Crop ratings slipped more than expected.
Grain futures opened higher last night on worse than anticipated crop condition ratings, but row crop pricing went out near the lows of the night session at 7:45 AM. Wheat prices moved sharply higher overnight as it was reported that a critical dam in Ukraine that supplies water to a nuclear plant and Crimea was breached, flooding an area of the war zone separating Russian and Ukrainian forces. Both sides are blaming the other as tensions flare. It’s unknown why wheat prices moved up so high while the same headline did not support corn, as the war escalating is the only ramification of this.
A negative headline countering Ukrainian dam news is that the EU is allowing Poland, Bulgaria, Romania, Hungary, and Slovakia to ban domestic sales of Ukrainian grains until Sept 15th. President Zelenskiy is calling for immediate removal of the ban because it will restrict Ukrainian exports and cause storage difficulties for the winter wheat harvest.
India’s May soyoil imports rose to 290K MT from April’s 262,455 MT, while sunflower oil imports also rose to 319K MT from 249,122 MT. India’s May palm oil imports were only 441K MT, off -14% from April. We also reported in yesterday’s newsletter that Australia’s ABARE estimates 23/24 winter crops of canola, barley, and winter wheat to be off -41%, -30%, and -34%, respectively. Australia’s weather bureau estimates that El Nino weather conditions have a 70% chance of developing, which would typically bring drier and hot conditions to Australia’s east coast and much warmer weather across the southern 2/3 of the country.
Yesterday’s USDA Crop condition reports showed corn at 64% G/E, down -5% from last week. IL was down -19% G/E week-over-week. Soybeans came in at 62% G/E in their first condition rating, below market expectations of around 65% G/E. IL was 51% G/E, -31% behind last year in the same week. Spring wheat was at 64% G/E with 76% the crop emerged. Winter wheat ratings improved 2% and is now at 36% G/E due to high abandonment. 82% of the winter wheat crop is headed.
The forecast models, for now, offer below-normal rain for the Midwest/Delta for the next week, with widely scattered showers moving into Ohio/Indiana in week two for the forecast. Illinois and the E Midwest will still be dry this week, while afternoon pop-up showers are possible across the W Midwest through Saturday. The split jet stream pattern feeds in the week two timeframe, allowing showers to develop on the GFS in the June 15-18 time period, while the euro is not as aggressive on the moisture. Overall, the GFS weather model is wetter than the euro, but both agree on temperatures returning to more seasonal mid-month. In Russia, the spring wheat areas of the Urals and New Lands are facing a deepening drought with dryness in high temps ranging in the 90s/lower 100s.
Another day of new contract highs yesterday in live cattle before retreating throughout the session on profit-taking but still closing firm on the session. Negotiated cattle markets are quiet to start the week, but higher prices are being anticipated. The choice cutout jumped $4.26 and select was up $5.80. Whether the beef market is catching up with last week’s cattle market or forecasting further cash market gains is unclear. Cattle futures are now the most overbought they’ve been at any time during the bull move, with records being set again on Monday. Caution is advised that any demand shortfall story will trip this market up.