Grain futures attempt a Wednesday Turn-around Tuesday

A mixed reaction overnight to grain futures with soybeans and spring wheat higher on continued eroding condition ratings, while corn is lower again on further margin liquidation with ratings stable week over week. CBT open interest totals for Tuesday's trade showed a drop of 177 contracts in soybeans and 1,586 contracts in wheat, while corn open interest rose a surprising 1,115 contracts. The sharply lower grain trade did not spark considerable or widespread liquidation. Either end-users stepped forward and were buyers from weak speculator holding, or funds are maintaining their corn length.

The NASS weekly crop progress report showed US corn ratings holding steady at 64% GD/EX with conditions gaining in the east while declining in the N Plains and Minnesota. 10% of the US corn crop is silking compared to the 14% average. The bulk of the US corn pollination period will occur from July 10-25th. US soy GD/EX ratings at 59% GD/EX were down 1% on the week and 12% from 2020. The 59% GD/EX rating in soybeans was the 5th lowest since 1996 and leaves questions about the crop's ability to reach trend yields at 50.8 BPA? US spring wheat ratings fell to just 16% GD/EX, with a sizable 50% of the US spring wheat crop rated poor or very poor. This is the 2nd worst rated US spring wheat crop on record, with only 1988 being worse. With 69% of the US spring wheat crop heading, the chance for rain/yield recovery is fading. Canadian spring wheat cannot be much better amid the recent acute heat/dryness across Saskatchewan.

The primary overnight forecast models reduced their rainfall estimates for the driest areas of the Central US over the next 10 days for the Northern Plains and Minnesota. Also finding themselves in a lasting dry weather trend are Kansas and Nebraska, states to be closely monitored. The drought looks to deepen following recent rains in the past 36 hours. A large portion of the corn and bean yield with acreage increases this year occurred in North Dakota/South Dakota, with Minnesota also carrying the burden of yield shortfalls. Illinois, Indiana, and Ohio could have record yields, and still, with production declines in the west, we will not beat the record national 176.6 BPA. The USDA is using 179.5 with an Asterix beside that yield, and the Asterix implies normal planting and normal US weather. That is not occurring, and the likely 3-bushel yield decline offsets the multiplication of the extra 1.6 million acres picked up on June 30. Total carry out of new crop corn and bean production is in decline, as the USDA is still not figuring in the robust demand we are going to receive this fall with Brazil's shortfall in production.

Russian Ag minister estimated that Russia would export 48 MMTs of all grains and 37.5 MMTs of wheat. This compares to WASDE, which is forecasting that Russia will export 40.0 MMTs of wheat. 

Elsa is quickly advancing her forward progress and will soon be onshore as a weak category 1 hurricane. As Elsa quickly exits North Carolina late Thursday, she heads northeast to Newfoundland. Her exit will allow for improved model forecasting consistency. The 3 primary models are similar and have diminished their rainfall potential for the driest area of the Central US, the N Plains, and Minnesota. Iowa/ Missouri will receive welcome and needed rainfall with totals in a range of .75-2.50″ over the next 10 days (heaviest east/lightest east). And rains of .5-2.50″ will maintain favorable soil moisture for the Eastern/Southern Midwest.

Cattle futures trade yesterday was higher with the sharply higher event for feeder cattle on the collapse in feed values. Yesterday's cash market was quiet to start the week, with show lists in the region thought to be steady higher. Boxed beef prices were mixed to start the week. The choice cutout gained $1.24 and select was off $1.10. The choice/select spread has broken more than $14 in the last month. But at $23, it is still a record for early July. The latest quality grade data showed that the percentage of cattle grading choice or higher was the lowest since October at 81.1% and 2.61% less than a year ago. This summer, the lower, high-quality grade, and strong domestic demand have lifted the choice/select spread to record levels. August cattle to be caught in a range between 118-125 to finish out summer activity.