French Milling wheat and KC wheat make new contract highs.
Overnight French Milling wheat scored new contract highs, with spot December French Milling wheat hitting $312.25/MT before retreating $2, while Kansas City wheat pressed to a new contract high slightly before values started to drift in the morning session. Australian wheat futures rallied $15/MT overnight the spot January settling at $8.40 per bushel. The Australian market, on paper, is no longer heavily discounted to other markets and is now awaiting aid to measure what rainfall of 3-5” the next four days dust wheat quality in the east. Stats Canada will release their final 21-22 crop report on December 3, which keeps the risk elevated that further high-quality milling production can be trimmed further.
The US dollar has pressed new 16-month highs to just shy of 97.00. This is an external force being used to control inflation via currency strength. The Federal Reserve continues to talk about becoming more aggressive with dialing back the QE program of bond-buying and the threat of an interest rate hike by summer 2022. This remains a burden to oil prices (commodities as well) as a higher dollar gives oil priced in US dollars a lower value, with all the oil traded in the world in US dollars, making supply/demand interests work harder to create an elevated price lift. In addition, OPEC has left open the possibility of discussing changes in future production in response to the US planning to add supplies by reserve stocks.
The volume in commodity trading will start to reduce for the rest of the week after today’s trade, and very changeable American weather forecasts can create accentuated moves in light of declining volume. Also, we still await the long-touted and likely becoming irrelevant EPA biofuel mandate announcements. Even if negative, we will likely find buyers on any dips it creates in grain pricing.
Favorable weather is anticipated through the weekend for Argentina, where expectations of .5-1.50” of rain are anticipated. Meanwhile, the extremely wet N and C Brazil forecasts start to dry out into the weekend. Overall, longer-term guidance is consistent in offering a lengthy period of dryness in Argentina, and S Brazil starts next week. Above normal precipitation remains probable in Central Brazil for December and January. Weather forecasts into December will be closely scrutinized like US forecast in June as La Niña is present.
Cattle futures are expected open firm, as has been over many of the prior sessions. Cash cattle markets remained quiet to start the holiday week with offers on Monday quoted at $136 in the south which is mostly $3 higher from last week. Boxed beef values were mixed on Tuesday with choice gaining $0.84 and select lower by a dime. Yesterday’s November cold storage report showed that the seasonal recovery be stocks continued in October. End of the month be stocks rose 30 to Mil pounds (8%) from September but were still 25 Mil pounds less than a year ago. February cattle are back to extreme Fibonacci retracement numbers, where any further strength now projects the fall highs to be challenged.