The wheat trade leads the overnight strength in grain futures.

Grain futures have some strength this morning, with the wheat market leading the overnight gains following increased hostilities between Ukraine and Russia over the weekend. The market is also starting to acknowledge dryness across Canada, parts of Europe, and the Black Sea region, which has prompted front-month buying from index funds. The heavily short positions held by index funds in the wheat exchanges, along with French milling wheat, are forcing a reassessment of their holdings.

Domestically, all eyes are on the Eastern Corn Belt, where farmers continue to get crops seeded, mainly corn. We are now at the pre-plant date for corn in several areas, and in many cases, delaying planting is looking more attractive than forcing in a crop, especially with new crop corn futures below break-even. In addition, reports of needed replanting are raising more questions about U.S. corn production.

Soybeans are lower this morning due to continued pressure from South America, including larger production estimates for Brazil. The Argentine soybean harvest is gaining momentum, although quality remains unknown.

Crude oil is up more than $2.50 per barrel following the OPEC+ decision to leave production unchanged rather than implementing the expected increase. The U.S. dollar and equities are posting moderate losses to start the week, while gold is up more than $60.00 per ounce as safe-haven buying resumes. President Trump announced an increase in tariffs to 25–50 percent, which often triggers renewed interest in gold as a hedge.

On the trade front, talks between the U.S. and China remain stalled, but over the weekend, the Secretary of the Treasury stated that President Trump and President Xi will be speaking soon. However, Japan has stated it wants all tariffs dropped before restarting trade talks. The market has grown tired of hearing promises about upcoming trade deals without follow-through, and this continues to cast a negative tone over the broader sentiment.

Today, we will get the April Census Crush Report. Soybean crush is estimated at 201.5 million bushels, while soy oil stocks may rise to 2.1 billion pounds, the highest total in 10 months. The lack of subsidies for blending soybean oil into green diesel has led to numerous biodiesel plants shutting down due to negative margins. This buildup in soy oil stocks has been a key factor pressuring soybean oil futures.
Malaysian palm oil and Chinese Dalian exchange trading are closed due to national holidays, so we are receiving no influence or direction from those markets today.

The wheat market is finding support as there are still no signs of improving weather across the Canadian Prairies, portions of Europe, or the Black Sea region, all of which remain dry. Long-range forecasts in the 10- to 15-day window are starting to show potential for rain in the Black Sea and Canada. As harvest approaches, grain rallies tend to become more labored, but we have seen counter-seasonal rallies during harvest when early results disappoint. Index fund traders may attempt to buy into this harvest to exit their short trades. Heavy rains remain in the 6- to 10-day forecast for Texas, Oklahoma, and Kansas, where producers are eager to begin harvest and limit the spread of disease.

Last week was rough for the cattle and feeder cattle futures markets, with heavy selling to start the week, a midweek rebound, and then more losses by Friday. When the dust settled, both live and feeder cattle futures finished lower on a week-over-week basis. Technical indicators turned negative again last week, adding to the bearish momentum that began when the market topped three weeks ago.
In the cash market, dressed sales in the North were up $6 to $13 on the week, ranging from $368 to $375. Live cash trade came in at $223 to $225, a gain of $2 to $4 from the prior week. The board appears to be pricing in the end of the cash market rally as we move into June. The five-area average last week came in near $231.

Cattle slaughter last week totaled 477,000 head, down 62,000 due to the holiday-shortened schedule. It was the lightest Memorial Day week kill since the USDA began reporting this data in 1990. Gains in boxed beef helped support cash prices, with choice cuts up $4.79 and select up $5.33. Seasonally, we expect fed cattle slaughter rates to increase through the summer, especially as Mexican calves that started entering the country in January built up through the spring before being halted in early May. Technically, cattle markets are more of a sell on rallies than a buy on breaks at this point.