Stocks and commodities are lower today and risk-off trading.
This morning, commodity futures are lower across the board due to outside market activity, tied to yesterday's release of the Federal Reserve minutes from their previous meeting. Many are dubbing it that Taper Tantrum, as outside markets are having a macro risk-off day tied to the statements of many board officials who would be willing to consider reducing its bond purchasing program sometime later this year or in early 2022 as its 2% inflation target was reached. This would reduce the amount of liquidity that is provided to the US financial system. The insight caused the US dollar to rally to its best levels in 9 months and for most asset prices, stocks and commodities to decline.
WTI October crude oil futures were down over $2.50/barrel, testing their lowest level since May at $62.66, while US stock market futures look for the DOW to open 200-250 points lower. European stocks are off 1.8%, while Asian equities fell slid 1-2%. The Fed minutes did not show the potential for a rate hike until late 2022 or early 2023 as the labor market normalizes. This does not change the developing fundamentals of the world grain markets that have tightening supplies and importers searching the world for available product. Still, fund managers currently are getting smaller in their risk exposure across a host of asset classes. Over the longer term, there will be a tightening of world grain stocks that will spark new rallies, but for now, the financial market tapering talk is creating a risk-off mentality.
The Pro Farmer Tour estimated the Illinois corn yield at 196.3 BPA, above last year's 189.4 BPA and the 3-year average 184.4 BPA. ARC notes that NASS pegged the Illinois corn yield at a record 214 BPA in its August report. The Illinois PF Tour soybean pod count was an average 1,280 pods in a 3 X 3′ square compared to 1,247 last year and a 3-year average of 1,191 pods. The W Iowa PF Tour corn yield was pegged at 192.1 BPA, well above last year's 180.0 BPA estimate and the 3-year average of 184.3 BPA. Soybean pod counts were slightly above last year and the 3-year average. The Pro Farmer Tour finishes later today in Rochester, Minnesota, after surveying crops in the eastern half of Iowa and Minnesota. The PF Tour to date has largely confirmed the NASS August Crop estimates for corn/soybeans.
The current forecast models have the best rains dropping across the Central Canadian Prairies, ranging from 1-3.00″ this weekend. Minnesota looks to be short-changed, as will most of Iowa in the next 6-7 days. The best chance for Iowa rainfall is the August 27-28th period. Unfortunately, much of Kansas, Illinois, the eastern half of Iowa, and Indiana will miss meaningful rain. The 10-15 day forecast returns warmth/dryness to the N Plains/N Midwest. High temps range from the 80's to the mid 90's across the N & C Plains and into the N Midwest into the weekend before a cooling trend develops. N Plains/W Midwest high temps decline to the 70's to the 80's while the rest of the Midwest and the Central Plains hold in the 80's.
Yesterday there was light cash cattle trade being reported in the North. Cattle sold from $125-128 or $1-3 higher. Small numbers in the south sold steady to $1 higher at $121-122. Similar trends look to continue the rest of the week. Cattle slaughter at midweek totaled 360,000 head, up 14,000 from last week and 10,000 more than a year ago. Despite the larger kill, beef prices continued to climb. The choice cutout gained $2 and select was up $3.00. Ahead of Friday's Cattle on Feed report, the average estimate calls for July placement rate at 93% of last year, a marketing rate of 97%, and an August 1st feedlot inventory at 98%. A year ago, feedlots were still moving large numbers into the feedlot due to the spring deficit. The average estimate for this year is just above the 10-year average.