Risk-off to start the week across all investment sectors.
Grain futures opened softer Sunday night and found a mild evening rally, with most of the strength going to soybeans. The overall lift underway in the evening with commodities and stock indexes ended near midnight when universally, a risk-off mentality evolved over the complexes and allowed all sectors lower to sharply lower this morning. The Federal Reserve meets on Wednesday and will raise interest rates by ¾% or a full 1%.
Pres. Biden indicated on the news program 60 minutes that he would defend against Taiwan’s invasion by China with US troops if it occurred. The US defending Taiwan caused China to issue a strongly worded statement on Monday (near midnight Central US time that caused the universal selling) that the US is moving away from its One China policy. Relationships between the US and China continue to sour, and many are concerned that the largest purchaser of agricultural goods will seek them elsewhere when available. The US will be on add needed basis.
The private Russian analytic firm, IKAR, raised their estimate of the 2022 Russian wheat production crop to 99 MMTs and suggested Russia would hold an abundance of exportable wheat well into 2023. Export estimates are rising to 47 MMTs if logistics can come together. This report put heavy selling into the wheat market overnight, which tried to rally substantially on Friday.
The weather models disagree on the central US weather forecast, as a high-pressure Ridge produces above normal temperatures and below normal rainfall speeding along with the start of harvest this week. The EU model continues that pattern in its week 2 forecast, while the GFS has a central US trough. There is no Midwest frost or freeze risk into the end of the month. Gulf hurricanes are absent, while a tropical storm will reach the US shorelines and ride north. Weather forecasts allow for the US harvest to accelerate this week.
Cattle futures closed higher last week while feeder cattle stumbled, and a mixed outlook is offered for early trade today with the risk-off mentality across the investment sector. Box beef values continued to be under seasonal pressure, with the choice value last week down $4.86 at $252.4, the lowest price since April 2021. The select value fell even harder and was down $8.08 for the week. Last week’s cash market held up surprisingly well, with the southern plains $1 higher for the week at $142 while Nebraska remained steady at $143. Outside weakness this week with the softer box trade could wear on cattle futures this week.