Grain prices on retreat to start Thursday morning.
After a higher start and firm trade in the evening, grain futures turned lower as the stock market retreated from new highs on Wednesday to down 500 Dow points this morning. Japan declaring a state of emergency to deal with Covid-19 variance ahead of the Olympics, along with China reporting a slowing economy, put a risk-off mentality on indexes and commodities.
Brazil's CONAB released their yield data this morning, lowering their corn crop only 3 MMTs to 93.4 MMTs, with most expecting them to get near 92 MMTs. A corn crop cut to below 90 MMTs is not anticipated until their August data releases. Soybean production is left unchanged at 135.9 MMT. Last week's hard freeze will take time to digest in terms of Brazil's winter corn yield. Private estimates are coming in for a Brazilian corn crop of 85-87 MMTs as the cold severely harmed the crop in Parana/MGDS, which would knife Brazil's corn export potential as cash market prices rise well above the world values. WASDE is forecasting the Brazilian corn crop at 98 MMTs, but they should lower their forecast sharply on Monday (July WASDE). The sheer size of the Brazilian corn crop fall offers a sizable export opportunity to the US in 2021/22.
The average estimate for WASDE July 12th crop report has US corn, soybean, and wheat stocks at 1,088 Mil Bu of old crop and 1,402 Mil Bu of new crop corn, 134 Mil Bu of old crop and 148 Mil Bu of new crop soybeans, and 729 Mil Bu of wheat. In June, WASDE estimated old crop US corn stocks at 1,107 Mil Bu with new crop corn at 1,357 Mil Bu, soybeans at 135 old crop and 155 Mil Bu for new crop, with wheat at 770 Mil Bu.
The Canadian Prairie Drought is worsening, and today's weekly crop report from Saskatchewan should reflect almost dire crop conditions amid the extreme heat. The loss of canola, wheat & corn crops will play large in world grain values. Winter wheat values are scoring harvest lows now, and the world wheat trade is getting very active. Today Saudi Arabia is tendering for 3 and 60,000 MTs of world wheat for October.
The tropical storm Elsa continues to create erratic weather models, so as it leaves later today, forecasting should become more consistent by the weekend. Forecasts are already noting far less than needed rainfall for the Northern and Central Plains and the W Midwest. The models were too wet early this week, and drought-ending rains will not drop across the Dakotas and Minnesota. It is appearing the QPF forecast is too wet for Iowa with 7-day rains of 2-4.50″. There will be some needed rain over Northern and Eastern Iowa, but the state will not end their drought concern. Iowa and Illinois 10-day rainfall totals are forecast to be in a range of .5-2.00″. Kansas soil moisture is retreating quickly and will soon be part of the drought-impacted crops with little or no rain for the next 2 weeks forecasted. It looks that the drought will be deepening across the Canadian Prairies, the US Plains, and Minnesota. The extended range EU and GFS Ensemble forecast models place the strong high-pressure Ridge over Colorado and lift the Jet Stream northward, allowing the Western US heat to spill eastward. The extreme Western US drought will push eastward into August.
Both cattle and feeder cattle futures were lower Wednesday, and a softer start is anticipated. August live cattle fell back to major moving averages with technical support needs to hold below the market or a larger setback will develop to 118. Wednesday's cash trade was quoted at $120-122 in Kansas or steady to $1 higher. Dressed trades in Nebraska were also steady at $198. Boxed beef values were lower on Wednesday. The choice cutout was down $1.78, and the select value was off $1.23. The weaker beef trend looks to continue into the end of the month when seasonal demand returns.