Grains are sharply higher on ratings surprise.
Grain futures gapped higher overnight on the decline in the corn ratings of 3% from the GD/EX category, with a sizable 16% of US corn crop rated poor/VP. This poor corn is located in the productive areas of Nebraska and Iowa. With 45% of the US corn crop in the dough stage, it’s unlikely that any broad yield improvement will be likely if rains miraculously arrive, which are not in the 7-10 day models. The current ratings are lower than last year’s crop at this time, and yield models imply a 170-172 BPA yield.
The soybean ratings declined 1% to 59% GD/EX. This is equal to the low seasonal rating for beans of late July. Yield models pegged the crop at 50.5 BPA. China is interested in beans, having recently bought, and they’re anticipated to be underneath the market with ready bids. Also releasing ratings yesterday was satellite imagery company Gro Intelligence. Their data would suggest the corn yield of 167.2 BPA and soybeans at 48.9 BPA. These yields would be shocking to the current supply and carryout situation but show the wide variability of a crop that will not likely make trendline.
Since last Monday, a total of 12 ships have left Ukraine, with many of the vessels being questioned if they will actually arrive at their original destinations. The first cargo has already been rerouted from Lebanon, as the cargoes are anticipated to have inferior grain quality on board. Also, it’s anticipated new loadings will be challenging. The new growing concern is that Ukrainian farmers will not be planting a winter wheat crop in late August/early September due to uncertainty of the war and lack of seed/diesel/crop inputs.
Weather models keep the Plains and W Midwest dry into August 16. This week’s Ridge pattern maintains these arid weather conditions with high temps in the 90s to lower 100s, the drought here is deepening. Seasonal temperatures are in play now for Central and E Midwest, which favors crop development there. Ridge riding storm systems provide moisture for the Central and Eastern Midwest, with the next chance being late in the weekend and early next week. Temperatures here are in the 80s to lower 90s.
Yesterday found another strong day for cattle futures with a steady outlook anticipated for live cattle will feeder cattle may open lower on the sharply higher feed grain values. The cash cattle trade is quiet the early week outlook remains firm. Box beef values were higher, with choice gaining $1.62 while the select value was up $0.19.
September feeder cattle yesterday pressed above their April high and will soon be targeting their February contract highs which are just a few dollars away (November feeder cattle are at their contract highs while January feeders are making new contract highs). The CME’s Cash feeder Index last week rose to the highest price since November 2015, supported by the strength in the cattle/corn spread. Based on current spread values, the feeder cattle index is undervalued by nearly $20, while fall feeders are $10-15 too cheap relative to forward spreads. The last time that spread was above $1,600/head, the feeder Index was over $200/CWT.