A mixed-grain trade developed overnight despite a sharply higher crude oil market.
Grain Overview
The grain trade opened higher Sunday night as crude oil was sharply higher, as the Strait of Hormuz remains closed, and the Iranian conflict was intensifying over the weekend with more missile strikes from Iran. The selling vigilantes immediately showed up and trimmed the gains, eventually pushing corn and soybeans to new lows in the current decline after it was announced at 6:00 a.m. CST that a cease-fire was underway among Iran, Israel, and the US. The White House continues to claim the war is over and that operations are nearly complete, but these developments cast more doubt on those statements.
The wheat complex is trading mixed-higher in late overnight action, while corn and soybeans continue to struggle. Wheat is finding support amid a growing list of disappointing crop reports worldwide as adverse weather chips away at production prospects.
Weather concerns are no longer isolated to one region. Nearly every major grain-producing country, including the United States, is dealing with some form of stress. So far, US corn and soybean crops have avoided widespread damage, as periods of above normal heat have been offset by scattered rainfall across much of the Corn Belt. That balance remains fragile. Areas that continue to miss rain are likely to see crop conditions deteriorate, even at this stage of the growing season. One region attracting increased attention is the Ohio Valley, where excessive moisture has become a problem. Heavy weekend rains triggered widespread flooding across parts of Indiana and Ohio, raising concerns about crop development and potential yield losses.
With the Strait of Hormuz closed, the fertilizer story will start to get more attention as Brazil imports 85% of its fertilizer needs annually, and high prices and financial struggles amongst farmers there are causing them to cut back on intended planted acres. As this war drags on in the Middle East, the impact on Brazilian farmers will continue to worsen. The rising Real (Brazilian currency) and import cost structure for seeding a crop are causing a cutback. At this time, the impact is not measurable, but it will become a problem soon enough.
The cascade of selling over the past two weeks has seen corn open interest drop to likely under 50,000, with index funds short over 70,000 wheat contracts. Some form of jolt or spark is needed to stop the relentless selling by index funds, as they do not consider price dynamics when they liquidate. Their positions were losers for not seeing China buying after the summit in mid-May, and they just want out and moving on to greener pastures. Mondays or Tuesdays are when lows can be made, with late-week recovery bounces.
Cattle Overview
After a tumultuous week, live and feeder cattle futures managed a higher close week over week. This generated technical key reversals, but not an outside-week reversal. We were trading early in the session on Friday above the prior week’s highs for both live and feeder cattle, but failed to stay above those levels into settlement.
The discovery of the New World Screwworm and confirmation in the US finally broke the tension and fear of its occurrence. It was found in a young calf, and the US now has many products and supplies to fight the NWS parasite. It does create work with a potential death risk for cattlemen. But it does not alter the US beef supply.
The cash trade wrapped up last week, with sales in the north at $2 58, while dressed sales rep $405. Live sales in the South also picked up at the end of the week, with a gain of $1 to $258. Box beef values had choice picking up $1.23, and select was off $0.49. For August live cattle, 239-240 has become the new support range, while August feeder cattle should find buying interest in the 348-350 price range. Seasonals are higher now into July for the feeder cattle market.