The grain trade is looking for a short covering day today if seller vigilantes fail to materialize this morning
Grain Overview
Grain futures overnight found consolidation with wheat and soybeans trying to firm a bit, while the corn market etched a new low overnight with December corn dipping under 450. The real test comes during the day session, when the seller vigilantes like to do their work, and if early selling is minimal, a potential short-covering session could be in store for the grain trade. Corn has fallen back to its annual lows, which should prompt end-user forward booking. Availability of safrinha corn comes to the world market in July.
Weather expectations have been mostly good domestically, but global droughts are expanding, with Australia and Asia struggling in some areas, while China is experiencing excessive rainfall in its wheat-harvest region. There are reports that Russian spring wheat planting may be smaller than previously noted. Farmers are opting to plant oilseeds on spring wheat acres.
This afternoon’s commitment of trade report will be an interesting read, as it’s thought long corn interest could be down well over 100,000 contracts, wheat off 30,000, and soybeans losing 52,000 contracts of length. Looking at corn, if it comes in around 110,000 contracts, it will be down from the spring high of 343,000 contracts. Funds may still be long over 160,000 contracts of beans.
Cattle Overview
It was a dynamic day in live and feeder cattle yesterday, with feeder cattle only opening $5 lower and immediately reversing higher on the session. Feeder cattle put on $15.00 in 15 minutes from their low, signaling that the concerns over the New World screwworm have been long in the making and are finally here. A classic sell-the-rumor, buy-the-fact event occurred, with short hedgers that had a market exceptionally discounted to the cash trade liquidating aggressively. This ultimately generated a limit-up close, with the new limit at $10.75 for feeder cattle. Today, feeder cattle limits are now $16.00 while live cattle expand 12.75.
Given the extremely tight protocols in place by the USDA, it would not be a surprise to hear another finding now and then, but the market is convinced that the spread of any New World Screwworm in the US is exceptionally minimal, with one year of preparation compared to Mexico. Mexico has to deal with cartels that don’t like to see planes flying overhead, releasing sterile screwworm flies, as it fears that the CIA has cameras in them. In the US, the intensity of releasing sterile flies will be aggressive.
There was more cash trade again yesterday, with most action steady with Wednesday, with the north dressed sales at $405, while the South continued to move some cattle at $256. Higher starts are anticipated this morning for cattle, and whether those gains get checked will be determined by traders’ enthusiasm for the upside mindset shift. Weekly trend reversals would occur in the August feeder on a close above 356.30, while August cattle require a close above 243.87. The cash feeder index yesterday was at $357.21, off $2.43. The markets look to square up quickly amid excessive discounts, driven by fears of the screwworm coming.