Wheat holds its strength overnight, while corn and beans drift slightly.
Grain Overview
Wheat futures remain higher this morning but have backed away from overnight highs after Chicago wheat traded limit up yesterday. Putin’s latest comments suggest negotiations with Ukraine remain unlikely unless attacks on Russian refining infrastructure stop, leaving Black Sea grain movement severely restricted.
The bigger issue for wheat is becoming fairly simple: either Black Sea grain moves or it doesn’t. If exports remain stalled, world buyers still have to secure supplies, with demand expected from Saudi Arabia, Morocco, and other major importers. Argentina, Australia, and Canada can replace some of the missing wheat, but probably not all of it. India could eventually become a larger exporter if world prices rise enough, although higher domestic wheat and rice prices could limit its willingness to aggressively sell.
At the current pace, the world could be facing a 5-6 MMT monthly hole in Black Sea supplies. That is difficult to replace quickly, particularly with freight costs elevated and Russian producers already facing poor economics. The disturbing news for wheat buyers is that Russia itself has admitted that much of the port damage will take months to repair and claims it could be years before shipping returns to normal in the Black Sea.
After three years of relatively cheap wheat, the market has become accustomed to abundant Black Sea supplies. If those supplies remain unavailable, traders may quickly be reminded just how violent a wheat market can become when importers are forced to compete for physical grain. Today, Chicago wheat trades with expanded limits.
Corn and soybeans were along for the ride yesterday, as wheat is effectively pricing itself out of feed rations as the spread becomes increasingly wide. Corn is getting elevated not only toward psychological resistance near 550, but as we showed in yesterday’s video, measured movement into the 540 range implies prices are becoming extended in the short term.
Soybeans will likely see another flash sale to China again this morning, as yesterday’s 330,000 MT announcement continues the nearly 1 MMT-per-week purchase accumulation we have been anticipating as China maintains obligations ahead of the September 24 summit between Pres. Trump and Pres. Xi.
Soybeans pushed to new contract highs yesterday, breaking through what was essentially the fourth attempt at 1254 on the continuation charts. Holding the mid-1250 range into Friday’s close would open up new technical targets with 13.00 in sight. A soybean carryout falling below 300 Mil Bu is becoming a realistic prospect, with soybean pod counts below last year and numerous Western states experiencing a poor August finish.
It doesn’t take a rocket scientist to say the grain trade is overextended heading into Thursday’s trade, but there is a bid developing underneath the market, with buyers waiting for price breaks to buy into. Any selling that develops in the days ahead is normal, both from farmers taking advantage of higher cash prices and algo traders taking profits.
End-users are hoping and praying for breaks to buy into, as they have become aware that an upward trend is in play. We’re not at the endgame. This is part of a new trend that got underway June 30. If you’re trading it, keep your positions controllable. The days of carrying heavy positions are a bit behind us.
Export sales this morning were solid for corn over 1 MMTs and soybeans and soybeans over 2.4 MMTs.
Cattle Overview
Stability came to the cattle trade yesterday, with live cattle making a stand just under the prior day’s lows and settling mixed. JBS was bidding 218 yesterday in Western Nebraska and raised those bids to 220 late in the session. This cash trade would still be off $5 from last week, but August live cattle seem to have found interest around 218 heading into their closing days. The deep discount that October carries, essentially another $10.00, is quite lofty, as the proclamation signed yesterday for the 300,000 MTs of beef trimmings does not include high-priced cuts only trimmings that will help lean out the hamburger.
Afternoon boxed beef pricing had Choice slipping $3.40 to $385.13, while Select gave up $6.30 to $362.68. Movement was strong at 119 loads, with just over 69 loads of Choice and 20 loads of Select. Another 22 loads were Ground Beef, with the rest Trim.
The black storm clouds could be passing here, revealing a cattle trade that is not only extended, but also quickly approaching measured-move targets on the charts. October live cattle are nearing measured-move theory targets in the 207.50-208.50 range, while the continuation-chart targets for feeder cattle in the 303-306 range are being satisfied by November. October feeder cattle remain the continuation-chart contract for another three weeks, but November is already dancing with those chart numbers.
Recovery bounces could occur on any potential hiccups at the port of entry for feeder cattle in Douglas, Arizona, as the NWS inspection process on incoming feeder cattle is only entering its fourth day today. At 700 head a day, as even bison and horses also have to be evaluated, it’s a slow process. Observations are still being made on how smoothly the process goes, but additional border openings are scheduled for September 24 and then October 24 if everything continues as anticipated. The next port of entry to open on September 24 is in Santa Teresa, New Mexico, if everything goes well can process almost 3 times as many a day. The timeline remains flexible and can be delayed or paused if the NWS risk changes.