The grain trade softens ahead of another harvest weekend.
This morning’s grain trade has wheat softer, with row crops mixed after yesterday’s round of selling from new highs for September was achieved. The N Brazil and W Russian weather issues and managed money short covering into the month and quarter have helped lift grain price trends over the recent weeks. Monday is the USDA September Stocks and Final Small Grains Report, and it’s Another Friday Harvest Weekend Day. Typically, Friday’s Struggle to Rally with Pre-Weekend Harvest Selling.
There is a prospect of rain for NW Matto Grosso late in the 10-day forecast. Otherwise, the bulk of the northern soybean region looks to remain dry into October 7. The EU model calls for the monsoon rains to start across Northern Brazil potentially by October 9-11. Otherwise, extreme heat persists with highs in the mid-90s to lower 100s across Northern Brazil, with a cooling trend that starts in NW Brazil if the monsoonal rains arrive. Monday’s trade will solely focus on the validity of the potential rain for Brazil. It WILL rain in Brazil in October; the question is, can the total amount be 2.00 inches by October 15? There has been essentially no moisture since May.
The trade is trying to determine what the incredible about-face from Chinese leadership regarding monetary policy and fiscal stimulus may mean for demand going forward. At the start of the week, all sentiment towards China was relatively negative, with expectations for demand lukewarm at best. The initial stimulus package unveiled Tuesday provided billions in liquidity, bolstering trader sentiment, but was said not to be comprehensive enough when it came to stimulating consumer demand.
However, it appears China will roll out another round of stimulus, with over $284 billion set aside to help consumer demand and relieve local governments drowning in debt. In addition, leaders have earmarked another $140 billion to help prop up ailing banks, a clear sign they plan to do whatever it takes to support the economy. The stimulus rollout is so massive and so sudden it has caught domestic markets by surprise and sent them soaring. Outside investors are said to be changing their investment strategies as well, with one well-followed trader said to be looking to buy “everything” in China.
Corn has found resistance at 418-419 ahead of Monday’s report, with soybeans stalled at the 100-day MA at 1065. Chicago wheat has defined its resistance at 597-598. These key levels may hold through Friday but will be targeted on any friendly surprise Monday at 11:00 a.m.
Live and feeder cattle futures pushed higher yesterday after a mixed day of trading. A firm outlook is anticipated for this morning start. Cash markets turned very active on Thursday, with higher prices in all regions. Live trade in the north was $2-3 higher at $186-187, and dressed sales were $3 higher at $were to 94. Live sales in the South were $2 higher for the week at $185. These are the best prices in over a month. The northern premium increased to $2-3 over the South and was the highest in six weeks, while the basis turned up to $$3.50 over nearby futures. Seasonally, the north premium tends to narrow to the end of the year, while the nearby basis tends to remain positive.
Box beef values were lower again on Thursday and are holding weekly losses.
Estimated slaughter margins have again fallen sharply this week, but the cattlemen have maintained leverage on tight inventories. December cattle is targeting the summer highs near $188.00 if cash holds and is not seasonally drifting in October.