Grain prices drift lower after overnight short covering.
Grain pricing softened overnight, as index fund flows had ceased on Tuesday, and the market now focuses on the improving prospects in Argentina and Southern Brazil, which will receive beneficial rains that slowly start today and carry into the weekend. Early week strength that was created by index fund inflows after the USDA crop report lowered carryout numbers last Thursday rather than increasing them are now finding themselves priced in. Export sales expectations will slow dramatically to China over the next week, with their holiday getting underway starting tomorrow and lasting through next week.
Financial markets stumbled yesterday as some of the US central bank commentators suggested the lending rates could go higher and achieve 6% on the Fed fund forecasts, as China is no longer a deflationary factor and could press energy and wage costs higher. The rising US rates could tip the US into a mild session by midyear.
India is enduring high wheat prices again, similar to last year. The government is considering measures to cool prices with the potential record large new crop supplies available in 60 days. It’s anticipated they may sell wheat from the government reserve to bridge the shortfall until large new crop supplies become available in April. It’s not expected that India will turn to importing wheat because those imports would start to arrive with the onset of their harvest. Internal reserves are more quickly accessible.
South American weather shows showers starting tonight in Argentina with multi-chances of rain running through January 25. Both the US and GFS forecast models show rainfall totals from this first system ranging from point 5-2.00”. Another storm system offers like amounts into the following weekend, with the EU model suggesting total rainfall for the Argentine corn and soybean areas receiving 2-4.50” over the next two weeks. As a result, the drought in Argentina is now anticipated to be fading, and corn production could be a record with additional acres switched from beans into corn production. In addition, Brazil is receiving a drying period now coinciding with harvest across Mato Grosso and Goais. This drier trend accelerates harvest and brings on a favorable start for their winter corn seeding.
Live cattle yesterday closed mixed with feeder cattle showing small gains. Late cash trade in Nebraska and the IA/MN region on Wednesday found live sales at $153-156, which was steady to $3 lower. Most feedyards have passed on those bids, and asking prices in the South remained near $158. The NASS will release the January Cattle on Feed report after the close on Friday, and average guesses have December marketing at 95% of last year, placements near 91%, and the January 1 feedlot inventories are expected 97% of a year ago. If these numbers are realized, it will be the smallest January 1 inventory in five years, and excluding the Covid months, it will be the largest year-over-year decline since January 2014.