Grain prices firm on thawing Chinese/US relations.

Grain prices firmed overnight as news sources on Twitter and major media outlets reported that the Chinese Commerce Ministry is discussing the possibility of trade talks with Washington. The grain market is gaining strength on hopes that the tariff battles will de-escalate and signs of potential progress soon. The stock market continued its recovery overnight on the same news, lending support to some commodities.

Wheat futures are finding support as drought conditions persist across northern China, where most of the country's winter wheat is grown. Over the past five years, China has seen its wheat stocks decline by 20 percent. If significant moisture does not arrive in the next two weeks, China may begin searching for additional wheat, as it committed to doing when joining the WTO, with the option to purchase up to 12 million metric tons.

Like China, the Black Sea region needs rain. Weather forecasts indicate dryness across Northern Europe, Ukraine, and much of southern Russia. May and June will be critical for determining yield performance and assessing whether the United States will face stronger export competition later this summer. The large fund short position could be at risk in the next 60 days. The first notice day declines that occurred midweek may have marked the end-of-month or beginning-of-month lows, from which the grain market could start to recover.

Planting progress continues steadily in the Central Plains and the Upper Midwest and is expected to get back on track in the Eastern Midwest next week. Rainfall between May 8 and 16 is expected to be isolated to the far southwest. Otherwise, we should see near or above normal temperatures expanding across most of the Central United States next week. The winter wheat regions of hard red winter wheat have several rain events in the forecast, while the northern plains are expected to remain mostly dry after receiving about an inch of rain last week. Moisture deficits in North Dakota, South Dakota, and eastern Montana will become more concerning if May remains dry and heat arrives in June, which could impact spring wheat production.

A volatile session unfolded yesterday in live and feeder cattle contracts. After opening sharply higher on strong cash markets across the country, prices reversed sharply lower during the session. Feeder cattle and deferred contracts closed lower but recovered somewhat from session lows. In yesterday’s cash trade, the South paid up $5 to $6 at $218, with a few sales at $219. Meanwhile, the North saw prices $8 higher on the dressed trade at $350, with live trade at $222. The Actual Slaughter report showed that steer carcass weights for the week ending April 19 were unchanged at 946 pounds. This is 27 pounds heavier than a year ago, 47 pounds above the five-year average, and a record weight for late April. Typically, carcass weights would be moving lower at this time of year.

Technical damage was evident in the cattle contracts this week. June live cattle produced an outside day lower close on Wednesday, which was not surpassed on Thursday. September feeder cattle also recorded an outside day lower close yesterday. This week’s highs might mark the start of another correction, which has tended to happen every six to eight weeks.