Overnight, Pres. Trump flips from a deal within days, to we may have to strike Iran again.
Grain Overview
The grain trade rose overnight, with wheat leading the recovery. Monday has proven to be another significant low point for the grain trade, prompting a recovery (reflex) rally. This rally was accentuated at 6:00 a.m. CST this morning when Pres. Trump flipped on his comments that a deal is all within days, to saying we may have to put more strikes against Iran to get them to compromise. This pushed wheat to a new weekly recovery high, while corn and soybeans challenged their weekly highs.
After a prolonged selloff, soybean products are finally offering the soy complex a measure of support. Soybean futures have been under heavy pressure, closing lower in 15 of the last 18 sessions, including 8 straight losses. While the break has improved the position of US soybeans in export markets, South American supplies continue to be the lower cost option for global buyers. The recent price action serves as a reminder of how far out of line US soybean values had become compared to competing origins.
Corn demand continues to hold together despite increasing competition from Brazil's safrinha harvest (crop estimates are lowering it by 1 MMT). Flash sales for corn should continue this week. Attention is also beginning to shift toward US crop conditions. Although initial ratings were favorable, they have begun to trend lower. Early season ratings do not always translate into final yields, but with a tighter stocks-to-use outlook, the market is likely to react to any development that raises concerns about production potential.
The WASDE USDA crop report is on Thursday at 11:00 a.m. CDST, and as I’ve been stating for well over a month, the USDA is woefully behind on export numbers, as we are currently at 98% of what is scheduled to be sold in the balance sheets through September 1. The prospect of their increasing exports by 50-100 Mil Bu is growing. Whether to do it today or in subsequent reports is just a matter of time. Witness last year: they continued to carry out the charade for the old crop, as exports remained above their expectations.
Temperatures will start to cool, and a wet pattern for the Midwest and Delta will continue for the next two weeks. Temperatures next week will be 7-12° below normal at the start of the week. This is the breeding ground for scab on SRW wheat, which will ultimately again lower US wheat production after the HRW shortfall.
Cattle Overview
After a rough-and-tumble early opening yesterday, after a fifth NWS case was reported, the cattle trade turned sharply higher. The feeder index gained another $1.19 yesterday, bringing it to $368.20. This prompted feeder cattle to contend with the extreme fear priced in on the board and helped prompt a $4.00 again.
Yesterday’s box beef market had choice picking up $0.70 to $392.90, while select slipped $1.16 to $376.93. Again, box beef values are not capable of climbing back above 400 and advancing, as consumer demand would wane.
The June contract, which expires in 20 days, is still trading $10.00 below the present cash market, creating an interesting dynamic over the next three weeks as this massive spread is addressed. This also includes the deferred August contract, which is a full $8.00 below the present June contract.
August feeder successfully held 349-350 over the last two sessions, making that significant support. If that let’s go, then 344 would be the next threshold. On the upside, August feeders need to breach 358 on a closing basis to rebuild the momentum of the recovery rally that got underway last week.