Another heavy night of liquidation in commodities.
Grain and commodity futures across the spectrum overnight continued their relentless and plunging action in liquidating style from index funds that is beyond a slight improvement in the weather in the short term. Since the release of the CPI two weeks ago Friday and the actions of the Fed that imply continual rate hikes, the index fund mentality is that of complete risk-off in the liquidation of long commodity assets.
A strong record basis being paid on old crop corn and bean values has done nothing to slow heavy liquidation that continues unrelentingly. End-user buying procurement will start to escalate with world wheat demand stepping up as Tunisia and Algeria make purchases for wheat, along with Saudi Arabia seeking nearly 500,000 MTs of world wheat. Bangladesh, Iran, and Pakistan are rumored to be getting prices along with GASC soon to announce a tender.
Chicago SRW wheat has declined to values that have occurred before the invasion of Ukraine by Russia. It’s as if wheat is free-flowing out of Ukraine, which is not the case. In fact, Russian wheat exports are hampered due to the surge to seven-year highs on the Russian ruble that has created a wheat market of FOB pricing that is difficult to secure. World wheat demand will be pushed to Europe rather than Russia.
Temperatures are set to decline across the Midwest, while the Delta and E Midwest will be dry for another 10 days with limited rainfall for Illinois, Indiana, and Ohio. Much of this area is starting to endure crop stress due to weeks of drier than normal weather. Rain will be needed in early July ahead of pollination, or yield losses will be unavoidable.
Central US weather still shows an amplified high-pressure Ridge holding across the Midwest another two days before being compressed to the South into the Delta/S Plains, where extreme heat will be felt with highs reaching the 90s and lower 100s. The high-pressure Ridge retrogrades West the Intermountain West early next week, which allows for cooler temperatures across the upper Midwest while limited rainfall will be experienced. Soil moisture is on the decline for the next 14 days raising yield risk for pollination. The high-pressure Ridge returns to the Midwest after July 4.
Yesterday’s cash cattle market found late trade developing in parts of the South at $138, which was roughly steady to $2 lower than last week’s weighted averages. A few of the bids were noted, but most of those were steady with last week. The day beef carcass values were softer, with choice losing $0.99 and select $0.71 lower on the load count that was moderate at 157 Lowe’s. The cattle market is now looking forward to the June COF report released after the markets close on Friday. Expectations have cattle on feed at 102%, placements at 100%, and marketing’s 103% of last year. The market will be watching the placement numbers to gauge the cattle crop going into the year’s end and 2023.