Grains start the month under selling pressure.
Grain futures gap lower overnight, even though the forecast remained cool and damp, the prospects of the crop getting planted beyond 50% within a “reasonable” time of the optimum May 10 date remove the bid for the market, especially with the US dollar furring back up overnight in anticipation of the Federal Reserve’s interest rate hike later this week.
Estimates for this afternoon’s planting progress have US corn at 18-20% (33% five-year average) and soybeans at 15-17% seated. Spring wheat seedings are anticipated at 21-23% because of the Western United States spring wheat crop, not North Dakota. Limited rainfall across North Dakota over the weekend and this week was an abrupt change in the forecast, allowing planting to progress sooner than last week’s expectations.
There is a consideration that India may eventually move to limit exports with the prospect that India’s new wheat crop may be smaller than anticipated. Recent heat and India and Pakistan have the potential wheat crops in decline. Part of the post-Russian-Ukraine invasion selloff in wheat price was tied to the prospects of India exporting 8-12 MMTs of wheat in the 2022/23 crop year. Any reductions would be price friendly if announced.
The Central US weather forecast has storms passing eastward through the Central US every 2-3 days. There will be patchy stretches of dryness where farmers will have periods to plant. 10-day rainfall accumulations are estimated in the range of 1.00-3.50”. This morning, the GFS model is farther east with rain in the Plains, while the EU model has rain farther west in the HRW wheat belt for later this week. Rains in the Plains will be debated as to the ability to help the crop, but it certainly stabilize it.
Cattle futures are called mixed to lower for the session, with feeder cattle finding support on the weaker feed grains. The trend is still lower and technically driven by chart-based selling, backed by upcoming demand concerns. April cattle expired on Friday at 141.90 after gaining $3.40 on its last day. In contrast, June cattle posted its lowest close since March 4 and traded within one tick of the 132.47 April low.
The cash cattle trade this week has expectations of remaining strong which could support futures. Last week, the choice cutout dropped by $7.57 while select declined by $4.62. High slaughter levels and cold/wet weather have put a damper on the beginning of the growing season and the usual seasonal rally that beef would see this time of year. Estimated slaughter margins declined and were down $40 for the week to a six-week low of $258/head. The live cattle market is currently priced reasonably relative to the beef market.