Grain futures recover overnight on renewed war premium and weather concerns.
Grain futures started firm overnight and moved sharply higher on the same news they ended with last Friday in a slump. Weather remains dry in the southern plains with today’s NASS start of national wheat crop ratings, which are expected to be poor, along with continual fighting in Ukraine with the port in Odessa likely to not provide exports for the remainder of the calendar year. Odessa exports around 20% of Ukrainian agricultural products.
Soybeans initially started weak in the night session on the continual talk that Shanghai remains shut down with concerns that exports may slip into China. Still, demand did reemerge after the grains rallied significantly in the night on what we know to be tightening supplies of US/Brazilian cash soybean supplies in the coming months. US cash soybean crush margins hold above $2.00/Bu, which offers no indication of demand rationing.
There continues to be no indication of any truce or cease-fire talks between Ukraine and Russia making any progress. At this point, it isn’t very likely that Pres. Putin or Zelinskiy will be holding any phase-to-face negotiations in the near future. This has war premium again working back into the marketplace. EU/NATO members are discussing a new round of sanctions. Whether the sanctions include new Russian banks being cut off from the Swift banking system or pushed away from Russian energy is yet to be determined. Russia is finding renewed strength in its currency by demanding its products be purchased in gold or rubles from NATO members that want energy or countries circumventing the sanctions and purchasing grain from Russia. North African and Middle Eastern countries will need to acquire rubles as they hold US dollars.
Saudi Arabia’s state ag buyer SAGO purchased 625,000 MTs of optional origin wheat, with even North American wheat being involved. The purchase price was $422.47/MT ($11.50) for new crop delivery from September through November.
US and weather models reflect a strong jet stream and a series of storm systems that will pass eastward across the Northern Plains and the Midwest over the next two weeks. Embedded short waves produce rain for Midwest locations every 5-6 days. Some of the rain in the Eastern Midwest will be heavy and delay the start of early spring seeding. In the two-week timeframe, the eastern plains will be included in the rain with totals of .25-1.25”. Chilly temperatures will accommodate rainfall, but the returning warm front will produce rain through the eastern plains in the Midwest early next week. The secondary cold shot is looking to push itself in the 11-15 day period producing rains across the Northern Plains/Upper Midwest. The dry areas of the Western HRW wheat belt remain dry.
Cattle futures were lower last week overall, with cash trade mostly steady at $1 38 with a few sales in the Western Midwest near 140. Dressed ranged from $221-225, steady to $4 higher. Cattle slaughter last week totaled 639,000 head, down 3% from the previous week but 6% more than a year ago. Box beef values continued their seasonal rally with extended gains last week. The choice-value gained $4.50 to a six-week high and select was higher by $10.38. Feedlot inventories are holding at historic levels, and packers continue to work this, creating significant profits again by holding the line on paying for cash trade below 140.00. The bull market in cattle is in the fourth quarter and into 2023.