After a substantial upside move in the metals overnight, with silver reaching new 11-year highs of $41.99 and crude oil rallying to $66, up two dollars on the session, they are now deflating across the board, with stock indexes coming in sharply lower to start the first trading day of the month. Meanwhile, we also have grain futures in the red to start September as the short covering that supported grains to finish August strong has subsided.

The big focus of the market remains on US production numbers and how close the USDA is to their current projections. As more and more field data comes in, less and less credibility is given to the high corn yield numbers we have seen. Some regions of the Western Corn Belt report potential corn yield loss of 20 bushels per acre in fields impacted by southern rust and tar spot. This is in treated fields. Untreated fields are showing losses of 50 bpa. While this is not across the entire Corn Belt, enough is being seen to question corn production numbers.

September rains will be crucial, but the forecast does not have them in abundance. The USDA dialing back yield guesses to 185 BPA and soybeans below 52 BPA will have a dramatic affect on the carryout, offsetting the concerns of no exports to China. Still, China will likely be in the US market in December/January, picking up the final needs of 9 MMTs of beans, improving basis at year-end.

Drought in parts of the US is also altering crop estimates. Now that the calendar has turned to September, traders know it won't be long and they will have actual yield numbers to look at, not just estimates.

A big story over the weekend was a Federal Judge striking down many of President Trump’s tariffs, setting up another court battle. This is also likely to impact how trade partners negotiate with the US on trade, if at all. The US dollar is rallying while equities fall, pressuring commodity trade this morning.
Export inspections will be released this morning, and crop progress will be released after the close. The next WASDE crop report is on Friday, September 12. StoneX will be out with their big estimate for the WASDE report this afternoon.

With daily swings becoming normal at these elevated price levels, live and feeder cattle prices closed at new all-time monthly highs last Friday. The feeder cash index jumped $15.20 for the week and is at a record $365.38, throwing heavy support towards the feeder market. Last week’s cattle in the north traded steady at $245 while sales in the South picked up $2 and were at $242.

Last week, cattle slaughter rose to 565,000 head but was still 52,000 less than a year ago. Box beef values jump sharply, with choice picking up $7.50, improving Packer margins. Given this week’s Labor Day holiday, the kill will be down, but an after-holiday correction in beef prices is expected.