Russian export difficulties support wheat and corn.

Grain futures are firmer this morning led by the wheat trade. According to Bloomberg, Russia’s Ag watchdog agency was holding up a couple of Egyptian grain ships waiting to export their cargoes. This is said to be connected to TD RIF. This morning, Reuters reported two grain cargoes were loaded and shipped with phytosanitary certificates. What is concerning now is that government scrutiny has expanded from one company (RIF) to two Aston and Grain Flour, which together call for a sizable portion of Russian grain export capacity.

The wheat and, to a lesser extent, the corn market are poised to be significantly affected by Black Sea developments. This is because world importers are increasingly dependent on the cost-effective Russian supplies. Russia had set a record of exporting 10+ MMT between April and June, making any disruption significant. The aggressive lowering of wheat offers by Russia was the primary catalyst for the bearish trend in 2023. Moreover, stocks in the US, Canada, and Australia are not plentiful.

This morning’s job numbers exceeded expectations, coming in at 303,000 compared to the estimated 200,000. The employment number has also declined from the estimated 3.9% to 3.8%. This has led to a reaction in the market, with the dollar up $0.40 at 14.29. However, the impact on gold and silver has been relatively mild, with gold only down $3.00 and silver down $0.55. This data provides a snapshot of the current economic landscape.

Data from Brazil’s government showed March corn exports of 431,307 MT vs. 1.335 MMT in March 2023 and soybean exports of 12.63 MMT vs. 13.24 MMT. This implies that the soybean crop production is likely lower than the USDA is projection.

Managed funds this morning are estimated short 251,000 contracts of corn, 144,000 of soybeans, and 127,000 of combined Chicago and KC wheat. This means they are short 522,000 contracts which has only been paired modestly since peaking in February. With the NOAA’s short-tumor alerts in the USA Today, which includes excessive wins in the Plains for several days, flood risks in the E Midwest and Delta along with elevated chances of frost/freezes in an area covering IL, IN, OH, and KY, should keep them very nervous and imply volatility on the way.

The US forecast maintains prior runs, but the Delta/Southeast rainfall is anticipated to be more intense than expected. A broad pattern of excessive rainfall in the South and East, along with warmth and dryness elsewhere into the second half of April, is what is stacking up. Seeding in key areas of the southeast will be delayed into late month as regional rainfall of as high as 5-8” falls across areas of LA, AR, MS, and west TN. Unwanted precipitation impacts southern IN and OH. All looks elsewhere are conducive for fieldwork and planting beyond April 15, as little/no rain is forecasted west of the Mississippi River.

Live and feeder cattle futures closed higher yesterday, but neither exceeded prior day highs, which has been the case for the last several sessions. Thursday’s cash trade was $2-3 lower from last week and $187. The South remained quiet, with packer bids quoted $182-183, which would be $3-5 lower than taken. A weaker trend is expected today. The futures market is languishing and not recovering quickly from the early week of H5N1 news. Box beef prices also dropped yesterday, with choice off $4.15 and select lower by $0.87. The choice/select spread narrowed to a $1.10 choice premium. Carcass weights continue to market counter-seasonal increases. For the week ending March 23, the average steer carcass came in at 924 pounds, up 29 Lbs. From a year ago and 14 Lbs. Heavier than the previous record.

If June cattle fail to rally, the next major support zone is $171.50-172.00. May feeder cattle have already dropped to their 50% retracement value of 240.00, which we discussed in the Weekend Hedger. If 240.00 gives way, the next major value is 234.50-235.00, which is the 62% retracement of the December low.