Three-day weekend creates heavy liquidation.
Despite searing heat forecasted for the Delta and Gulf states where corn is pollinating and the trend of below-normal rainfall, along with Russian missiles flying into the port of Odessa in Ukraine, grain futures opened sharply lower overnight and went into heavy liquidation. Active index fund selling for managers limiting their commodity exposure as the Central US weather forecast is a bit cooler than anticipated last Friday. Beyond this weekend, the ridge de-amplifies with a cold front pushing southward from Canada. This front produces a few showers with totals of .10-.90” coverage no better than 35%. This does leave a large share of the Midwest/Delta and plains with a rapid decline in soil moisture which will have crop ratings falling this afternoon and again next week.
Volatility has been high since the central bank raised interest rates last week by .75%, with commodity markets enduring liquidation from fund managers. Yet this overnight rally in the stock market and energy values did little to dissuade selling. Fund managers are now net short Chicago wheat futures.
The decline in world wheat prices since last week and overnight has created interest from importers. Algeria and Tunisia are tendering for wheat with rumors that even Egypt will be back later this week with another tender. The US wheat harvest will surpass 50% before July 1 this year, which could cause seasonal lows to be formed much sooner.
The US and GFS models are in fair agreement for the Central Midwest forecasting, while the GFS is erratic in its forecast and cooler than the EU model. The EU model continues to remain a more consistent weather forecasting source. An amplified high-pressure Ridge holds across Central US for the 2-3 days before being compressed southward to the Delta/S Plains, where extreme heat will persist this week with highs ranging from the mid-90s to lower 100s. A high-pressure Ridge retrogrades westward to the Intermountain West, allowing cooler temperatures but not much rain. Soil moisture is on the decline for the next 14 days, raising yield concerns heading into pollination for corn.
The cattle trade is called firmer, with a higher feeder cattle market anticipated due to the collapse in feed value pricing overnight. The cattle market was resilient on Friday despite weakness in the energy and oil markets, which did recover in the Sunday and Monday sessions. Last week’s strong cash showing in the north allowed new highs for 2022 to be above 143.00. This occurred while the choice cutout declined by $4.88/CWT for the week, with select lower by $4.05. Cattle numbers are still trending lower in the feeder cash index was firmer last week by 1.61 to 162.17.