Grain futures retreat from overnight strength.
Grain futures traded mostly higher overnight, alongside a sharply higher energy complex and stock indexes. However, with technical resistance overhead on corn and soybeans, grain futures drifted from overnight gains to reflect a soft close in price at the end of the night session, awaiting fresh export news.
Ukraine’s cumulative corn yield, with 90% harvested continues to point toward a final crop of 40 Mil tons versus the USDA’s currently projected 38 Mil. As a result, Ukraine exports will likely be lifted by 1.0-1.5 MMTs, but with a lack of Russian shipments, this is mostly now offset on the USDA’s balance sheets. Also, the Ukrainian FOB basis remains at $1.25-1.30/bushel over CBT futures, compared to Gulf premiums of $0.80-90 over.
Today, Pres. Biden holds a call with Russian Pres. Putin to discusses a range of issues that are critical to the US. A plan to implement widespread economic sanctions on Russia if tensions on the Ukrainian border escalate is also on the table. Of course, it’s impossible to know whether anything will become of a military conflict. Still, it would be a big deal to global grain flows out of the Black Sea region if something were to develop, unlike the less turbulent annexation of Crimea in 2014.
South American weather forecasts show lengthy dryness and rising temperatures in Argentina and Southern Brazil. Forecasts are not entirely void of rain in these areas, but they are considered minimal with totals of only .15-.75” in spotty areas. Longer-term models on both the EU and GFS are similar in showing below-normal rain and abnormal heat to continue across this region into the opening days of January. Trend yields will be at risk by January if forecasts models do not return to a more normal rain pattern.
Cattle futures started the week higher, with cash cattle markets at the typical standstill to start the week. Next week’s slaughter marks the last full week of the year, so Packer demand for the rest of the month is in question. Last week’s higher trade caught many off guard, and the early outlook remains steady for the week. Boxed beef values were lower yesterday, with the choice lower by $1.83 and select down $0.79. The choice or/select spread narrowed to $14.68/CWT choice premium.