French Milling Wheat surges $5.50/MT overnight.

This morning’s grain trade is higher again, led by wheat. French and German wheat quality concerns helped push French milling wheat higher by $5.50/metric ton. There are widespread reports that recently harvested French and German wheat is not meeting milling specifications. The EU farmers are enduring sharp cash price falls on quality dockage, which renders a large share of the wheat crop as feed. The poor-quality French and German wheat crops argue that Russia will have to fulfill a large share of North African and Mideast wheat demand.

French soft wheat ratings again fell a sharp 5% and are now at 52%, good excellent as 14% of wheat crop is harvested. The weekly sharp fall in ratings due to quality is a crop with light test weight and low protein. The harvest has advanced 10% in the past week, with little of the week meeting milling wheat specifications. Sizable dockages on cash are facing producers as they deliver their wheat, and some are considering bailing the wheat. It’s becoming alarming to see the inability of French and German wheat to meet milling specifications.

The grain trade remains firm through Pres. Trump’s speech in front of the Milwaukee Republican convention. In his 1.5-hour acceptance speech, Trump indicated he would end the “Green New Scam,” and the electrical vehicle mandate would end on day one. American agriculture was not explicitly mentioned, but Trump did joke that he had China importing $50 Bil dollars of US goods in his trade deals, including $35 Bil of US ag goods before the arrival of the China virus. Trump did not specify his use of tariffs against China, as congressional sources indicate that Trump would need their approval for any use of tariffs on a widespread basis. GOP whip John Thune on Political indicated that he should only use tariffs against countries applying unfair trade practices. Pres. Biden allowed the TAP (Trade Promotion Authority) to lapse in June 2021, which means that any new US president would need congressional approval for tariffs or new trade deals.

This afternoon’s release of the Commitment of Traders report is expected to show managed money adding to an already record-large soybean/corn short position. Wheat funds shorts are also expected to surge. This record large net short position adds to the potential upside price risk on reversing developments. World wheat has a bullish story, with French and German crop quality issues persisting and deepening, which will spark additional US wheat export demand. Over the next 1-2 weeks of wheat harvest, eight out of the EU countries will be closely scrutinized for wheat crop quality. Demand for US high-protein wheat into the EU is expected and has supported spring wheat.

Cool and dry weather will occur across Midwest with warm/dry weather in the northern plains and hot/dry weather across the Canadian Prairies. Meanwhile soaking rainfall of 2-6.00″ will occur across the Gulf states and the SE US and up the Atlantic coastline. A strong high-pressure Ridge located across the western US will push northward into Canada next week. This Ridge will keep the jet stream displaced in the north, thereby creating a NW upper airflow through the Central US, curtailing rain chances. Rain has again been taken out of the forecast for Ukraine in SW Russia, which will create further downward revisions on the corn and rapeseed crops. This is a bullish developing story for US exports that the trade is still continuing to ignore.

Live and feeder cattle futures tumbled lower yesterday, with a steady mixed outlook offered for this morning. Live cattle turned lower on weaker cash trends and lower deferred cattle futures pulled feeder cattle market down. A quiet trade is anticipated now in front of this afternoon’s July Cattle on Feed Report. Expectations this afternoon for the COF report are for on-feed at 101.2%, placements at 97%, and marketings at 91.8%. There were 2 less marketing days in June compared to last year. Today’s report will also have quarterly feed-by class data to offer insight into heifer retention rates.

Cash trade Thursday was quoted $2 lower in the north at $196, with dressed sales down $2 for the week at $310. Sales in the South were also $1-2 lower for the week at $188. Similar trends look to continue for any additional cash sales today. Placements could be a surprise here if imports of Mexican and Canadian feeder cattle were to show up, given the recent strong search to keep pens filled.