Wheat lifts the grain complex overnight.
Grain futures reacted sharply higher to the first NASS wheat crop condition report showing only 30% of the 2022 winter wheat crop rated GD/EX, with 36% of the crop in the poor/very poor category. This is the second-lowest initial US winter wheat crop on record and was a bullish surprise. This created a sharp push higher in wheat that carried soybeans and corn higher in its wake overnight.
Ratings as low as reported yesterday imply a drop of 10-20% to trendline yields, which is completely dependent on April/May weather. Trendline yield is anywhere between 43-44 bushels, which implies a potential crop of 36-40 BPA. Overall, this forecasts a wheat crop some 100-150 Mil Bu lower than last year, which could have ending stocks dropping to near 200 Mil Bu, not seen since 2007/2008.
The ratings data will now have weather forecasts for the Plains/Canadian Prairies in the Western Plains as a significant focus as it awaits rain to break what is still a long-standing drought for most of the wheat-growing regions in these areas. If the drought deepens through April, this opens the door for Kansas City wheat to rechallenge and overtake the highs made on March 7. Our charting inside the newsletter implies a final wave 5 higher move.
Last year, the onset of wheat harvest helped break corn values after May 1 into summer. If rain does not arrive in the coming weeks, corn will be left alone for rationing supplies, as an alternative, such as wheat, is not there to fill the feed bunks.
The EU is announcing new sanctions against Russia, including a ban on high and food products (vodka/caviar) and blocking bank transactions from three more Russian banks that were initially on the Swift list. It also includes the sale of semiconductors and computers into Russia.
Central US weather models agree that a strong jet stream and a series of storm systems will pass eastward across the N Plains and the Midwest of the next two weeks. Embedded short waves produce Midwest rain every 5-6 days. Some of the rain in the E Midwest will be heavy and delay the start of spring seeding. The Plains states continue to hold in an arid weather trend with little rain for the drought areas of HRW wheat. Texas remains warm and dry for another two weeks, the largest wheat producer by seeded acres. Flooding otherwise continues for another two weeks across the Gulf states and Delta. In the 11-15 day period, a secondary Canadian cold shot pushes southward, producing more rain across the Northern Plains and upper Midwest, keeping temps 5-12° below normal. The colder temperatures will slow the started Midwest spring seeding.
Live cattle and feeder futures were lower on Monday, with further weakness anticipated this morning due to the higher fee grains. Cash cattle trade did see some sales on Monday on a light volume of 9,600 head which mainly was at $138.00, with dress sales also steady at $222. Box beef values were mixed with choice gaining $0.90 to $268.04, and select values were lower by $0.82 at $261.70. Feedlot inventories are holding at historic levels, and packers are using leverage with formula cattle to maintain large profits. Summer cattle will likely struggle on any attempts again to the 138.50-140.00 range, as the market does is not concerned with a tight situation until the fourth quarter. June cattle need to hold the 133.50-134.00 price range (62% retracement of the March rally) or risk further bearish momentum that could challenge 130.00. (Which was the summer/fall of 2021 valuation.)