Row crop futures higher on follow-through buying from crop report.
Grain futures pushed higher through the overnight session on follow-through buying from yesterday's bullish NASS acreage data. After a brief break in the night session on soybeans, as Chinese President Xi gave a hardline speech that spooked bean pricing, a resumption of buying continued in the morning hours on upcoming dry/warm forecasts. With grain open interest having been in sharp decline in June, managed fund money is anticipated to flow into the grains at the start of the month. Additionally, yesterday's data implies exceptionally tight 2021/22 US corn/soybean/wheat stocks for another year, with adverse weather sparking the opportunity for a sharp rally.
In celebrating 100 years of communism, President Xi spoke of China's resolve to stand up to foreign pressure while laying out their national aspirations, including the incorporation/return of Taiwan. The news sparked initial selling in a host of financial markets, but values recovered as new nearby action by China's leadership is unlikely.
It's anticipated to take another week to fully assess the corn crop loss from the hard freeze on Tuesday/Wednesday mornings. Initial corn crop loss estimates range from 2-3 MMTs, but the quality loss could be more important in terms of the ability of Brazil to satisfy world corn export specifications. Many analysts are now working with a sub-90 MMT total Brazilian corn crop.
The primary weather models agree on the forecast for the next 7 days. The forecast models have sharply diminished or eliminated a chance of rain for the N Plains and Minnesota next week as a tropical system makes landfall across Western Florida and steals needed upper air moisture from a weak cold front passing through the NC US. Florida appears to be the target of a new tropical system (named Elsa) in the SC Atlantic. The drier forecast for the N Plains and the NC US will deepen the drought and crop stress with developing heat starting on the US holiday weekend. The Canadian Prairies are included in the dry trend with just a few storms over Alberta. The American west stays in a dire drought with extreme heat forecast after July 7th. Another heat dome is forecast to form according to the EU model. The N Plains and the NC Midwest will endure numerous days of highs in the 90's with a few lower 100's.
Cattle closed higher Wednesday while feeders fell as the corn market rallied to limit gains. A steady outlook is offered for early trade today, though feeders will remain a function of the corn rally. June cattle futures went out at $122.50 vs. $91.65 last year. The cash cattle trade was mixed for Wednesday. Cattle in Nebraska sold steady to $2 lower with earlier week trade at $125-126 but was steady last week. Dressed trade was also steady with last week at $198. Kansas trade was steady to $2 lower with the last reported market two weeks ago, at $120-122.00. Boxed beef values were again lower. The choice cutout declined for the 15th consecutive day, sliding $1.05 to $291.29. Select was down $1.13.
Feeder cattle prices are at risk that deferred live cattle will not keep up to absorb the potential of rising corn prices to new contract highs. We had advised over the last two weekends to continue hedging fall and January feeders on valuations above 160.00.