Grains trade mixed overnight rather than collapsing as the week has seen.
Grain futures are not sharply lower this morning as they have been in the last several sessions, but traded mixed overnight and ended the morning session a couple of pennies lower. Stability should find its way into the marketplace today as good rain possibilities over this coming weekend and late next week are dialed in as a sure thing. Tomorrow’s Stocks and Seeding report are on deck and may offer some surprises.
The theme in the grain trade has shifted dramatically in the last week, as last Thursday, there were already conversations that the corn crop could be sub 170 BPA. With rain coming, it remains to be seen what the WASDE crop report will indicate on July 12 for production, but for now many are thinking a yield of 178-179 BPA could be used. Ironically these would be new record yields, but still down from trend expectations of 181.5. Supply fears have been eased, but the majority of the growing season still lies ahead.
The macro environment has become more bearish with the main driver being hawkish rhetoric from the Fed. Chairman Powell opined yesterday that more work is needed, and more rate hikes are likely appropriate. Bond markets are offering an 80% chance that the Fed will raise rates next month.
This morning’s forecast is consistent with Wednesday’s model solutions with the delusion of rain lying ahead for the driest areas in the Midwest. A southward shift in the jet stream this weekend fuels an active pattern of rainfall. The potential rainfall of 1-2” will blanket a majority of the US corn belt with some areas experiencing drought-busting totals of 2-3” but that will be more of us scattered nature. A more zonal flowing jet stream emerges this weekend and stays in place for the following week. Moisture is pulled in the Pacific into a line stretching from Nebraska to Pennsylvania. The remains uncertainty over follow-up showers in the 6-10 day period and extreme weather risk for parts of IL/IN for extreme storms, but the coming moisture is timely and will help moisture deficits for Central IL. The bulk of these rains fall between Saturday and Monday.
Live and feeder cattle were higher on Wednesday, with a firm outlook anticipated this morning. August cattle marked the best gain at midweek but still carries a wide difference to the cash market. Feeder cattle outpaced fats on the sharply weaker corn prices. Cash markets on Wednesday were still quiet, but small numbers reportedly traded at $178 in KS and $179 in TX, which was steady with early week sales. Early week volumes have been light, but similar trends are expected for the rest of the week straight. Box beef continues to fall Wednesday, with the choice down $1.33, now off $6 for the week, while select moved lower by $1.75, which is $3 lower from last week.
Quarterly Hogs & Pigs Report this afternoon, analysts estimate All Hogs as of June 1 at 99% of last year, Kept for Breeding 99%, and Marketings 99%