Grain prices push higher in the early morning hours. Will the trade/(algos) again sell morning strength?

Corn, soybeans, and wheat are all trading higher this morning as selling pressure that has weighed on futures is beginning to ease. Futures are approaching oversold territory in the grain markets, and there is little risk premium built into the soy complex given the less than ideal crop conditions. One emerging theme is the wide variability in this year’s crops. Corn in Iowa is rated 84 percent Good to Excellent, but in Ohio, the crop is only 46 percent. The nation's initial soybean rating was the second lowest in the past six years. These figures do not support current production forecasts, especially with reports of replanting needed in the Eastern Corn Belt.

Forecasts are now calling for increased heat across the Western Corn Belt, with some expecting record temperatures. Weekly ethanol data will be released this morning, and the trade is anticipating mostly steady numbers compared to the prior week. Most attention will be focused on exports to determine whether the weaker dollar has sparked additional demand.

Today is the deadline for US trade partners to submit proposals to the White House for evaluation to determine their tariff levels. This follows the US decision to double its steel and aluminum tariffs. Vietnam, India, and Japan are reportedly nearing the finalization of trade agreements. The US has also delayed the increase in Chinese tariffs until August 31. President Trump and President Xi are expected to hold talks later this week. In many cases, the uncertainty surrounding these developments is more damaging than the tariffs themselves.

Ukrainian grain production is now being acknowledged as lower than last year. The total grain crop is estimated at 51 million metric tons, with corn accounting for 26 million. Overall grain production is down at least 10 percent, and oilseed production is expected to fall by 5 percent.
In Canada, dry conditions persist, with hopes that rainfall may arrive within the next 10 to 15 days. However, nearly half the country remains excessively dry, and more moisture will be needed.

Bloomberg is reporting that Chinese wheat production is now forecast to be at least 12 million metric tons lower due to a drought that began in April. This shortfall may lead to increased imports this fall. Although China has sufficient stocks to prevent a critical shortage, the need to rebuild supplies will likely drive buying activity this fall, something not yet factored into USDA wheat tables.

Yesterday, cattle futures surged higher in the morning, breaking above last week’s highs, only to be met with heavy selling later in the session. There are unconfirmed rumors that a major packer may close a plant to cut losses, which would redistribute cattle supplies to other facilities. Live cattle performance remains a concern, as boxed beef values are under pressure. Choice beef fell $0.56, while Select was down $1.59. A stronger or even steady cash trade in cattle does not appear to be easily supported this week.

Technically, live cattle posted an outside-day lower yesterday, making a higher high than the previous day, then a lower low, and closing below the prior day’s low. This pattern is often a negative signal, suggesting that further selling may develop. While futures are trading at a discount to cash, which provides some support, it does not shield the market from the kind of volatility that can lead to lower prices.