Grains continue to strengthen after the WASDE report.
Grain futures are higher across the board this morning, follow-through buying after yesterday’s bullishly construed soybean and corn WASDE crop numbers. Crude oil is trading back near the highs of the week as gold and silver surge with Middle East tensions rising. The Israeli military is urging the evacuation of 1.1 million people from Gaza before the Army pushes into Palestine in retaliation for last weekend’s attack. It’s going to be an explosive weekend again as Hamas refuses to evacuate and Israeli troops mass along the Palestinian border.
Yesterday’s October crop report reveals a statistical probability that November yields will be lower again. The fact that USDA did not make any changes for the bulk of the Midwest growing area for soybeans in the states of IA/IL/MO/AR/ND/SD/MN, while the surrounding areas and less important states had seen a drop in yield, implies more is coming in November. The USDA massaged the numbers to maintain pipeline supplies are soybeans at 220 Mil Bu, and during that, for the third month in a row, they Lord exports, and yesterday by 35 Mil, and still, we are at pipeline.
Due to the ongoing dry weather, the Buenos Aires Grain Exchange lowered its Argentine wheat crop estimate to 16.2 MMTs from 16.5 MMTs. Meanwhile, WASDE yesterday left the wheat crop at 16.5. Private analysts argue that the crop is no larger than 15 MMTs with the need for immediate rain due to the crop in the reproductive stage. Meanwhile, Brazil’s import needs for milling wheat will grow after the frequent heavy rains over the last several weeks have downgraded the crop to feed quality. Let’s not forget that Australia again is losing production by the week. World stocks are on the decline, and Russia will soon hit the winter wall whether exports will be less reliable. Wheat should have a seasonal low behind, delayed longer than normal, but still, seasonal uptick should be in front of the wheat trade.
Dryness in North Central Brazil has now caused soybean seeding to stall, farmers are now worried about uneven germination and future replanting costs from that which was already put in the ground on September 15. Dryness persisting for another 2 to 3 weeks will capture the market's attention, as currently models remain dry through the 10 day, and as typical, the 11-15 day always hold out hope for a change. This ongoing dryness opens up the export window for US soybeans well into February when normally our export window starts to falter after mid-January.
Yesterday, live and feeder cattle pushed higher despite the improving feed grain price outlook. A better cash cattle trade helped extend live cattle gains to almost $1.00. On Thursday, higher prices developed in the South, where they were quoted at $184, up $1.00 from last week, while sales in the north increased to $185. Yesterday’s October WASDE report showed a slight increase for 2023 beef production and Lord exports. They still increased domestic consumption, which absorbed additional supply. The fourth-quarter average dear price forecast was reduced by $5 to $185. The first quarter price was lowered a $1 to $187. Since 1983, the report has consistently underestimated cattle prices 60% of the time by an average of $6.50. The board has accounted for much of this with the quarterly cash equivalent price of $193 for the first quarter of 2024. Our target for February cattle is $200.