This morning's grain trade is mixed. Soybeans bounced from yesterday's significant losses, while wheat slipped to new contract lows in Chicago.
This morning’s grain trade has wheat futures leading the weakness as they digested the US dollar's new strength to near 108.00, with the March Chicago wheat contract at a new contract low. The continuation contract low is at 514. Meanwhile, soybeans pressed lower overnight to a new contract low on January near 945 before recovering a dime.
Yesterday’s soybeans dropped sharply, driven by a host of factors, all of which are bearish soybeans at face value. Rainfall across much of Argentina will go a long way to stabilize crops there ahead of what is an expected period of dryness, helping to limit worries we would see drought development. Conditions across much of Brazil are nearly ideal, though we are starting to hear some talk of increased disease pressure and potential delays to the start of harvest as too much rain has fallen in parts of Central Brazil.
The great weather this growing season has prompted some analysts to start bumping their production estimates up, with talk Brazil could land in the mid-170s for production, above the USDA’s current estimate of 169 mmt. This, combined with the Brazilian real falling to a new record low yesterday, has analysts expecting aggressive farmer selling and an oversupplied pipeline. These expectations have prompted Chinese buyers and Brazilian exporters to weaken their basis values paid to farmers, like what we saw ahead of the US harvest.
Corn prices in China have fallen to multiyear lows due to a great supply push into the pipeline this year due to quality concerns in the north and on the back of muted demand. There are thoughts that China’s corn imports could be trimmed further, with the initial ‘bearish’ private target of 13 million metric tons now projected by the USDA, with the idea that true imports will land below 10 mmt.
The US dollar was pushed to new 2-year highs yesterday from a far more hawkish Federal Reserve message than what traders were expecting in the post communiqué. Fed chair Jerome Powell confirmed the 25-basis point cut traders anticipated but was adamant that the group will take a more conservative approach to cuts in 2025. According to the updated Fed dot plot, there will only be two additional cuts in 2025. Powell added that we will unlikely see cuts early next year as the group will want to ensure inflationary pressure does not return.
The Dow Jones Industrial Average fell 1100 points on the day, extending its losing streak to 10 days, the longest stretch of lower closes since October 1974. Optimism faded by the end of the day that Congress had negotiated its way to a continuing resolution that would keep the government funded, provide year-round access to E15, as well as extend the farm bill, provide aid to farmers, and a whole host of other things in 1550 pages. Criticism of the bill grew loud throughout the day, with President-Elect Trump calling on Republicans to vote no on the bill in its present form but did support the $31 Bil Farm assistance and hurricane aid to be left in. While the bill is not entirely dead, Congress must agree on something and pass it before sending it to Biden to be signed before midnight Friday to avoid a shutdown.
Yesterday was a lower day for live and feeder cattle trading, with live cattle seen steady soft ahead of this morning's action given the substantial losses in the stock market late Wednesday. Light sales were quoted yesterday at $304-305 dressed in NE and IA, up $1-2 in NE, and steady to $1 higher in IA. Some better interest is expected to develop with a steady/firm cash outlook, but some cash trades may wait until after Friday’s COF report.
The cattle market is unwilling to add much premium to deferred markets at present record prices. January-May feeder cattle futures are at $257-259, which is under the cash index and under major resistance on the continuation board at $260-261. Typically, deferred contracts trade above the cash index in mid-December, and a year ago, deferred futures held at a $25-30 premium.