Weakness overnight has corn and wheat finding support.
Grain futures were lower overnight, awaiting the US trade representatives Katherine Tai's announcements today on how the Biden administration will approach upcoming bilateral trade talks with China. China is behind on Phase 1 Agreement purchases with three months remaining in the current agreement for this year. China has recently purchased 1 Mil bales of US cotton during September, which help push cotton futures over one $1.00/LB. China could embark on a massive soybean purchasing project with the Gulf being more functional in November-December. China could also purchase ethanol which can be stored and delivered in the new year.
China is out this week as it celebrates its Golden Week Holiday, so any reaction from China could be delayed. However, it's thought today's announcements could help be the restart of trade talks that holds China accountable for meeting its Phase 1 Pledge and starting discussions for Phase 2 and longer-term avenues for Chinese tariff reductions.
Overnight Bloomberg news reports that Russia will be setting a wheat export quota in February to limit its 2021/22 wheat exports to 31.5 MMTs. This will include 2-3 MMTs of trade into Kazakhstan. These numbers are well below the WASDA Russian wheat export estimates of 35 MMTs. Russian may only export 11-14 MMTs of wheat from February through June, which will push demand to other world suppliers. Amid a floating export tax rate that could reach $70/MT this month, Russia still remains the cheapest wheat in the world. Also, Argentina is now growing GMO wheat in Buenos Aries and Cordoba provinces, and many are awaiting if Argentina will create GMO-free wheat export certificates.
Malaysian November palm oil futures closed 80 ringgits/MT higher overnight, getting within striking distance of record spot futures highs set back in May. This is drawing support in again to Bean oil and canola after drifting overnight in price. China's Dalian markets are closed for holiday. US corn yields continue to be disappointing while soybean yields are running better than expectations. China stepping in and picking up its purchase program to avoid new tariffs can absorb the negative price mentality that soybeans are struggling with. Corn and wheat are also looking for improved potential Chinese demand.
Central US weather shows a warm and mostly dry week ahead, maintaining an active harvest. The next chance of rain is late next weekend as a weak system pulls eastward. This system looks to produce .25-1.25 inches of rain with the best totals across the Eastern Midwest. The drought-stricken Plains will enjoy a few light showers, but totals will be less than .50″. Central US temperatures will be near to above normal with highs ranging from the 70's to upper 90s.
The South American forecast shows a slow arrival of the wet season with rains building across Northern Matto Grasso and Goias. The rains will slowly leak South during mid-October, setting up a favorable spring growing season. However, concerns remain that Southern Brazil and Argentina will dryness looks to linger again for another 10 days. In addition, short soil moisture has halted corn seeding.
Last week, the negotiated cattle trade was steady in the Texas Panhandle at $1 2 for instate to lower in other regions. Cattle in Kansas sold from $1 21-124, Nebraska traded $1 22, and the Western Midwest market sold cattle for $1.01 22-123. The early week outlook is for steady to $1 lower. Beaks scratch that boxed beef values experienced another week of steep losses, which weighed on the cash cattle trade. The choice cutout fell $1 one, and the select value dropped close to $1 zero. From the late August highs, the choice cutout fell $56, and the select value dropped $55. Both values still are holding at record seasonal levels and by a significant margin. Despite the drop in beef values, estimated slaughter margins are at a record $651/head in his looks to support cash cattle trade at $1 20. Cattle futures seasonally expect a low by mid-October.