Grain prices lifted overnight by a sharp rise in energy values.

Grain futures are all higher this morning, led by crude oil, which is up over $3.00 a barrel on the Saturday surprise attack on Israel by Hamas/Palestine terrorists. Israel has declared war on Hamas and has ordered a complete siege of Gaza. The attack by Hamas on Israel raises the risk for world energy supplies amid the support they receive in the inclusion of Iran in the war. Iran is now producing 3.15 Mil barrels of crude/day with daily exports of 2 Mil barrels. Should the world confirm Iran's support of Hamas or the expansion of the battlefield into Iran, the risk to world crude oil supplies is sizable.

China returns today from its week-long holiday and will be watched as to what kind of pent-up demand they have created for corn and soybeans. China has been a record large importer of soybeans and started a similar large program and corn in August. Their import demand is currently being filled mostly by Brazil and not the US due to record large crops. China’s government estimates they have suffered $42B in losses from natural disasters so far in 2023, with 9.7 million hectares of crop affected.

Russian sources indicate that the Russian government is considering the announcement of a 2 MMT intervention purchase to support farm income. Where the wheat will be secured for the Government Intervention Fund (GIF) will be important. Wheat quality across Siberia is poor, and millers there need an unusual flow of milling wheat from the West to the East. IKAR raised their 2023 Russian grain production estimate by +1.2 MMT to 141.2 MMT. They predict exports of 64.5 MMT, up +0.5 MMT than previously.

Brazil has planted 10.5% of its 23/24 soybean crop, similar to last year. The problem is abnormal dryness across Northern Brazil is a risk to the crop, with drought striking Mato Grosso, Goias, and Bahia. Drought in Argentina and below-normal rainfall trends there, along with Northern Brazil, need to be closely followed, as it will soon become a production issue by the end of October. There is also no rain forecasted for the next two weeks for almost the entirety of Australia except for the coastal New South Wales area.

Live and feeder cattle closed lower last week, as the cattle markets were continually under Fund liquidation during the week. A short covering rally on Friday helped limit half of last week’s losses in the live trade. Negotiated feeder cattle trade was lower by $1.00 across all regions, with the South at $182 in the North at $183. The cash cattle market avoided a seasonal summer correction, but now the rally has stalled. Demand concerns have caused liquidation from the index funds' trade, which can seasonally stall the trade out through October with the cash market needed to produce new upward momentum for trends.

A significant increase in beef production will be two years away, any price weakness will currently be tied to the demand factors, as tight available supplies are fully known. Support for December live cattle is in the $182-183 range, with record cash prices expected towards the end of the fourth quarter and into the start of the new year.