Grains are sharply lower on rain and China concerns.
Grain futures opened softer overnight on improving moisture prospects for the W Midwest and Plains, with losses accelerating sharply lower late in the evening as China’s July Industrial Production numbers slowed to 3.8% versus expectations of 4.5%. All commodity sectors suffered overnight, with crude oil posting losses of nearly $5.00/barrel. Crop ratings this afternoon are anticipated to find corn declining 1-2% from the GD/EX category, with soybeans down 1%. Rains this week are anticipated to stabilize the crop, with soybeans likely to find improvement.
Along with the concerns about China’s economy slowing, more US legislative delegations are visiting Taiwan this week, further irritating China’s policies with Taiwan. China is suffering from its zero Covid policy, and real estate prices are continuing to impede economic recovery, which would increase world raw material demand. China cut its one-your bank lending rates to 2.75%, which was down .10%.
Seasonal price pressures continue to the downside after the recent recovery pricing for corn and soybeans, which was experienced into last week, and the tendency is for weakness to carry through into the first part of September. Continual sizable swings both higher and lower look to remain in place, but index fund interest may wait until after the September USDA crop report data for ownership.
The weather forecast for the Central US calls for rain amounts of .5-2.50” in the driest areas of the corn belt, with Nebraska, W Iowa, E Kansas, and Missouri having the best chance of meaningful precipitation in over four weeks. The high-pressure Ridge that has held over the Plains for nearly a month is now retrograding westward to position over the western third of the US. This allows for improved storm chances across the Plains and W Midwest into September. Seasonal temps and near normal rainfall are forecast for the E Midwest. Also, Western European rain chances will increase in the next 10 days, which will help end one of the worst droughts in decades.
Live cattle futures are called mixed with feeder cattle higher on the sharply lower feed grain market. Last week’s cash trade was higher in all regions, with Nebraska selling for $144-148, Kansas and Texas also $4 higher for the week at $140. Box beef values did slip with choice down $1.25 while select gained $0.92. On Friday, the Commitment of Trader’s report showed that index funds were buying into live cattle contracts last week and picked up 11,000 contracts, putting their net long position now at a five-month high of 49,000 contracts. This brings the total accumulation of contracts to 35,000 in five weeks. Live cattle contracts are close to resistance points that could create stalling and put them into a corrective price mode.