Commodities and equity indexes hit with risk-off trade overnight.
Grain futures had a firm start overnight but were met with heavy selling as the US dollar pushed higher towards 108.00, causing a risk-off scenario as all commodities, including financial indexes, moved sharply lower in the early morning hours of Friday. Corn futures firmed after morning weakness, as the French corn crop ratings were reported to have fallen to 50% GD/EX, down another 3% from last week and the lowest corn rating for a comparable week since 2011. Last year 91% of the French corn crop was rated GD/EX. Private EU crop analysts pegged the French corn crop in a range of 50-54 MMTs, well down from the initial season estimate of 70 MMTs.
Ukrainian export activity continues to remain active, with vessels regularly leaving and entering the corridor. Even though there are difficulties securing ships to move into a war-torn Ukrainian seaport, the fact that modest tonnages of wheat and corn are starting to move has been an overall bearish factor to the CBOT. The Ukraine Grain Union estimates that Ukraine has harvested 17.1 MMTs of wheat which represents 91% of the estimated 2022 crop. This is down from 30 MMTs last year.
What seems to be going under-reported is that a heat wave continues to affect Central China which is producing a risk of crop yield losses in acute livestock stress. The heat wave is reported to be one of the worst in decades, with high temperatures in the 104-118° range. The loss of summer row crops will push China to be a larger world grain importer, especially in feed grains. What is unknown, though, is the loss of hogs due to the high temperatures.
The best chances of rain this weekend are across Minnesota, Wisconsin, Michigan, E Iowa, and N Illinois. Rain totals will range from .25-1.25” with locally heavier amounts. Thereafter the pattern is dry with just a few lite showers noted across the E Midwest. Dryness looks to persist into September. No lasting heat is foreseen for the Central US, with high temps ranging from the ’80s to the low 90s. Any extreme heat now is focused across the PNW, while better rains are needed across the Midwest for the finish on the crops.
Live cattle and feeder cattle futures were lower on Thursday in pre-COF report hedging. A steady outlook is anticipated for today. Cash cattle sales yesterday were quoted at $142 in the southern plains, which was up $1 from earlier in the week and $2 better than last week. Live sales in IA/MN were $148-150, which was $1-3 higher than last week. Dressed trade was up $4 at $234. COF data after the close at 2:00 p.m. has On Feed numbers at 100.7%, Placements at 98.5%, and Marketings at 97.1%.