Wheat leads overnight strength.

This morning’s grain trade is sharply higher in wheat, while corn is also recovering well due to concerns that rainfall may impact final acreage totals. Preventive planting is becoming a growing topic in the Delta and Southern Midwest and in parts of North Dakota, which have been inundated with rain over the past week, with more precipitation expected.

With mutual funds becoming increasingly bearish, having shorted a record number of wheat contracts in both Chicago and Kansas City at this time of year, short covering is now tightening those positions. It is estimated that funds had likely reached a short position of around 100,000 contracts by last Friday.

Yesterday afternoon’s wheat condition report showed a two percent drop in the good to excellent category compared to last week, falling two percent below trade expectations.

Based on Monday’s NASS planting progress data, there are still 21 million acres of corn and 28 million acres of soybeans unplanted. Between 4 and 5 million acres in Illinois, Indiana, and the Southern Midwest remain unplanted. While a drier pattern is forecast after Thursday, Missouri, southern Illinois, Tennessee, and Kentucky are still expected to receive an additional two inches of rain by next Tuesday. Cooler temperatures are also slowing evaporation and crop emergence.

Support for wheat also stems from the drought that began in China six weeks ago. Even last week’s extreme heat, with temperatures exceeding 100 degrees, drew little attention from the wheat trade. Today, the market appears to be factoring in the possibility that China may need to replenish its reserves later this year with new crop wheat, as approximately 10 million metric tons are at risk of loss.

Weather forecasts continue to call for rain across the Upper Midwest, including northern Illinois, Indiana, and Ohio. These rains are expected to end by Thursday. Meanwhile, additional rainfall of 0.75 to 1.50 inches is expected across the Northern Plains and regions east of the Mississippi River. The Delta remains saturated, with 10-day rainfall totals of 2 to 4 inches or more likely in Arkansas, Missouri, southern Illinois, southern Indiana, Tennessee, and Kentucky. In China, reasonable rains remain south of the main crop-growing regions for the next 10 days, while high temperatures persist in the 95 to 105 degree range through the end of this week.

Yesterday, live cattle futures posted a second consecutive day of recovery, although they remain below the 10-day moving average. Feeder cattle saw a morning rally that faded by the close. Boxed beef values continued higher, with choice cuts up $2.32 and select gaining $1.72. Estimated slaughter margins are anticipated to be near breakeven. Packers likely secured the last of their needed supply for processing and delivery ahead of the Memorial Day weekend.

Last week’s report showed packers bought 81,722 head, with 48,654 for delivery within 1 to 14 days and 33,068 for delivery within 15 to 30 days. The average negotiated live steer price rose $2 to $226, while the average dressed price also increased by $2 to $358. Negotiated volumes were slightly higher than previous record price levels.

Today marks the third day of a bounce that remains mild compared to last week’s sharp decline. However, there is a risk that index funds may continue selling out of their record-long open interest in cattle, as waning consumer demand becomes a growing concern. Credit card debt among consumers is rising rapidly.