KC wheat trades over $10.00
This morning, grain futures are higher, with Kansas City wheat over $10 after trading up the $0.50 limit. US grain values are following world values that moved sharply higher overnight with Paris wheat/corn futures, the Chinese corn, and the Malaysian palm all scoring historic highs overnight. In addition, Malaysian palm oil has now rocketed to 8,170 ringgits/MT, the first time a palm oil futures contract has ever traded above 8,000.
Grain prices continue higher as it has become apparent that the military campaign of Russia into Ukraine is going to take weeks. Also, there are reports of a convoy stretching 40 miles headed Ukraine’s capital city of Kiev. This appears to be a dramatic escalation of what is now a six-day war from Russia. Traders understand now that if the war extended and Russia ever captured Ukraine in the coming weeks, the world will not allow Russian/Ukrainian grain/energy to be sold any day soon, as the Swift banking system is unavailable. Other alternatives that could be used would be Bitcoin or China’s international bank clearing CPIS. Additionally, Turkey and Syria will take Russian ag products without concern for sanctions.
Crude oil futures again pushed over $100 a barrel in the night to a session high of $101.53 before retreating well over a dollar off the highs. Trade trends are now implying crude oil targets of 115-125 into the spring if OPEC does not dramatically move to increase production, as large strategic reserve draws cannot be maintained without putting the country at a security risk.
Grain futures volatility stays elevated with traders looking for China to book US corn as it switches from Ukraine. The Black Sea contract defaults are growing and will be sizable. The US is again becoming the grain bin of last resort, and importers are becoming more aggressive buyers. Similar to last Friday, sharp price corrections will be used as buying opportunities by end-users in the near term.
South American weather produced rain across northern Argentina and southern Brazil yesterday with rainfall totals of .25-1.25” with the best rains falling across the Rio Grande do Sul. High temperatures will range from the 70’s to mid-90s, with the coolest readings across southern Argentina. The forecast continues to show a Ridge of high pressure located over Northeast Brazil, which is shunting upper-air humidity into passing cold fronts across N Argentina/S Brazil. The Ridge produce the drying trend for Central and Eastern Brazil with rainfall of .25-1.00” . The 10-day forecast maintains regional thunderstorm chances for central Argentina and southern Brazil this week with rain totals of .5-3.00”. The southern third of Buenos Aires and most of Central Brazil will hold in a dry trend with limited rainfall.
Live and feeder cattle were lower on Monday, and a weaker outlook is anticipated this morning. Negotiated fed cattle markets were quiet to start the week while a few hundred head moved at $140.50-142.00 in the Western Midwest. Box beef values extended early losses on Monday, with the choice cutout falling $0.76 and select lower by two dollars. Fed cattle carcass spreads continue to narrow. The prime carcass premiums fell for the seventh consecutive week and out $10 under the record high traded in November at an average of $21 premium to choice. Also, select continues to narrow the spread on choice with last week’s average like carcass trading seven dollars in the choice up nearly $23 from the late September low. April cattle have massive support at 139.00-140.00 that needs to hold or else the cattle market will break into a larger decline on recession fears and consumers being more selective in their purchases.