Grains decline on potential Black Sea truce and China lockdowns.
Grain futures started soft Sunday night and steamrolled into a sharply lower night session led by wheat. With Russia shifting its military focus to the Donbas region of E Ukraine, the market senses the ability of Central and West Ukraine to have improved planting progress for spring crops. In addition, peace talks start today in Turkey, and there is renewed hope for progress.
China has begun to lockdown its largest city, Shanghai, due to the rapid spread of Covid-19. Shanghai is a city with a population of 26 Mil, where mass testing is now beginning. The lockdown would be a drag on Chinese demand and their second-quarter GDP. Crude oil futures fell sharply on this news with the May contract hitting a low early this morning already of 106.81. The declining crude oil was hard on biofuels and along with good growing weather for the winter Brazilian corn crop.
The NASS March Stocks/Seeding’s report is this Thursday at 11:00 a.m. It is widely known that the post-reaction to this report is historically volatile. This is not prompting any renewed buying interest in the market unless significant breaks produce value hunting by end-users. Speculators are in risk-off mode.
Adequate rainfall continues to be forecasted for the Brazilian winter corn crop, with rains of 1.50-3.50” commonplace in the forecasts with seasonal temps in the 70s/80s/90s. No evidence of any extreme heat is forecasted post a threat to the winter corn pollination that starts in early April across Mato Grosso. Weather patterns are favorable for Brazilian corn yield potential.
Cattle futures recovered to the better levels of last week ahead of the March Cattle on Feed report. The feedlot marketing rate was 1% better than expected, while placements were 3% higher than expected. The report would favor bull spreading in live cattle, with strength in April as opposed to June absorbing higher placement numbers. Last week’s cash trade continued to be mostly steady at $138, with a few trades in the $139-142 range. Last week’s box beef trade had the choice cutout $4.48 higher, while select gained $1.49. The start of the seasonal rally has been delayed by almost a month but is underway. Look for the June and August live cattle contracts to struggle in the 138.50-140.00 range.