Grain trade moved higher after recent rains.

Grain futures moved higher overnight as beneficial rains did arrive over the weekend. Still, the market is focusing on the dry stretcher weather ahead in the seven-day forecast, along with the excitement that China “may” be buying Ag products coming out of their Lunar New Year holiday and their 0% Covid restrictions.

Last night’s strength was led by the soybean meal, with the index funds having a record-long position and defending it, with soybean meal getting within a few dollars of their January 19 high before retreating into the overnight session close. It’s estimated that Brazil has harvested close to 10 MMTs of beans, which is delayed from last year when they had 14.2 MMTs already cut. Last year’s drought and heat had pushed crop maturity to an earlier harvest but had diminished yield results. This year it’s a record crop that is taking more time to mature and harvest. The recent buying excitement in soybeans and corn may be difficult to maintain, as China will not likely pursue US beans over Brazilian beans and have the time to wait on South American corn as well at lower prices.

Wheat prices also advanced above last week’s highs but quickly gave up a dime of gains into the overnight close, as world wheat prices are not following US advances that are occurring from short covering. Russia’s 12.5% wheat is softer this morning at $304/MTs, which compares to US Gulf corn at $308/MT. It is not very often that world grain importers can purchase milling wheat at a discount of $2-4/MTs to corn. Russia is estimated to export a record tonnage of wheat in January again at 4 MMTs. This puts them on track to export 44-46 MMT of wheat, well above USDA’s expectations.

After good weekend rains in Argentina on Friday and Saturday of .7-3.50”, while the forecast has limited rainfall now the next two days before another shower thunderstorm passes on Wednesday/Thursday. Rain totals of nearly an inch with locally heavier amounts will favor Southern and Western Argentina on the storm track. After that, a lengthy period of dry weather follows for the next week and the chance of rain is held out until the 11-15 day window. This is what has the markets excited. With recent rainfall, crops will be able to maintain and improve, having near-normal soil moisture and temperatures that are not considered hot. The Brazilian State of Río Grande do Sul continues to be shortchanged in rainfall and will not likely produce record yields.

Live and feeder cattle were able to close higher last week, but the negotiated fed cattle market was quoted at $156 in the southern plains, which was a dollar higher for the previous week, while the dressed trade was at $248. Box beef values lost a lot of ground last week, with the choice cutout down by four dollars for the week, and select was lower by nearly 6 dollars. Estimated slaughter margins decline for the third consecutive week at $136/head. Cattle prices are high relative to the beef values and are stressing Packers, like 2014-2015. On Tuesday we get the January Cattle Inventory Report will be released in the report is expected to show a significant decline in both beef cow herd and the retained heifer inventory. Feeder cattle supplies are forecasted at a multi-year low, which keeps the longer-term cattle outlook bullish on corrections.