Risk-off versus a threatening weather forecast.
Grain futures opened higher last night and moved sharply higher on wheat, with corn and soybeans also finding initial strength before getting caught up in the risk-off selling in the outside markets. Stock indexes were down another 5% overnight after Friday’s massive losses from the CPI index, which was much hotter than anticipated. Fears are growing that this week when the Federal Reserve meets, they will break their promise of capping interest rate hikes per meeting at .50% and could move that to a .75% increase. This strength in the US dollar overnight was back to 104.76, near the highs made at the beginning of May before softening after the Federal Reserve created a softer stance that rate hikes would be capped at .50%.
The negotiations between Russia/Turkey working to move Ukrainian grain through export corridors from Odessa have ended. The concern now is Ukraine’s winter wheat/barley harvest will start getting underway, with government storage facilities still over half full. Bottlenecks will begin to occur now with Poland and Romania also focused on their wheat harvest, circumventing the movement of Ukrainian grain. To add insult to injury, now it’s understood that Ukrainian farmers are struggling to find fuel for harvest in some orders won’t fill for 4-6 weeks. With no exports out of Odessa, Ukraine will struggle to move as much as 1.5 MMTs of grain out of the West via truck and rail. Also, the USDA’s report on Friday that Russia will export record amounts of wheat/corn is just plain wrong. NATO sanctions will limit the ability to acquire insurance on vessels entering the Black Sea, with Russian exports likely capped at just over 30 MMTs, not the 40 MMTs the USDA used in their balance sheets on Friday.
The upcoming Central US weather forecast is threatening with heat/dryness in the next two weeks under an amplified high-pressure Ridge. Long-range models into mid-July maintain periods of heat and reduced rainfall trends. This afternoon’s corn crop ratings will likely come in near unchanged at 73% good/excellent, with initial soybean ratings pegged to come in somewhere near 69-72% GD/EX. These will likely be the best ratings of the year as ratings will decline likely into July. This afternoon’s planting progress reports will probably show the finality to spring wheat, corn, and soybean planting, where preventive plant acres will have to be determined for ND/MN.
Cattle futures were lower on Friday due to the risk-off selling in the stock markets and concerns of a recession developing at the end of this year. This put selling pressure on the cattle trade, with a softer start expected this morning. Last week’s cash trade in the South mainly was $136 with some $137 on the live, while the north experienced a market that was $2-4 higher at 140-144. The boxed beef had choice jumping $4.06 while select was $1.13 lower. Demand is anticipated to slow after Father’s Day weekend buying is satisfied. Box beef prices look to move lower after this week. Due to last week’s CPI showing extreme pressure with inflation on consumers, this could have budgets finding beef demand hit as a discretionary item that can be reduced.