WASDE crop reports need ideal weather to verify.
Grain futures firmed overnight after a soft start, with Kansas City wheat taking the lead on the recovery rally. Soybeans found buying interest after midnight as the Brazilian basis, which started to firm last week, firmed further and has now bounced 30-$0.40 off its lows. It is still tracking well over $1.50 below US values, but the harvest in Brazil has now moved enough product that storage can now contain the remainder of the harvest.
Turkey’s presidential election is now headed towards a run-off on May 28 as none of the two leading candidates out of four received 50% of the vote. The top two will now run for the presidency on May 28. According to Ukraine, the EU Ukrainian Export Corridor has no talks scheduled this week, which means the corridor will expire on the 18th. This has been factored into the marketplace over the last two weeks.
The WASDE crop report is behind us, and the strong carryouts for new crops are based on ideal weather producing trendline yields. This means that moving forward, weather forecasts now have a strong influence as they shift from ideal or concerning.
Below normal rainfall this week prevails across the northern half of the Midwest and Canada with seasonal temperatures this week and above too much above normal levels next week. The best rain chances are Thursday/Friday for a storm system pulling east across the Central US with rains of point 25-1.00”. Drier, warmer weather follows on the weekend as a high-pressure Ridge builds north. The Ridge looks to be more transitory next week, but a more lasting Ridge could return in early June. Needed rain will fall across the Plains and NW Midwest, according to the GFS model, later this week.
Live and feeder cattle pushed sharply higher on Friday, with feeder cattle aided by the weakness in the corn market. However, overnight strength in the grains may soften the feeder cattle start today. Negotiated fed cattle last week were mostly lower, with the southern plains trading in the 170-price range while Nebraska was mostly 175 and IA/MN $176. $1.00 lower than last week. The cash highs for the spring are in, but now the board is working to narrow the wide basis that is anticipating a big break for the summer cattle market into the low 160.00 price range. The hog market has suffered a horrific demand loss over the last five months, while up until now, live cattle have avoided the same fate. The trade will be watching for signs of weakening demand, which is why the basis has been running so wide over the past several weeks.