Grain futures spill into a price correction overnight.
Grain futures are lower, with corn and soybeans sharply correcting after Wednesday’s powerful gains. The markets have become elevated and extremely overbought even with the prospects that are fully known that yields will not make trendline even if rains arrive at the end of the month.
Soy oil futures continued their decline beyond yesterday’s synthetic expectations of a $0.30 lower and are down another 2.00 this morning on liquidation based on the EPA’s limited rise in RVOs for bio and renewable diesel. The US biofuel industry will work to stand on its own due to the large investments that have been made by big oil and private investors. The EPA’s RVO announcement is not to kill or change renewable diesel plant or production plans, it’s just that they are now not mandated. There are large state and federal tax breaks and carbon incentives it will maintain sizable demand for biofuel feedstocks. But for now, soybean oil and canola are looking to find a trading bottom for values.
A top Ukrainian official said they are 99.9% certain that Russia will not extend the Black Sea export pact as they no longer need Ukrainian ports to ship ammonia. Russia will complete a pipeline by the end of this year.
Chinese financial and commodity markets are closed today and tomorrow to celebrate the Dragon Boat Festival. Chinese markets are weak following interest rate cuts earlier in the week. It’s also not being reported that China is on pace to become the world’s largest buyer of wheat. Australia is a key supplier.
Primary weather models maintain a trend of below-normal rain with near to above-normal temperatures for the Midwest for another 10 days. Two Ridge riding systems will produce potential showers, with the first system passing on the weekend and another due late next week. Both could produce .1-.8” of rain for 30% of the Midwest. China is currently enduring a heat wave, with Beijing yesterday being 106°F which is a record for June. This heat also includes the Northern Chinese Plains, where drought and extreme heat are starting to affect their corn and soybean crops.
Live cattle and feeder cattle were lower yesterday, with the feeder cattle market obviously having a sharp price decline with corn valuations dramatically increasing. A better start for feeder cattle could be expected with corn under pressure overnight. Cash trade yesterday was late but at weaker prices. Sales in the southern plains were $to lower at $180, while live trade in any was quoted at $2-5 lower at $182-185. Light sales in the IA/MN region were $2-3 lower at $184-185. Similar trends the to continue for the rest of this week.
The June COF report will be released on Friday. Ahead of the report, average trade estimates call for the May feedlot placement rate at 102% of last year and marketing rates of 102%. The June 1 feedlot inventory is projected to be at 97% last year. If realized, June feedlot inventory will be at a six-year low and marked the ninth consecutive month that the inventory was below a year ago. August live cattle should find major support at 166.00-167.00.