Grains lower overnight from the Brazilian rain forecast but not sharply lower.

The overnight grain trade opened lower as anticipated, but after the initial hour, a bid arrived in corn, soybeans, and wheat, and prices improved modestly throughout the night, leaving small losses in corn and soybeans while the wheat trade had turned mixed. The big story is that needed rainfall will begin to fall across Northern Brazil this week, along with the advancing US harvest. This is a heavy burden for prices to absorb, especially with the WASDE and October Crop Production report due out on Friday. Price strength will have to come from strong end-user needs.

The US dollar remains strong, over 102.00 from last Friday’s employment data, and the 10-year treasury note has returned to 4%. This provides a headwind for index funds that are less optimistic about buying unless the dollar falls below par (100).

Soybeans will be looking for Chinese buying interest as they are back from their Golden Week Holiday. However, because China has been buying both US and Brazilian beans over the past two months, the USDA may cut soybean exports again for 2020/25 on Friday. Some estimates suggest it could be anywhere from 50-100 Mil Bu.

This week's bigger story is that the monsoonal rains are starting to develop, two weeks late across N Brazil. This gives Brazilian farmers confidence to start planting their new crop of soybeans, with their progress accelerating into mid-October. Once the monsoonal rains arrive, they historically produce rain through March, so the continuation of the drought in this tropical environment downturns low. Improving Brazilian weather is a big deal to world grain markets if Brazil can produce 169 MMTs of beans.

Russian ag minister Oksana indicated that the war and bad weather adversely impacted the 2024 Russian grain harvest. This helps the trade gauge grain production cuts by the Russian government later this week. Meanwhile, Saudi Arabia booked 307,000 MTs of optional wheat, likely to be sourced from Russia due to the FOB price relationships. Russian wheat for December is offered at $221/MT, which makes this the most likely supplier. December French milling wheat is only off $.50/MT this morning, which helped wheat cut some of its overnight losses.

The Central US weather forecast maintains almost complete dryness, with temperatures in the 60s to upper 80s. The growing season has been extended, with temperatures running 8-12° above normal. The extended range forecast maintains dryness into the week three window, thereby suggesting another fall and higher Mississippi River water levels. In Brazil, rains arrive by Wednesday and become abundant throughout the end of the week.

Live and feeder cattle futures pushed higher last week amid index fund buying and a higher weekly cash trade. Live cattle futures are now priced even with the cash market, while the October and November feeder cattle futures are above the cash index. Last week’s feeder cash index rose to an 8-week high of $246.78. Box beef prices were higher at the first half of the week and gained sharply on Friday. Both choice and select picked up $6 on the week.

Cash trade was light and scattered during the week but then pressed higher in all regions. Live trade in the South was at $186, $1 higher on the week, and Iowa was at $187. Dressed sales in Nebraska gained $2, to $296. Estimated slaughter margins slipped last week with live cattle pricing. In the coming weeks, cattle will be battling between tight supplies, negative feeding margins, and negative slaughter margins. This could keep prices in a broad range, with resistance for October and December cattle being heavy at $188-190.