Grains drift on a lack of buying interest.

Grain futures are softer again this morning as the market continues to struggle with a lack of fresh bullish news to attract buyers. With next Monday’s USDA reports approaching, along with month-end and quarter-end positioning, there appears to be little appetite for establishing new futures positions. Favorable weather across much of the U.S. is further limiting buying interest.

While conditions remain mostly favorable, more trouble spots are beginning to emerge. These have been confirmed by the declining crop ratings seen in last Monday’s Crop Progress report. The key question now is whether recent weather has been enough to halt further deterioration. If crop ratings decline again next week, discussions around yield potential—particularly for corn—are likely to intensify. In the Eastern Corn Belt, the effects of a wet spring are becoming more evident in poor crop stands. That said, until the USDA adjusts yield projections, the market is likely to remain hesitant to react.

Outside markets have stabilized as the second Israel-Iran ceasefire appears to be holding, for now. The de-escalation has brought calm to global markets, which may benefit the agricultural sector. Corn remains technically oversold, and other contracts are trending in that direction as well. The historically wide spread between the U.S. dollar and the Brazilian real, coupled with oversold conditions, has sparked some export activity. All attention now turns to China, which has yet to book any new crop purchases from the U.S.

Private crop estimates for Brazil’s 2024/25 corn production are reaching as high as 150.3 MMT. Whether the final figure lands at 140 or 150 MMT, it represents a substantial crop that will compete directly with U.S. exports this fall. This could pressure current USDA export estimates, which started unusually high and may be subject to downward revision later this year. U.S. exporters will need Chinese buying support, ideally through some form of trade agreement. China is currently experiencing drought across over 40 percent of its corn-producing region, which could prompt significant imports. The wildcard remains former President Trump, who may attempt to revive a version of the Phase 1 trade deal established in 2020, potentially encouraging Chinese purchases of corn.

U.S. weather models remain favorable across the Central U.S., with widespread rain and near-to-above-normal temperatures forecast through July 12. Any extreme heat is expected to remain west of the main crop areas during the first half of July. In contrast, China continues to suffer from drought and heat stress across its corn-growing regions, while Western Europe faces similar extreme conditions that are beginning to reduce yield potential. Despite these international concerns, the grain trade has largely ignored them so far.

In livestock, live and feeder cattle futures saw another volatile session yesterday. Feeder cattle set new weekly lows before recovering off the $300.00 level, while August live cattle held support at the 50-day moving average. Initial asking prices in the South are aiming for steady to $2 higher trade in the $228-230 range. Packers are attempting to lift boxed beef values, with choice cutouts gaining $4.03 to reach $394.25, the highest level since the COVID-era rally.

Historic discounts persist in the cattle complex. June cattle are trading $13 under last week’s cash levels, signaling that the board anticipates a price break. August cattle are trading $25 under current cash, compared to $10 last year. Historically, August cattle average a $5-7 discount to cash. With the June contract expiring on Monday and the board carrying such a large discount, a convergence is likely. This sets the stage for a possible cash market break, a futures rally, or a compromise between the two by early next week.