Wheat prices move sharply higher on Russian wheat news.
Grain futures had a sharply mixed night, with wheat futures pushing sharply higher on winter wheat values as Russia's private attic analytical firm IKAR dropped their estimate of the 2021 Russian wheat crop to 78.5 MMTs, a 6.5 MMTs decline from the WASDE July forecast. Row crop futures started steady but moved lower on weekend rainfall that accumulated as expected for the Central US, but broad swaths of the Plains and Midwest were still missed. A large drop in September Malaysian palm oil futures had soybean oil into its 2nd day of retreat losses.
Russian wheat yield data remains hugely disappointing, with further cuts in the crop expected. The yield data with 46% of the crop harvested argues for a crop of 74-76 MMTs which would be 9-11 MMTs below WASDE. The disappointing 2021 Russian wheat crop yield and upcoming further cuts to the Canadian crop are creating a sharp recovery in pricing from harvest lows. In the release of their 2022 budget, the Russian Gov't has maintained its floating export tax well into next year. The future increases in the Russian wheat export tax and its smaller harvest shift world trade demand to other suppliers. This is where Canada's drought and Russian crop shortfall leads to a shortage of world high protein milling wheat. Wheat is taking itself out of the corn ration was just increases demand in the coming months for new crop corn.
NASS crop condition ratings for US corn/soy crops are expected to slide 2-3% this afternoon following last week's heat/dryness across the Plains/W Midwest. A further decline in conditions is expected next Monday amid this week's dry and warming weather forecast. The US corn balance sheet is tightening with soybeans already tight. It does not require much yield loss to cast both corn/soybeans into an even more bullish category than wheat. It is the absence of a yet to develop aggressive export demand market that is holding soybeans and corn at bay, and giving the bearish trend opportunities to talk yield potential is still there.
An arid/warm weather pattern will hold across the Central US until August 12th. Crop areas that did not witness rainfall on Friday and the weekend will endure increasing stress amid declining and short soil moisture. A high-pressure Ridge across the Western US produces an NW upper air flow thru the Midwest. This flow limits Central US rainfall chances for the next 8-9 days. Temperatures will be cooler than normal for the next 4-5 days before warming late week and on the weekend from west to east. Highs return to the upper 80's to the upper 90's which will further push crop maturity from Thursday onward. The heat spreads eastward into the E Midwest next week. The lack of rain trough the Plains/W Midwest is a growing concern for crop yields. The next chance for meaningful moisture does not arrive until the 10th day of the forecast across Iowa/W Illinois which is too far out for any confidence. The 10 day rainfall graphic is from the EU model. Notice the broad area of Central US dryness. The GFS and EU models maintain the Plains and W Midwest drier than normal weather pattern into August 17th.
After an early week high, cattle futures declined the remaining days of last week. This is creating a steady weaker outlook to get underway. The cash trade last week was steady in Nebraska at $122 live and $196 dressed. Live trade in the south was $1 better at $120. The early week outlook for this week's cash trade is firm on rising beef values. Boxed beef values continued to climb last week, led by the choice chuck and rib values. The choice cutout value gained $11.83 for the week to $278.46 and the select value gained $9.25 to $259.19. The choice/select spread increased to an $18.40 choice premium, up from $10 last year and average of $8.The relationship between beef and cattle prices has been coming into balance as beef prices correct and cattle prices hold around $120. But the still wide disconnect keeps the cash cattle outlook steady in the foreseeable future.