forecasts place extreme heat over the Western US, with record highs set for California and the Interior West next week. The GFS model has shifted 1.00″ rainfall eastward by some 150-200 miles that leaves Iowa on the short end with amounts of .75-1.50″ while Illinois/Indiana/ Missouri receive 1.50-4.00″. The eastward shift is important as it produces limited rains across the Dakotas, Nebraska, and Minnesota. The EU model's rainfall forecast is like yesterday with 2-5.00″ across Iowa/ Illinois. It is keeping the heavy and needed rain across Iowa. The models are struggling in forecasting convective rainfall activity from T storms. Recent history would suggest that some areas do see heavy rainfall while others are short-changed. Undoubtedly, all the models leave the Canadian Prairies and Northern Plains in a deepening and dire drought. The extended range forecast suggests that the Western US Ridge progresses eastward in July.

Cattle futures experienced strong gains yesterday on an initial weekly cash trade that occurred at better prices. This week's early thin volume has been quoted in Nebraska at $126.50 or $2-3 higher than last week. The midweek cash outlook holds steady to higher. The boxed beef market fell $5.45 on choice and $1.71 on select values. A short-term low is expected ahead of Independence Day, with the seasonal decline to then resume during the remainder of July. Argentina announced on Tuesday that it would limit exports of beef cuts until the end of the year. China has been the primary destination for Argentine beef exports in the last 3 years, accounting for 70-90 % of total Argentine beef exports. This is likely to drive additional beef export business to Brazil and the United States.