Wheat looks to provide morning strength.
Grain futures look for a split opening this morning with wheat called 3-5 cents higher on two-day strength for French milling wheat while corn is mixed and soybeans steady-3 cents lower. Declining world production is meeting US crop improved weather. Rain fell across the E Midwest over the July 4 holiday, but the Midwest forecast looks progressively warmer and drier beyond July 14.
Europe’s largest grower of wheat is France, which is reporting a wheat crop that will drop to 28.1 MMTs from the prior year's production of 35.1 MMTs due to curtailed seeding and cool/wet weather conditions. Crop Institute Arvalis and Grain Industry Group Intercerales made this 7 MMT drop in crop larger than expected. This will decrease the European 2024 wheat production to 127 MMTs versus the USDA’s expected 130.5 MMTs. A European wheat harvest of 124-126 MMTs appears realistic and will pull world wheat stocks below 250 MMTs. This puts the stock/use ratio of the major exporters at a record low. Russian and European wheat exporters will hold wheat stocks of less than 19 MMTs compared to 27-29 MMTs and last year’s stocks. US wheat stocks are rising, but other leading exporters are facing tightening supplies and stocks. US wheat exports look to be on the rise this fall/winter.
The extreme heat/dryness has overtaken Black Sea crops, which continue to stay in place, sharply declining their future export grain potential. High temperatures range from the 90s to lower 100s well into mid-July, adversely impacting their spring wheat and corn crop. Russian all-wheat crop estimates have recently seen a slight bump in better winter yields across the SW Russian region; however, if the July weather pattern does not change, their spring wheat crop will get harmed.
Ukraine is enduring acute stress, and the June WASDE forecast of 27.7 MMTs is no longer realistic. Private estimates show the Ukrainian corn crop is now in the 25 MMT range and needs rain. In I have Ukraine/Argentina and Brazilian corn production estimates of all faltered with the Buenos Aires’s Grain Exchange holding to an Argentine corn crop of 46.5 MMTs down from the June estimate from WASDE at 53 MMTs. At some point, the trade will have to acknowledge that the USDA will be too low on export potential this coming season.
The remains of Hurricane Beryl are now the weather feature for the Central US for the next two weeks. The hurricane is forecasted to make landfall at the coals at the tip of the Texas/Mexican border early Monday and hook northeasterly through the E Plains into the southern Ohio Valley. To the west and north, drier weather will prevail as the Western US high-pressure Ridge progresses eastward. The central US forecast will gradually turn warmer/drier, with the last half of July also looking warmer and drier. The forecast models are now trying to determine whether extreme heat can work back into the forecast, with the EU model being the least hot.
Cattle and feeder cattle pushed higher on Wednesday, with a better start anticipated for this morning’s early trade. August live cattle continued the recovery, while December cattle gained $1.20 to mark the highest close since March. Strength in deferred live cattle is now lifting feeder cattle futures with over $2.00 gains, and feeder cattle are now starting to push trendline resistance, which has kept them at bay. Negotiated fed cattle trade has yet to take place. Small numbers reportedly sold in Iowa for $308 on a dressed basis, which was $4 lower than a week ago, but there was a of volume to call that a trend. Box beef values slipped in front of the holiday with choice off $0.55 at $329.84 and select was off $2.10 at $340.38. The choice cutout value had rallied for six straight weeks and is now at the highest price of the year comparing this to a year ago the values are $13 higher. Domestic demand seasonally slips through the summer after Independence Day and is seasonally likely seeing a top in the box beef market forming. This will pressure cash cattle and CME prices from mid to late summer.