China cancels remaining Covid restrictions.
Grain futures are set to open higher on the restart of trading this week, with soybeans anticipated 5-10 higher while wheat and corn look 3-5 cents higher. Over the weekend, China lifted the remaining portion of their covert restrictions, which included no longer quarantining inbound travelers starting on January 8. Pervasive dryness remains a major concern in Argentina, but Brazil looks to be set to produce a record crop to help offset production losses to the world.
China’s ending of Covid restrictions, which were applied back in March 2020, was met with enthusiasm from equity markets, energies, and metals overnight. However, trade is already becoming subdued, with crude oil hovering near 80.00 from an 81.00 high and the stock market retreating from initial gains. The concern is growing now how China does not have natural immunity and will likely see soaring worker absentees as infections widen while the country adapts to the new policies. Some suspect that first and second-quarter growth prospects may see drags, as the population works to become naturally immune as the rest of the world has mostly become.
Egypt is seeking world wheat for mid-February, with the lowest offers coming from Russia at $310/MT. The World Bank must review the tender offers as they stay open for two more days. Talk of losses in Argentine production due to the ongoing drought is being met by the anticipation that Brazil will be harvesting a record crop of potentially over 155 MTs of soybeans which will start to become available in three weeks. Early yield reports show yields on 90-day soybeans slightly better than expected.
The South American forecast continues to remain that the vast majority of Brazil will experience ideal growing conditions with ongoing rains and daily temperatures in the 80s/90s. Meanwhile, Argentina continues to receive limited rainfall, with shower chances noted this weekend with highs in the 80s/upper 90s. Rain this weekend on a wide range of .4-2.00”. The 11-15 day forecast calls for five days of dryness again after this weekend in Argentina. Over the past weekend, Buenos Aries picked up the most rainfall otherwise, Santa Fe and Córdoba had received spotty rains.
Friday’s Cattle on Feed Report showed the marketing rate at expectations of 101% of last year while the placement rate came in at 98%, which was 2% higher than expected, with the December 1 feedlot inventory right at expectations of 97%. The On Feed rate showed the largest year-over year decline since July 2014 and the largest December decline in feedlot numbers since 2013. Last week’s cash cattle trade was mostly a dollar higher in the South at $155-156, with the north also a dollar higher at $1.57. Boxed beef prices exploded last week, with choice gaining $9.12 and select higher by $10.02. Slaughter margins rose to a six-week high last week, helping anticipate a strong cash market this week. Live cattle have a strong tendency to continue their seasonal rally from December 7 into the opening days of January.