Wheat trades limit for the 6th session in a row.
Grain futures pressed sharply higher again overnight with the winter wheat contracts again touching limit up. In what has become a typical format, profit-taking hit grain futures overnight when the French Milling Wheat exchange opened at 3:40 5 AM and profit-taking ensued with markets stumbling from overnight strength. The rocket fuel of hysteria buying headlines for wheat is about spent, and you can see in the corn and soybean market that their recent rally reflects a tired ambition to rally.
The Russian invasion is now entering its second week with heavy shelling of Kyiv and urban areas also involved in the coastal south. To date, no wheat in Ukraine and Russia has been vaporized, and the new crop prospects of Ukraine is mostly winter wheat that’s in the ground. The remaining old crop wheat that is not being sold now will be available-for-sale later this year, the only question is will it be summer, fall, or winter. New crop pricing is stalling compared to spot. The second record large Indian wheat harvest is in the making and the importance of sourcing wheat/feed wheat in the month the heads is now looking towards India. The spread between Chicago and Paris wheat futures is nearing a prior record set in 2008, making US SRW wheat non-competitive in the world marketplace.
The Wall Street Journal is carrying a story this morning that the Biden administration is preparing to strongly confront China on trade, industrial subsidies and to protect American IT with section 301 investigations. This allows the prospects of punitive economic tariffs. Talks include Phase 1 purchase agreements that have failed and/or halted. There is potential China will use US grain as last resort.
Story and Bloomberg suggest the EU may allow farmers to use crop fell land as the warheads Ukraine to boost world grain supplies. The largest French Grain Co-op (Invivo) indicated that could boost total French acres by 10-15%. Spring wheat, canola, and corn would be the crops of choice. There is also the consideration of the US government (political talk) that could allow cultivation of CRP set aside ground this year, but that would be logistically difficult (which speculators would not understand).
The South American forecast is consistent with a Ridge of high-pressure located over any Brazil which shuns upper-air humidity and the passing short waves across N Argentina/S Brazil every 2-3 days. The system is producing above normal rainfall of 1.50-4.00” for Argentina and S Brazil which is helping ease the drought. The rains are coming at the end of the reproductive cycle, which is stabilizing and slightly increasing slashed yield expectations from this region.
Cattle futures closed mixed yesterday with feeder cattle higher, as bear spreading weighed on the front month of cattle prices with deferred cattle gaining. This helped support feeder cattle yesterday for gains of $2-3. Cash trade had some feedlots moving at lower bids in the South at $140, off $2 from last week. Life trade in the North was down $2-4 at $140. Box beef prices had choice lower by $0.96 at $255.72, with select just down $0.18 at $251.34. Wednesday marked the 23rd consecutive day lower in the choice cutout, which closed on every single day in February. The last time the value saw such a long, consecutive losing streak was in May 2020 during the pandemic chaos. The beef market is oversold and seasonally is looking forward to improving demand as March progresses.