Grains are higher on a weak dollar and dry forecast.
Grain futures were mixed most of the evening session but by the 5 AM release of the GFS showed a perpetually hot and dry forecast for the western half of the US corn belt for the next 10 days creating a price advance. At 7:30 AM this morning, the CPI came out at 8.5% versus a guess of 8.7%, creating a collapse in the US dollar of 1%, sending it down to under 105.00. This ignited buying in the metals and grains along with stock indices. Crude oil rallied off its lows on the dollar weakness. The tamer CPI resulted from the collapse in commodities seen in July. The market is reading this as an opportunity for the Federal Reserve to move to data-dependent interest rate hikes in the future rather than the prior guidance of predicting rate hikes into the future.
China ended its military drills near Taiwan overnight but maintained that it would continue to patrol the waters/airspace surrounding Taiwan. Nancy Pelosi’s trip to Taiwan strained US/China relations which, of course, since last week has kept traders thinking that China will at any opportunity secure more Ag products from South America rather than the US. We have now entered the time frame when Chinese buying picks up from August to January.
The drought in Europe continues with only a few showers forecasted for France/Germany, while the ongoing hot and mostly dry forecast will continue to remain detrimental to their summer row crops which is mainly corn. Many analysts are now putting the European corn crop at 52-54 MMTs, down from 68 MMTs as advertised by the USDA in June.
Both weather models generally agree that the Central US will hold a high-pressure Ridge across Colorado/Kansas/Nebraska into early next week before integrating West, producing a broad Ridge/trough pattern over the Midwest. That pattern looks to remain f the last half of August and is in all three of the primary weather models. Cooler temps remain in the Eastern and far northern portions of the US, but the pattern’s amplitude will not allow for much rain in the ongoing drought areas of the Plains/W Midwest. This is a growing problem crop in this region, keeping the prospects of national trendline yields unattainable.
Yesterday live cattle and feeder cattle futures closed lower, with feeder cattle taking a heavy brunt of that selling. A softer start is anticipated again this morning for feeder cattle, but live cattle may be encouraged by the strong stock market. Cash cattle markets remained quiet on Tuesday, with trade anticipated to occur by Thursday. Box beef values were soft on Tuesday, with choice down $1.51 and select losing $1.16. October live cattle have major support in the 141.00-142.00 range.