Spring leads grains higher overnight with new contract highs.
Grain futures opened higher overnight on the warmer and dryer forecast for this week, with crops in the N Plains and the W Midwest having limited soil moisture due to the ongoing drought and will not endure the coming heat/dryness very well. Yet, E Midwest and Delta crops have enough soil moisture to better withstand 10-14 days of arid/hot weather. The big question that continues is can the Central US heat/dryness last thru August? That would be a big deal for grain values and US corn/soybean yields. Weakness from overnight highs came from the large decline overnight in oil futures with OPEC on Sunday upping production and stock markets declines on the always occurring COVID lock-down scares.
US corn and soybean crop ratings are expected to rise 1-2% in the GD/EX category today due to last week’s improved Midwest weather. But this week’s lack of moisture in the NW cornbelt will have ratings likely on retreat in next week's data. US summer row crop prospects have been volatile since mid-June on varied US weather, world crop production potential has declined amid a dire Canadian drought, a Brazilian drought and generational freeze and record flooding across Germany/France. Even early Russian wheat yields are disappointing. World 2021/22 grain production is in decline with the world’s 2nd largest corn exporter Brazil, not offering corn beyond September and buying in record amounts of Argentine corn. Sliding world grain production requires large US corn/soybean crops on expanding import demand which could produce more of a marching rally effort if Central US weather stays arid.
China is boosting its purchase of pork for its Gov’t reserve (20,000 MTs) while disease could diminish its domestic kill rate. This is offering support to China’s domestic pork market and boosting farmer profit margins.
The forecast models agree and are consistent with prior day runs. A Central US High Pressure Ridge will become the forecast theme with a few Ridge riding showers occurring across the far Northern Lake States. Rainfall amounts for WI/MI and OH look to range from .1-.7” with a few locally heavier amounts. Otherwise, the forecast is dry for most of the N Plains and Midwest looking forward to August. Even the 16-20 day GFS forecast is arid for the N Plains, the W Midwest in the 1st week of August. The GFS Operational and GFS Ensemble models offer extreme heat for the N Plains and the W Midwest with highs ranging from the mid 90’s to the lower 100’s on numerous days. The EU model is still hot, but it does not offer the extreme heat of the GFS. Highs would range from the upper 80’s to the mid 90’s. The problem is the length of the heat and rapid fall in soil moisture levels in the next 2-3 weeks. This will be adding stress to corn and soybean crops with time.
Two reports out this week for the cattle market with the Cold Storage and Livestock Slaughter reports to be released on Thursday, followed by the Cattle on Feed and Cattle Inventory Reports on Friday. Cash cattle trade was steady last week. Cattle in the Central and Southern Plains moved at $120, while cattle in Nebraska sold for $123. The outlook for this week is steady/weaker. The beef market continued its seasonal decline. The choice cutout fell $10.65 last week and is $73 under the June high. Following a record seasonal rally, a record seasonal drop is unfolding. The select value was $5.62/cwt lower last week.