Big rains arrive in the forecast for the dry Midwest doughnut.
Grain prices are sharply lower, peeking on the opening tick of last night’s trade after the market saw sharply lower crop ratings from the NASS and seen selling throughout the night as weather models bring better rain opportunities into the dry Doughnut area of the Midwest this weekend and alas in the next week. This has heavy liquidation on the recent rally taking place ahead of this Friday’s Stocks and Seedings report.
The focus is that after 10 weeks of record dryness, crops will endure another 3-5 days of dryness on rising temperatures before rain chances start on a Ridge riding storm system this weekend. Yesterday’s data has the makings to be the worst of the year, with improvements possible into next Sunday if the forecast, which has high confidence to play out, starts late this week. Yesterday’s crop progress showed corn conditions down another -5% to 50% G/E and beans down -3% to 51% G/E. Spring wheat conditions were cut another 1% to 50% G/E.
The forecast that has the grain markets in heavy liquidation features a South-Central US high-pressure Ridge with storm systems riding around the northern perimeter of the Ridge, which produces Midwest rain this weekend and into mid-July. Storm systems will pass through the Midwest every 3-4 days and start this Friday. There will be fast-moving thunderstorms that will produce scattered showers, meaning it will take time to fill in all the dry spots. High temps will range in the 80s to mid-90s in the Midwest, with the major heat focused on the South and Central US, where the high-pressure Ridge is located.
Live and feeder cattle were mixed yesterday, with a firm outlook expected for feeder cattle today. Limited demand was seen yesterday for the negotiated fed cattle market, with June cattle on Monday suggesting a lower trend for the week. Fed supplies are thought to be slightly tighter this week than last. Estimated slaughter margins are strong, but box beef values were off $0.97 yesterday for the choice and select drifted $0.29. The seasonal cash trend is typically bearish the summer after Father’s Day, but August cattle already are carrying a historical $12-15 discount to recent cash quotes. Major support in August cattle is near $166.