FED meeting announcement today at 1:00 p.m. CDT.
The overnight grain trade was again softer as the liquidity drain continues on the concerns of the Federal Reserve meeting today, raising interest rates by .75% and strengthening the US dollar. The market is emotionally worrying about reduced demand because of higher rates. History does not show rising interest rates affect food demand; even the recession of 2008-2009 proved that food consumption continued its upward trend of usage. But for now, the market wants to believe there is a problem with the rate increase. Once we are through today’s 1:00 p.m. rate announcement, it is very likely that with the impending heat coming, you will see grains firm into the end of the week. Keep in mind that the grains will be closed for three days due to Monday being a federal holiday, and this will bring heightened concern and short covering from the weakness the grain trade has absorbed this week.
The NOPA bean crush is out at 11:00 a.m. today, and the May crush is anticipated to be a record 171.7 Mil Bu. The prior record was set in 2020 at 169.7 Mil Bu for May. May soyoil stocks should also see a decline of one .76 Bil pounds.
A significant decline in natural gas prices has occurred since last week due to the explosion at a Freeport plant in the South, ending significant natural gas exports until fall. This has improved ethanol producers’ grind margins along with the Biden administration encouraging E15 sales all year long to add to energy supplies. This will give a boost to corn buying for the ethanol grind through the summer.
The Central US weather forecast has heat/dryness slated for the next two weeks under an amplified high-pressure Ridge. Long-range models into mid-July maintain an arid trend with periods of extreme heat. There will be times the Ridge de-amplifies was showers across the northern third of the US, however, the future forecasts theme maintains a warmer and drier pattern creating worry for the upcoming corn, soybean, and spring wheat yields. Record heat has also battered Europe this week, and arid conditions will cause acute crop stress on the producing winter wheat/barley crops. Some rain is expected to fall in week two, but crop concerns are rising.
The cattle trade was mixed yesterday and looks to open steady firm this morning. June live cattle are running at a potential discount to the cash market, helping support prices. Cash trade is starting to develop with some lite trade triggered at $136, steady for the week, while the market saw some regional trade at $139 in Kansas. The retail demand was offered to start the week with choice values down $1.10 and select lower by $0.63. The load count was moderate at hundred 35 loads. Cattle slaughter is running strong with ample animal supplies available. Estimated slaughter on Tuesday was 122,000 head, down slightly from last week but steady with last year. Live cattle are watching outside markets for reactions to the Federal Reserve interest rate hike as it closes near 1:00 p.m.