Last full trading day until Tuesday, July 6, 8:30 a.m
Grain futures started the week's last trading day, ahead of the Independence Day holiday, firm for row crops and mixed for wheat. Corn futures gave up yesterday's gains, but still, corn futures at present values are experiencing the biggest weekly gain in corn prices in a decade. September corn futures are up $0.85 currently on the week since last Friday, and at one time, were up over a dollar yesterday. This is why the market struggled to maintain gains. Even holding steady at current values is a strong price performance for the week, as we await reopening of markets Tuesday at 8:30 a.m. July 6.
The primary weather models are consistent with recent day runs offering limited rainfall to the Northern Plains and the Northern and Central Midwest. The below-normal rainfall and warming temperature trend (highs returning to the upper 80's to the upper 90's) will stress corn/soybeans in the drought areas of the Northern Plains and the Western Midwest, where top and subsoil moisture is short to very short. Corn moisture needs to increase dramatically heading into and during pollination, with the weekly draw at nearly 1.75″. Crop condition ratings will continue to drop across the N Plains and W Midwest where rainfall in the past week has been limited. The forecasts maintain this arid rainfall trend into mid-July. Western Florida is the target of hurricane Elsa which is located today in the SC Atlantic. Elsa will steal upper air moisture from the Gulf and maintain warm to hot weather over the NW and NC US.
Amid the Pacific Northwest, N Plains and NC US drought, there is the risk that WASDE could adjust either yield or harvested acres down in their July 12 report. Some analysts are suggesting that it would be likely the WASDE will cut harvested acres based on the growing prospect of elevated abandonment and failed acres. In 2012 WASDE cut US corn yield by 20 BPA, but such a cut is not justified by crop condition ratings. Currently, for next Tuesday afternoon, there are expectations that crop condition ratings will fall another 1 to 3% out of the GD/EX ratings category for corn. The 2021 drought is more regional when compared to 2012. Because of this, it would be more likely the WASDE could opt to cut harvested acres to account for the growing prospect of a small 2021 US corn/soybean harvest. NASS is conducting an on the ground survey to account for yield/harvested acres.
The combination of ongoing US drought losses and the continual drop in Brazil's corn production due to this past week's freeze is a big deal as their export pace will suffer amid rising domestic feed prices. The risk remains the upside with end-users to use any weakness early next week for new purchases.
Cattle futures put in a strong performance yesterday, with December and the 2022 live cattle contracts making new contract highs. At the same time cash cattle markets were quiet across the Plains on Thursday. Earlier week sales were firm, but volume is limited in front of the holiday kill week. The boxed beef trade for Thursday was lower once again. The choice cutout dropped $3.64 (-$17 for the week) and select fell $2.34 (-$9 for the week). The beef market looks to trend lower into the end of July.
The US beef export program remains record large. US beef exports last week totaled 42 Mil Lbs, bringing the cumulative total for the year to 985 Mil Lbs. To date, beef exports are 122% of last year, but more importantly, outstanding sales are 141% of a year ago and record large. China has primarily driven the increase in exports and sales. 16% of US export commitments are to China versus 2% last year. The USDA is likely underestimating annual beef exports.