Grain futures are sharply higher from potential significant lows.
Grain futures are sharply higher this morning, recovering from extreme liquidation that has been taking place since early June and likely formed significant lows post-July 4th holiday. A shift from recessionary fears has focused back on heat and dryness that is forecasted to return to grain-producing areas over the next two weeks. Also, the climate pattern for weather in Europe is becoming worrisome do the prevailing dryness, which is not resolved during June.
India has announced that it will restrict wheat flour exports, with traders having to secure government permission before exporting the commodity. Ongoing talk is that production in India will be under 95 MMTs, and India, like Pakistan as of late, will have to become a wheat importer in late 2022. This prompted a portion of the sharp rally in wheat futures overnight.
The Central US weather forecast has the EU and GFS in more agreement as a final push of rain will occur in the next 36 hours before a much drier upper air flow produces generally dry weather conditions into July 19. The GFS ensemble model maintains a drier trend into late July with rising temperatures. Recent rainfall is needed, but it appears that rains are becoming an interlude and not an overall weather pattern change. Following another round of rain for S Iowa into C Illinois/Indiana of .25-1. 25”, dry weather will return. Midwest heat is forecasted to return in the 10-15 day period.
Live cattle are indicated higher this morning on follow-through buying from yesterday’s strong performance. In contrast, feeder cattle will deal with the sharply higher feed grains overnight and anticipate a steady weaker start. The cash market remains on traded through yesterday, with trade expected to develop today. While sharply mixed prices will again occur between the South in the north, the general friend of better pricing is anticipated. Box beef prices yesterday had choice sharply higher by $3.39, and select gained $3.06. Cash prices in the five-area average continue to hold well above the August board. Some of this is due to diversions in cash markets, where the South continues to trade at significant discounts compared to the north, with a large percentage of Mexican cattle and dairy. Long-term support continues on the August contract in the $130.00-132.00 range.