The grain trade recovers on potential heat/dryness setting in.

This morning’s grain trade is firmer, with corn leading the gains. CONAB released their data this morning, trimming the Brazilian crop by 340,000 MTs but raising the corn crop by 2.5 MMTs. Meanwhile, the focus remains on the US heat heading for the Central US in the ongoing building drought in China. Brazil’s soybean estimate is still 5.6 MMT below WASDE with corn 7.86 MMTs lower. Rio Grande do Sul’s crop yield was reported to have 75% of the area mostly harvested before the rains overcame the area.

China’s ag ministry said record high temperatures have had an adverse impact on the planting of crops. The ministry sent out several work groups to seven provinces to offer guidance in the fight against drought. China’s water resources ministry this week launched emergency responses to manage drought in Gansu, Shaanxi, Shanxi, Henan, and Shandong provinces, indicating various regions in the country spanning the northwest to the east are facing parched and scorching conditions. Yesterday's temperatures were 108°, and more of the same is expected through the weekend. Strategie Grains cut its EU wheat production forecast by 1.7 MMT to 121.8 MMT, which would be down 3.6% from the year ago and the smallest since 2020-21. The consultancy said it anticipated France would see the biggest year-over-year decline in production, followed by Germany, Poland, and Hungary. Strategie Grains also lowered its outlook for this year’s EU barley crop by 800,000 MT to 52.2 MMT.

Yesterday’s WASDE report is now behind the trade with little fanfare with price direction now into June 28's Stocks and Acreage report will be focused on weather. Heat, along with below-normal rainfall trends, will move to pull corn and soybean ratings lower into July. The high-pressure Ridge is D-amplify and retrogrades westward in the 11-15 day window. But it’s unfortunate that it is expected to return again in the closing days of June and into early July, which is quite seasonal. The models do offer various rainfall forecasts, though the EU model in the 10-day period is drier. The N Plains and NW Midwest are caught in the Ring of Fire storms writing over the Ridge. Meanwhile, the coming hot/dry pattern will cause crops to root down and foster growth, but we will be looking for rain in two weeks. High temperatures look to be routinely in the upper 80s and lower 90s under sunshine through June 24. This will help produce one of the warmest and rise June’s on record for the Central and Southern Midwest.

Live and feeder cattle drifted lower again yesterday for the second day in a row, while the cash cattle trade continues to have been limited so far this week, with trade too light to set a price trend. Despite big discounts to the cash market, cattle futures weakened yesterday, suggesting traders sense cash prices will eventually soften this week. What few cattle did sell, they were in Kansas on Wednesday at $185, which was steady. Most feedyards pass on bids and have cattle offered at $187-188.

Yesterday, in the June WASDE report, there were a few minor changes. Both supply and total use were lowered by five million pounds. The third quarter price forecast was raised by $1 to $183, and the fourth quarter was lower by $1 to $186. Of note, the WASDE price forecast is typically, on average, within $6 of the actual price. The current CME cash equivalent of dollar sign 183 is right at the regression forecast, meaning December cattle are too cheap to sell and too high to buy. With fed cattle supplies continuing to fall, it’s ultimately expected that December cattle could challenge the $190-194 in the coming months.