Grain futures failed to build on yesterday's rally.
Grain futures are mostly lower this morning after a higher push overnight. Corn and soybeans could only best Thursday’s post-report highs by a penny before succumbing to morning sell orders. What is interesting about soybeans is that despite all the friendly news in the morning out of Argentina and Brazil on reduced crop production, followed by the USDA’s surprising yield reduction, soybeans could only get within a dime of the December 30 high before again retreating. Closing back under $15.00 on a Friday would be a telling technical sell signal and imply valuations have priced in the shortfalls.
There is a strong historical correlation of grain prices the day after the crop report finding heavy selling. Farmer selling intensifies now into the end of the month.
Yesterday’s surprisingly significant winter wheat expansion in the heart of the Midwest brings about prospects that corn acreage will have a minimal increase in those areas. However, despite the revelation, December corn lost out the spot corn on spreads in yesterday’s rally. Moreover, yesterday’s corn carryout reduction is met by China’s approval of Brazilian corn imports, which will limit additional corn sales to China in the long run.
Weather forecasts suggest Central US areas of Kansas and TX/Oklahoma panhandles have a chance of 1-2” of moisture around January 21. Also, Argentine weather models show improved rain chances in the 8-15 day window. This shift is starting to be featured in the 7-10 day forecast, which makes it more viable. Near-term soil moisture prospects in Argentina are rising, which can stabilize the crop and improve it in some areas. The drought deepens in Argentina over the next 6-7 days with zero precipitation potential. The rain prospects appear in the January 21-25 window that needs to materialize.
It was a lower day on Thursday for live cattle and feeder cattle pricing. Negotiated fed cattle trade was slow on Thursday, but there were some live trades in IA/MM at $158-159, which was steady to $1 lower, while the dressed trade in Nebraska was steady at $252. Bids in the South at $154-155 were past but those cattle still offered in the $158-159 range. In yesterday’s WASDE crop report, beef production forecasts were slightly increased for all quarters in 2023, but it also increased the price forecast as well. The first quarter forecast was increased by $4 to $157; the fourth quarter was raised by $6 to $162.