Another weather weekend ahead.
Grain futures were mixed overnight, with spring wheat again leading the recovery, with corn and soybeans ending slightly to moderately lower. There is no question that the heat/dryness will have sliding US crop ratings on Monday, and it's likely into the following week. The market continues to look for saving grace in longer-term models that suggest rains arrive in August to revive yield prospects. This is why the volatility and bearish attitudes seem to want to hold on to reviving the crop in August.
Beyond the US, world crop production continues to slide due to the dire drought across Canada, the excessive rains across Europe and China, the freeze damage on Brazilian winter corn, and falling Russian crop prospects. All have elevated the importance of US corn/soybean yields in bridging a potential world shortage. The bearish attitudes are tied to the potential for seasonal price tendencies to decline from July and August, which are at odds with the coming record low stock/use ratios of world corn, wheat and oilseed exporters. The loss of 6-9 MMTs of Canadian canola cannot be understated.
The 10-day forecast has been consistent with a Central US high-pressure Ridge that focuses hot/dry weather on the Plains/W Midwest. Iowa's last meaningful rain was July 14th, some 9 days ago. And Based on both GFS/EU forecasts, another 10 days of hot/dry weather lies ahead for Iowa and the remainder of the W Midwest and the Plains. This makes early August rains extremely important to prevent an acceleration in crop condition rating declines and yield losses. The early August rains are highly important in deciding 2021 US corn/soybean yields potential.
The EU operational (day 10) and the ensemble model retrogrades the Central US high-pressure Ridge southwest due to a strong Trough that forms over E Canada. This allows for more seasonal Central US temps and improved August rains. The GFS operational and ensemble models are less amplified with the Eastern Canadian Trough and hold the Ridge across the Central US, extending the hot/ dry weather into August 7th, detrimental to crop yields. The GFS/EU models agree that a strong Central US High-Pressure Ridge which produces 10 days of hot/dry weather. Extreme heat builds south and east from the N Plains with widespread 90's to lower 100's featured for the Plains and the W Midwest. Slightly cooler upper 80's to mid-90's occurs across the E Midwest. Such extreme heat will push crop maturity into August. Its not only the daytime extreme heat across the Plains and W Midwest, but it's also the warm evenings that will limit the ability of corn to respirate.
It was a higher day yesterday for the cattle futures trade while the cash cattle trade was light and limited to Nebraska, where cattle sold for $1 95 or steady with earlier week business. Nevertheless, the beef market was able to build on Wednesday's reversal and closed up $.90 on the choice cutout and $1.00 higher on select.
The Livestock Slaughter report showed the total June cattle kill was 109% of May and 103% of last year. Total beef production was just 101% of a year ago on lower weights. But June production still reached a 15-year high. The Cold Storage report showed June beef stocks were 4% lower than May and 7% less than a year ago. This was the tightest June beef stocks figure since 2010 and the second-lowest in 16 years. The production/ stocks data affirms record June demand. The July Cattle on Feed Report is out today at 2 PM, estimates have on feed at 99%, placed 95.9%, marketed 102.1%. The Cattle Inventory Report will also be released which is estimated to have all cattle and calves at 99.5% and calf crop at 99.6%.