Short covering the future of overnight trade.

Grain prices rallied overnight on short covering from fund managers ahead of this Friday’s September 1 Grain stocks and final Small Grains Production report. Wheat price strength faded as Egypt announced a new wheat tender for 1 MMT for the last half of November with negotiations to purchase wheat from Russia in a direct government deal. The price offer from Ukraine-origin wheat for 60K MT at $239/MT fob was the lowest offer in Egypt’s wheat tender. No purchase has been finalized yet.

India expects their vegoil imports to decline by -6% in the coming marketing year due to leftover stocks from last season. Palm oil imports provide the majority of their vegoil imports. A top vegoil analyst said at an international conference yesterday that rising demand and slowing supply may encourage palm oil prices to rise over the next 4 to 6 months. Palm oil is undervalued at $100/MT. Soyoil and soymeal are entering their most “bullish window” of the year in the coming weeks. Soymeal usually outpaces soyoil in the spread by a significant margin. The direction of crude oil will play a role.

The Midwest harvest is picking up steam, with variable yields being reported. What stands out is that merchandisers note that grain is heading to farm storage, not the cash market. Only pre-sold grain is arriving in most situations. This should cause cash basis to firm in early October as end users are now forced to reach for supply, as grain bins in the Midwest were emptied last spring, feeding the drought-ravaged feedlots in the Plains.

In South America, recent days have featured extreme heat across Brazil, with highs ranging from 99-109°. In southern Brazil, where the wheat quality is being reduced to feed grain, Porto Alegre will set an all-time record for rainfall in any month at 18.00” falling in September. South American weather has been anything but normal due to the rapid building of El Niño, and although the forecast offers a few showers in Mato Grosso into the weekend, there does not appear to be any start of a normal monsoonal flow, with an extended period of dry weather to follow.

Yesterday, live and feeder cattle futures broke down hard, with a softer outlook offered for today's start. Fund liquidation was the feature with sharp losses in the stock market and concerns for consumer demand waning, pulling December cattle down almost $3.00 while November feeder cattle fell near $6.00. The sharp break triggered light cash trade at steady bids as hedged feed yards picked up a few dollars on basis. Light sales in KS were quoted at $183, which was steady with last week, while offers in the South are quoted at $186. The 50-day moving average for December cattle has provided support in the May and August price setbacks. Today, that support arrives at $186.00, some $2.50 below Tuesday’s close.