CPI still running hot.
Grain futures are higher this morning but well off the sharply higher status achieved in the morning hours before the CPI data came out. CPI data reflected a percentage increase when most estimates anticipated inflation cooling a bit. (CPI rose 8.3% year-over-year versus an estimate of 8.1%) This pushed the dollar back sharply higher this morning above 104.00, softening the commodity complex from its overnight recovery.
French milling wheat led the wheat rally overnight, rallying back to contract highs seen on Monday on the deepening concern of the EU drought. The 10-day forecast offers limited rainfall with above to much above normal temperatures. Also, India is reported to have exported 1.4 MMTs of wheat in April with like tonnages now expected to be reported for May. Price and supply pressures are building to the point where the Modi administration will move to restrict or outright ban Indian wheat exports due to the following 2022 wheat harvest. It’s expected this could occur before the end of May.
Thursday’s 11 AM WASDE numbers are anticipated to reflect declining old and new crop stocks for row crops. End-users are hoping for a last ditch bearish reaction to the USDA May report numbers not consistent with estimates that could create a break in prices for end-users to take advantage of recent sale prices and market corrective weakness.
Weather for the Central US has a Ridge of high-pressure pushing the jet stream northward into seven Canada and creating a boundary zone for additional showers/storms across the N Plains and NW Midwest for the next 6-7 days. One of the Ridge, the Midwest/Delta will have sunshine and summerlike temperatures in the 70s up to lower 90s. Extreme heat will position across the S Plains with the drought will worsen in reemerge for W Kansas/Nebraska and the week following. There is no indication a return of meaningful rain is evident in the next 2-3 weeks. North Dakota/Minnesota will experience preventive plant of some magnitude. 11.4 million acres were anticipated in the March 31 acreage data to be planted in these two states. The question is, will areas outside this region be incentivized to grow more corn while acres are lost in these two states?
Live cattle futures put in a technically sour trade yesterday, which will not embolden buying interest with key moving averages keeping downward pressure against recovery pricing. Yesterday the August live cattle contract closed under the 200-day moving average which is the first time this contract is done that. Cash cattle trade got underway with sales in the Texas Panhandle closed at $139-140 which is steady to $1 lower than last week. Cattle in Kansas sold steady at $140. It’s anticipated the rest of the week will materialize at steady prices. The cash cattle market has never caught on fire and the looming larger cattle supply and diminishing demand prospects keep the summer contracts under heavy pressure. The December cattle contract is catching a cold and looking pretty sickly with yesterday’s close if technical buying does not materialize today. Our technical target suggests spot live futures will trade down to $127-129.