Grains retreat overnight in Turn-around Tuesday style.

After yesterday’s substantial price rise on the day after Christmas, a corrective mode is taking place today, similar to a Turn-around Tuesday. European grain and oilseed futures are higher, trying to catch up to Tuesday’s rally, while US values softened to find equilibrium. We are also seeing crude oil and equity markets having the same corrective nature.

Private Brazilian crop estimates continue to fall with respect to agronomists now finding yields below 155 MMTs versus the USDA’s 161 in the last report. The planting season was spread out over three months, with the early crop finding dismal production while the later planted crop has prospects for improvement. Extreme heat returns for today and tomorrow, with temps in the mid to upper 90s while the rains have ended.

Wheat received support yesterday from a Ukrainian attack on a Russian naval ship, and heavy rains are expected to reduce the planting area in important producing areas of Europe. The market is vulnerable due to the fund's net short position. The US Navy shot down more missiles launched by Iranian-backed Houthis in the Red Sea, which is also an important trade route. Insurance and freight continue to rise globally for the transportation of grain due to war and other logistical issues.

The South American forecast remains consistent with prior runs anticipating rain returning to N Brazil after Jan 1, while more warmth persists until then. Long-range forecasts have remained unpredictable and misguided, and the rain models have only been accurate to an extent inside the five-day window. Rain has occurred, but substantially less than predicted and hoped for. The rainfall after the new year that expands the N Brazil right now anticipates rains in the accumulation of 1-4” into the driest areas of Matto Grasso do Sul, Mato Grosso, Goias, and Bahia. Again, long-term models have been consistently trying to work the monsoonal potential of rain into N Brazil, but these forecasts carry the risk of continued below-normal precipitation for Brazil.

Live cattle and feeder cattle closed higher on Tuesday after a sharply lower opening, solidifying recovering support into the cattle trade decimated into the December opening with heavy liquidation from index funds. As expected, negotiated fed cattle markets are quiet at the start of the holiday-shortened week, but higher prices last week in the face of the holiday week reviewed is a win for feedlots, which are looking to add to sale prices this week. Box beef values had choice gaining $0.38 and select $0.04 cents higher, with the choice/select spread widening to a $32 choice premium. In the final week of the year, the spread is slightly better than a year ago but still at a record high for the end of the year.

February live cattle has solidified support in the 167-168 range, with immediate resistance at 171 needing to be cleared and closed above to accelerate a new rally after congesting for five days. January feeder cattle have resistance at 225-226 to overcome, and then they can extend their recovery into the low 230s.