The KC wheat futures this morning are at their highest price since late April. Counter-seasonal with harvest for HRW wheat fully underway.

Futures traded in a narrow range overnight, with grains showing modest strength while soybeans held steady to slightly weaker. The market appears to be consolidating ahead of another holiday-shortened trading week. Markets will close at their regular time today and remain shut until Thursday night in observance of the Juneteenth holiday. With the shortened week, many traders may choose to square up positions early and extend the break.

This morning’s focus is largely on outside influences, particularly the upcoming Federal Reserve interest rate decision and rising geopolitical tensions in the Middle East. There is growing speculation that the US could become more directly involved in the conflict, which is prompting risk aversion across a range of markets, including commodities.

Regarding the Fed, no rate cut is expected today, especially following Tuesday’s data indicating a slowdown in consumer spending. Additional concerns are mounting over future US employment trends and a marked decline in housing sales. Currently, US home sellers outnumber buyers by 500,000, a sharp contrast to market dynamics from just a few years ago. Ongoing uncertainty surrounding the impact of tariffs is also weighing on sentiment. While no immediate policy shift is expected, the Fed has not ruled out the possibility of rate cuts later this year, which is being viewed as supportive for markets.

Weather in the US is beginning to influence grain trade more directly, following last week’s drop in crop condition ratings for both wheat and soybeans. Wheat quality concerns are emerging due to harvest delays caused by rain. Forecasts are calling for a significant rise in temperatures across much of the country through the weekend and into next week. Regions that miss out on rainfall are expected to experience increased crop stress, particularly in the Western Corn Belt, where field scouts are already reporting dry soils. However, without fresh buying interest, futures remain under pressure and are likely to continue struggling in the near term.

Weather conditions globally continue to influence agricultural markets. Over the next 10 days, Western Europe is expected to remain dry, with rising crop stress, particularly as heat intensifies over France and Spain. In contrast, temperatures across the Black Sea region and Russia are returning to seasonal norms. Ukraine remains largely dry, while Russia is forecast to receive scattered light showers.

Cattle futures collapsed yesterday, with live cattle falling by $4.00 to $5.00 and feeder cattle dropping by $6.00 to $7.00. The market was rattled by speculation that the USDA is exploring ways to reintroduce Mexican feeder cattle into the US, a move reminiscent of recent egg imports aimed at helping contain food inflation. This added pressure to an already fragile market, where futures are trading at a discount to cash values.

Negotiated fed cattle trade has yet to develop this week, and following yesterday’s sharp futures correction, buyer interest is subdued. However, some hedged feedlots may be willing sellers at steady to slightly lower prices, as the recent decline in futures has improved basis levels. At this point in the week, a steady cash trade would be seen as the best-case scenario. Meanwhile, boxed beef values showed solid gains on Tuesday. Choice cuts rose by $4.40 to $386.51, while select advanced $5.07 to $372.54.

In broader positioning, index funds are holding record-long positions in the cattle market, contrasting with their record-short exposure in wheat. These funds are not invested to influence policy, but to generate returns, which are now under pressure as volatility increases.