Wheat continues to work on validating a counter-seasonal rally.

Grains are posting moderate gains this morning, while soybeans are slightly lower. Yesterday, the market found support from the addition of a risk premium. The US weather is not overly threatening at the moment, but it is far from ideal and does not support current USDA crop estimates, particularly for corn. This morning, weather models are showing a ridge forming across the US, which typically brings warm and dry conditions. While these conditions can impact crop development, it is still early for them to pose a major threat. However, any decline in production pushes corn inventory closer to rationing levels and places soybeans deeper into a rationing scenario.

Soybean oil continues to show weakness as the EPA has yet to announce the Renewable Volume Obligations for 2026 through 2028. Rumors last week suggested an announcement was imminent, but like many promised trade deals, nothing has materialized. Electric vehicle obligations are still awaiting scoring from the Office of Management and Budget, which is expected to be completed by late next week. With the Senate under pressure due to the current spending bill, the 45Z credit could be at risk, even though it has already passed the House of Representatives.

There is still no relief from rain across the winter wheat areas. From Texas and Oklahoma into Kansas, rainfall of 1 to 3 inches is forecast through June 15. These rains are not needed and are contributing to rising disease concerns. Historically, such conditions have created problems that only become fully apparent at harvest. Combines can roll through 80 bushel straw and end up with only 40 bushel wheat or less. This is the kind of issue that heavily short index funds want to avoid, as they hope to buy back their positions under harvest pressure.

Rainfall remains elusive across Canada’s dry wheat fields, and forecasts continue to delay relief until the 11-15 day window. Minneapolis wheat has already priced in the anticipated rainfall and will soon start reacting to its continued absence. Meanwhile, Ukraine and southwestern Russian wheat regions are also expected to stay dry through June 15, with heat once again building. Trading risk premium has become something of a lost art in grain markets, as algorithmic trading systems often favor selling over buying. Eventually, this imbalance will be exposed.

Cattle markets posted another sharply higher performance yesterday in both live and feeder contracts. Live cattle are nearing previous contract highs, while feeder cattle also appear to be targeting theirs. The cash market for live cattle is strengthening again this week. With deliveries starting next week and no real threat of delivery, the futures market is finding additional support. Feeder indexes are moving higher, with yesterday’s one-day cash index at 310.17 and the average index gaining another 2.04 to reach a record 303.52.

Negotiated fed cattle trade began yesterday in the South with gains of 2 to 3 dollars, putting values at 224 to 225. Late-day quotes showed highs of 228. In Iowa, cash trade appears to be settling in the 240 to 242 range. Midweek cattle slaughter totaled 350,000 head, which is 8,000 fewer than the same time last year. Boxed beef values have been mixed so far this week but remain at record levels for early June. Live and feeder cattle prices are likely to continue pushing higher, as the absence of delivery threats supports June cattle futures in narrowing their discounts.