A firm overnight grain trade awaits crop report.

Grain futures are firm overnight ahead of the USDA's Small Grains and Stocks Report out at 11:00 a.m. today. Strength in French milling wheat futures as Emma dollar higher at ton, pushing the contract highs for the December contract. It's currently trading at €247 per ton, which is the equivalency of $8.09 US. Also, the E.U. rapeseed and corn markets scored new contract highs overnight, with rapeseed oil in Europe now quoted at $0.75 per pound. Canadian canola prices are stronger as well against the 900 value, as additional cuts to production are likely ahead in the next stats Canada data report. This overnight grain strength occurred despite a new 12-month high in the U.S. dollar. Reportedly politicians in the U.S. Senate have reached a deal to avoid a government shutdown in the near term, with funding available through December. However, the still leaves the issue of raising the U.S. debt ceiling, which will capture macro market attention.

Russian winter wheat seeding has been temporarily halted in the Central regions due to recent excessive rainfall. A drier pattern lies ahead, but wheat seeding at this latitude is typically complete by early/mid-October. A boost in seeding is needed to validate current government targets, but sources of auto Russia suggest wheat acres could be down slightly from last year’s record. Additionally, Russian wheat exports in Sep are likely to be down 1.2-1.3 million tons from last year, and food prices in Russia are still at or near record levels. Forward Russian grain sales are slowing amid rapidly rising export taxes, which looks to reach $60 per ton (vs. $30-32 in Aug) by early October.

Today's NASS is front and center with the release of final U.S. corn and soybean ending stocks. As noted over the last decade, data has typically leaned friendly on today's report, and there is evidence to suggest that production in 2020 and 2021 has been overstated. A trimming of carryout supplies just further increases the burden on yield performance. Currently, soybean yield data is improving in the Western cornbelt, with Iowa deemed mostly better than expected, while corn yield data in Illinois remains disappointing.

Moderate rain showers are currently working across K.S., E NE, and I.A., and a pattern of lite but steady precip will linger across the Southern and Central Plains into late Sunday. Additional precip of .50-1.50” is offered to TX, OK and K.S. This system expands into the Delta region and eastern Midwest early next week. Temporary halts to harvest/fieldwork are anticipated. But longer-term climate guidance maintains abnormal warmth into late October, while widespread Central U.S. dryness resumes Oct 5-10. The chief concern heading into winter is the lack of projected drought improvement across the Northern Plains and PNW. Above normal winter/spring precip will be desired there.

The South American forecast is consistent with prior runs. The issue in the near-term is that the E.U. & GFS models continue to keep meaningful Central Brazilian rainfall isolated to the 11-15 day period. At the same time, 10-day forecasts remain arid there and across Argentina. It’s still early in Brazil’s soy seeding season, but historic dryness will remain intact across Mato Grosso do Sul, Goias, and Minas Gerais into Oct 10.

Cattle futures finished lower yesterday on disappointment in cash cattle sales that started out on Wednesday with cattle in the Texas Panhandle selling steady for the week at $124. Offers were resting at 125 and hopeful they would be taken. Light trade in Kansas was quoted from $121-124, while cattle in Nebraska moved at $122-124 or steady to $2 lower. The boxed beef trade continued lower, with the choice value dropping $4.23 and select fell $2.57. The disconnect between beef and cattle prices has been well documented for many months. The wholesale 112A ribeye price reached a record $14.73 in early September and has since moved lower. The chart plots the ratio between the 112A ribeye and the 5 Area average live steer price. Relative to ribeye values, steers have been significantly undervalued all year. At the peak, the wholesale value was trading 11.8x the steer price, versus an average of 7x.