Three-day weekend ahead creating short-covering.
Grain futures are firmer to start the last day of the week ahead of a three-day weekend. Given the sensitive nature of the balance sheets, a one-bushel deviation from the USDA’s current 177 Bu/acre for corn is worth roughly $0.25 when perceptions swing. With stock markets having stabilized overnight, yesterday’s rally is continuing, with corn being the number one feature given pollination starting right after the July 4 holiday.
Acreage data will start to come into play the week of June 30, with increased corn and reduced soybean and spring wheat plantings as the current theme of where the guesses are coming in. But for now, it is all about the weather and what it can do to make or break trend line yields.
The forecast for the Central US continues concerning heat and dryness in the next two weeks under an amplified high-pressure Ridge. The EU weather forecasting model has consistently been the more accurate one, especially with the GFS experiencing volatility as it switches from the IBM to the new Cray computers at the NWS.
It’s hot and dry across the Plains, Midwest, and Delta with just a rogue thunderstorm over SE NE and another over EC OH. Rain is extremely isolated. Searing heat has been persisting with high temps in the 90s to lower 100s for the fourth consecutive day. Corn was reported rolling in see Illinois and Indiana on Thursday afternoon in the upper 90s.
The EU and GFS models are in better agreement that the next 10 days will produce below-normal rainfall and extreme heat next week. Slight cooling will occur over the weekend before the increased temperatures return and impact crops and livestock by Monday. The EU model has never shifted from the chance of record heat, only the GFS, which has been erratic, has but continues to come back to the EU solution. Ratings for the corn crop are set to fall when reported Tuesday afternoon by 2-3%.
Record to near-record heat is in the cards (watch yesterday afternoon’s video) for another 6-7 days of dryness that will stress European grain and oilseed crops. A few showers return on the closing days of June, but high temperatures in the mid-90s/lower 100s are likely having an impact on lowering yield potential. The European winter wheat/barley crops are in their formative reproductive stage at this time.
Cattle futures are anticipated steady-lower this morning as the August contract failed to push higher yesterday but did hold most of Wednesday’s gains. Prices have faded back from the 100-day moving average, which has acted as a swing point on the August contract. The cattle market is now juggling different influences, with higher grain values and perceptions of whether the economy will slow due to recent interest rate hikes. The ongoing concern of high gas prices continues to challenge strong consumer demand. Also, there is heat in the cattle feeding states, creating death loss and reducing daily gains.
Cash this week has seen the southern trade come up with $140 while the northern trade has been $145-148. Dairy cattle and Mexican cattle in the South in the mix are not making the grid. Retail demand after Father’s Day will be watched to see if restocking will be aggressive, Fourth of July featuring is mostly burgers rather than steaks which are popular on Father’s Day.