Sharply lower equity markets creates risk-off in commodities.

Row crop futures moved sharply lower last night as the equity markets continued their heavy liquidation, dragging energies and metals lower, which pushed corn and beans to the downside on potential bio-fuel reduced usage. (That may not be a fact heading into this time of year, but it’s what the market tells itself.) While wheat futures gapped higher with French milling wheat making new contract highs on the developing drought concern across Western and Northern Europe with limited rains for another two weeks.

The warmer, dryer forecast for the Central and Eastern Midwest has the prospects of accelerating spring seeding in this area, while also the May crop and WASDA report will be out Thursday. There is no question the crop will be going in later than perceived, but the most productive regions of the corn belt will hold that line at ten days later than optimum.

This week, a ridge of high pressure will dominate the Central US and push the jet stream northward into S Canada. This pattern will allow for sunshine/dry weather with the summer like Midwest/central plains temps in the 70s to low 90s. Extreme heat will continue across the S Plains, where the drought looks to worsen in reemerge across Kansas/Nebraska in time. Recent rainfall is an interlude in an overall drought pattern that is persisting into the summer. Northern Plains stay wet this week with another .5-2.00” of rain with flooding persisting into May 20.

French milling wheat pressed to new contract highs overnight, leading US wheat values higher as they are embroiled in eight weeks of arid weather for most of Western and Northern Europe with forecasts of no rain for the next two weeks. China’s primary wheat areas also have dried down and are at risk of drought. The Western HRW wheat plains also went through a rough weekend of the 90s/100s, with La Niña now expected to deepen for the rest of May. World wheat crops overall are in fast decline, including the Indian crop loss that could be another 10 MMTs based on commercial interests in India. This is heightened by the reality that the Ukrainian war has no end in sight for the calendar year. Also, the winter corn area in Brazil remains dry, which is seasonal, keeping production capabilities on the decline.

Cattle futures look to open lower with the weak equity markets and significant moving average support at risk, which is 132.50 for the June contract. Last week’s cash trade was primarily steady compared to the previous week, although the North had seen cattle trade in the 144-148 range. The choice cutout lost $7.42 last week and select declined $5.25. Seasonally box beef prices would see a rally with the approach of the Memorial Day grilling season, meaning increased demand. But the recent heavier slaughter tone indicates the market has plenty of cattle to work through in the near term, keeping the press for box beef in control. Feeder cattle made weekly gains last week off of the weaker feed grain market and could find further support this morning until values in the corn and soybeans stabilize and find new end-user buying.