Bullish CPI this morning firms grains.
Grain futures are higher this morning after a mixed overnight performance. CPI released this morning for October showed consumer prices rising more than expected. This lifted gold through the summer highs and helped crude oil recover an overnight selloff with inflation buying back into the grain complex this AM. The USDA November crop report is behind, and now the market’s focus will shift back to demand. Needs for corn and wheat will start to grow beyond USDA’s expectations.
Corn prices pushed to new highs overnight in China to US equivalent $10.85 rumors are building that China will be allowing US DDG’s to be imported again starting in January to alleviate tight feed supplies. Chinese January soymeal futures also rose $5.30/MT to $486.80/MT an active and-user pricing.
Black Sea values look to rise as the Russians will be raising their export tax on Friday with the Moscow Exchange back in operation with the cycle of rising FOB offers and rising taxes to persist as Russian wheat values try to reduce their influence in world wheat trade. Still, even with the export tax, Russian wheat is the cheapest in the world, and the Russian government is trying to slow trade. It’s anticipated that Russian wheat export taxes could rise to near $100/MT by the end of year. European wheat supplies are tightening so prices will stay elevated to slow demand, while now W Australian wheat is struggling from ongoing rains that are lowering quality with lower protein levels anticipated as harvest gets underway.
Central Illinois cash corn basis bids firmed yesterday $0.07-$0.25 over the board in need to pull supply from producers. December futures will become deliverable in several weeks in the cash pole should underpin futures and spot spreads. A demand lead rally is likely to start unfolding corn/wheat in the coming weeks, with one concern being the EPA is expected to announce prior and new biofuel mandates before the end of the month. Any weakness on the EPA announcements will also be used to buy breaks in soybean oil. Energy prices have returned to the highs of the year.
Cattle futures closed firm yesterday while feeder cattle struggled on the renewed strength in the corn market. Cash cattle markets were untraded with bids showing up at $130 but feedlots building on friendly momentum offering show lists at $132-134. Boxed beef had choice down $0.85 at $287.80 with select $2.02 higher at $270.62. Given the historical pricing of box beef, the recovery from the seasonal low would appear to be disappointing. Still, typically seasonal highs start to occur now from that box beef recovery by mid-November. Historic slaughter margins are keeping beef plants at capacity and look to stay that way into year-end. Cattle futures are in recovery mode on the charts, with December targeting 134.00.