Grain futures spill into corrective mode ahead of USDA Report.
Welcome to Turn-Around Tuesday, as grain futures reacted lower from the initial start of the night session. It appears the bulls are interested in taking some risk off the table ahead of Wednesday’s USDA February Report. The concern is that WASDA will be conservative in lowering its South American crop sizes would subsequently means slow to increase exports. Broad trading ranges are likely to develop between now and Wednesday at 11:00 AM, when the report is released.
Mato Grosso Institute of Agricultural Economics raised their soybean crop estimate in their latest report to 39.47 MMT’s, up 1.3 MMT’s from their December forecast. The estimates were for between 38-39 MMT’s, so the estimate above the range brought in selling for soybeans overnight. This is one of the more northern provinces of Brazil.
Turkey has purchased 275,000 MTs of optional origin corn, with additional tonnage is being worked into March 15. In addition, there is talk that China is back securing one MMT of Australian wheat for May/June shipment.
South American weather has a lasting period of below-normal rainfall and above normal heat for the southern third of Brazil and all of Argentina into February 20. Extreme heat with highs ranging from 90s to lower 100s will start this weekend and continue for a week across this region. The GFS and European models are in agreement on this hot and dry forecast which increases confidence. Crop stress will be increasing as drought deepens under a lingering high-pressure ridge. Currently, the second Argentine corn crop and podding soybeans in Rio Grande do Sul are the biggest weather risks.
Cattle futures put in new contract highs before closing lower on Monday, while the fed cattle cash trade was quiet. Box beef was under pressure again, with the choice down $0.85 at $278.96 and select losing $1.01 to $275.04. The choice/select spread widened to $3.92/CWT choice premium. The latest grading percent data from the USDA shows for the week of January 29, a record large 75.24% of fed cattle graded choice. Record beef prices keep the cattle outlook friendly, with supplies to fall in the last half of the year. April live cattle are correcting an overbought status but are targeting 151.00-152.00.