Continued hopes of a Ukraine grain corridor drive prices lower.
Grain prices are sharply lower again this morning, on follow-through from yesterday’s sharp break triggered by conversations at the Davos meeting that is encouraging the prospects of opening up Ukrainian exports through exports. New headlines overnight had the algorithm machines in high sell mode as the Russian Deputy Foreign Minister Andrei Rudenko stated that Russia was communicating with the UN still on potential food export corridors. The portion of his statement that was missed by the algos was that he said any comprehensive port openings would have to include the dropping of Western sanctions by NATO. This shifts the blame for the world food crisis discussed at the Davos World Economic Forum back on NATO. The only leverage NATO has over Russia is the sanctions.
Overnight Indonesia indicated that its new export licensing program for palm oil would include a Domestic Market Obligation (DMO), which is based on their processing volume, local demand for cooking oil and the government’s bulk cooking oil purchase program. It’s anticipated that this new program will be a drag on future Indonesian palm oil exports. Malaysian palm oil was lower by 50 ringgits overnight in a correction after its massive recent gains over the last several days.
Grain futures decline, while Midwest cash/soybean bases continue to rise as farmers limit old crop sales while they rush to put in the new crop. The news of humanitarian Ukrainian grain exports is being priced as if it will occur, but only NATO has the final say, given Russia’s stance on sanctions. The upcoming three-day weekend and the end of the month are at hand, which is classic for a seasonal price washout for a decline that typically occurs when grain prices press a high during May and typically goes out liquidating.
The best rains for the S Plains in 2022 have been occurring with rainfall totals of .25-2.50” while the Northern Plains and most of the E Midwest were dry. A potent trough will slowly work eastward across the Central US in a southerly displaced jet stream over the next 36 hours. This trough produces .25-1.50” of rain across the Midwest/Delta, with clouds preventing high temps reaching much above the 60s and lower 70s. On Thursday, the rains shift back to the N Plains and S Canadian Prairies on the weekend, where totals of .5-1.50” will occur. Extended weather models show a Ridge of high-pressure building across South and Central US during early June, offering more summer like temperatures and reduced rainfall. In Europe, rains continue to be had disappointment and are forecasted to remain minimal over the next 10 days as a French and German drought continues to worsen on their wheat crop.
The last two trading sessions in cattle have been encouraging, given the bearish data from Friday’s COF report that was absorbed. This still doesn’t change the front end supply picture and concerns regarding demand along with outside markets that can limit a higher move in cattle still. Cash trade did develop late on Tuesday, with late southern trade starting at $137, which was off $1 from last week’s totals. The cash market is still holding a premium to futures, with June just around the corner. The softer trend will limit gains in the front-month price lifting. Choice box beef yesterday lost $0.63 while select rose $1.2 higher. The load count was 165. Feeder cattle enjoyed substantial gains in yesterday’s grain price break, which will likely find further buying interest again this morning with corn and wheat sharply lower again. May feeder cattle will expire on Thursday, and the August contract’s premium to the feeder cash index is considerable.