Grain futures soften ahead of harvest weekend.
Grain futures were lower overnight, as corn and soybeans head into a big harvest weekend with extra hedge pressure anticipated on a Friday. Wheat was softer on profit-taking after charging higher almost $0.40 on the Kansas City wheat contract since the Tuesday low. Renewed concerns are developing as the US Government actions with spending become heightened affecting the US dollar, such as government funding, raising of the debt limit, the Infrastructure Bill (passed by the Senate), and the Democrats $3.5 trillion Reconciliation Bill all add to the political complexity that's ahead. The US Congress plans to work this weekend, but the polarized politics makes for the many unknowns. The US dollar will closely follow Congressional actions, which impacts commodities.
It's the same game every year with congressional leaders always mucking things up and having to raise the debt ceiling or threaten programs that run out of money. Barring a new appropriations bill, if shut down plans occur on October 1, it means the USDA would no longer release key data like weekly export sales, inspections, crop progress/condition data, and potentially the October Crop report. However, the September Stocks report will be released as planned next Thursday as the USDA will still be operational.
Evergrande is back in the news as Thursday it missed its $83.5 million coupon payment on dollar-denominated bonds. This kicks in a 30-day grace window before a default can be declared. Evergrande shares lost 12% in Hong Kong trade. Unease over the financial viability of Evergrande will persist until they restructure. China's Central Bank injected additional liquidity into China's banking system overnight, which amounts to over $70 Bil on the week.
Reuters reported that China purchased Australian wheat based on its quality/price, despite the nuclear sub standoff that developed late last week. It's anticipated that most of China's wheat purchases from Australia was concluded before the US/Aussie sub deal. So it's uncertain whether China will purchase anymore in the near term from Australia.
A warmer temperature profile with rain for the drier areas of the Central and Southern Plains is offered into early October. As a result, the 2021 growing season will be extended while the Midwest harvest accelerates. The forecast is favorable as the US harvest will push rapidly ahead. A Ridge of high pressure maintains its position across the Plains and pulses north and east. A fetch of Gulf moisture allows showers across Texas and the far Western Plains into the closing days of September. Any rain for the Plains is desperately needed amid their deepening drought condition. The Midwest will be dry with high temps ranging from the 70's to the upper 80's. The summerlike warmth and the dry weather should really accelerate the harvest. The 2021 harvest could be one of the fastest in years.
A steady opening is anticipated for cattle futures, with the Cattle on Feed report and Hogs and Pigs report due after the close today at 2 o'clock. Boxed beef values continued to fall, with the choice value down $2.23 and select was $.51 lower. For the week, the choice value is down $8.87, and the select value is $4.76 lower. However, the choice cutout is still $96 higher than a year ago and at a record high for late September.
The September Livestock Slaughter report showed the total August cattle kill was up 1% from July and 3% more than a year ago. The fed cattle kill was near unchanged from last year at 2.22 Mil head, while the average carcass weight was 11 Lbs lighter at 870 Lbs. Total beef production was 101% of last year at 2.36 Bil Lbs.