USDA crop report out today at 11:00 AM
Grain prices are softer Wednesday morning ahead of the USDA crop production data out at 11:00 a.m. Part of the concern is that the USDA is always slow in reflecting damage that is likely inflicted to the South American crop as of January 1. This can produce data that at face value appears bearish for the world stocks numbers. This means the USDA is focusing on crop potential rather than crop reality.
Today’s crop report is typically the most important data set for the winter. It provides a finish for last year’s US and northern hemisphere crop productions and looks forward to insights on this year’s potential with 20 2022 US wheat seedings. End-users will use any post-report weakness to create new long positions in what is an inflationary trending commodity market with world carryouts not being replenished as anticipated just 60 days ago.
In Brazil, Abovie (a soybean crush consortium) cut their estimate for 2022 Brazilian soybean production to 140 MMT’s. The cut was 4.8 MMT’s lower from their December estimate which also drops Brazil soybean export estimate to 91 MMT’s in 2021/22.
There are rumors that China is actively securing US new crop soybeans amid the South American weather struggles. China is booking basis, elevations, and cargoes out of the Gulf and PNW for September/October. As a result, a strong US export pace is expected from August onward.
Argentine heat produced acute stress on crops yesterday with ratings and fast retreat. Record heat this week is having a negative impact on yield. Weather models are in broad agreement with the 10-day outlook in broad agreement that rain impacts Argentina January 17-21st, but most meaningful totals stay isolated narrow bands across north-central Argentina with large portions of production areas missing much-needed rains. Beyond the next 10 days, the forecast has returned to dryer weather on the GFS, while the EU model offers potentially normal amounts of rain. The GFS has been more accurate with the past 60 days.
Cattle futures recovered yesterday and closed higher. Today’s USDA crop reports for the grains will have an effect on the feeder cattle inversely. Yesterday, the box beef market had another solid day of gains with the choice gaining $2.18 to $278.22, and select values rose $2.13 to $268.63. The choice cutout has advanced 14 of the last 15 days and compared to a week ago, this value was $11 higher. Packers in some areas are seeing staffing 5% below normal, causing bottlenecks in production. Cash cattle started out generally lower than last week, with small numbers the Texas Panhandle at $137, which is $1 lower than last week while Kansas trade was down $1-3 at $135-137. April cattle need to hold 140.00, or a larger topping phase was put in place last week.