Wicked Wednesday finds the price correction Turnaround-Tuesday missed.
Grain Overview
After pushing higher on Turnaround Tuesday, Wicked Wednesday caught the correction from an extended grain trade. In the opening minutes of the night session, new contract highs were seen across the screen, and immediately, profit-taking-inspired selling brought the market off its overnight highs, retreating a large portion of Tuesday’s gains.
Nothing has particularly shifted, as Ukraine and Russia remain aggressive and continue harming each other’s transportation capabilities, with Russia hitting Odesa hard again overnight, ensuring that grain movement remains at a standstill through the Black Sea. Meanwhile, crop scouts continue to report a much smaller crop than last year as we await crop estimates for the September 11 Crop Production/WASDE report. StoneX is expected to release its data from its desks soon, which typically remains the high-water-mark yield. A yield lower than the trendline is anticipated, providing further evidence of US corn carryout heading toward the 1.2 Bil Bu range or lower.
New-crop corn demand continues to build, and while it is behind last year, it is still one of the highest sales volumes in recent years. Global production outlooks remain price supportive, as crop losses continue to be noted not only in the US but also in the European Union. Meanwhile, planting is trying to get underway in Brazil, which will begin to influence weather outlooks across the region as we get deeper into September.
The South Central US remains in a flash drought, with heat and below-normal rainfall anticipated to continue well into September 12. This is not helpful for any crop finish, especially in areas from Kansas to eastern Tennessee.
The US/China summit remains on track for September 24, and we may see Chinese interest in securing some corn or wheat as a goodwill gesture. The September 11 crop report may or may not produce a price break ahead of that summit, but it is a window of anticipated buying by end users, as that may be their best hope for a price break if USDA drags its feet on yield reductions.
Statistically, a lower August yield, as we had compared to July, starts a trend of dropping estimates that likely continues into the fall. 1995 carried a similar supply-and-demand structure that offered minor breaks before continuing to new-high pricing.
If the grain trade slips from its current aggressive uptrend, major support will arrive for December corn in the 520-525 range, December Chicago wheat in the 755-760 range, and November beans at 1280-1287.
Cattle Overview
After forging a significant low last week and producing a bounce that ended early this week, yesterday’s cattle trade went heavily into correction mode, yet found renewed buying interest at the 80% retracement mark and quickly recovered to produce only moderate losses into the close. Look for a steady open this morning, with 210 having proven support for October cattle, while October feeder cattle also found buying interest just above 310.
The feeder index is slowing its rate of descent, losing only $0.11 yesterday to $329.19. Box beef improvement increased in the afternoon, with Choice picking up $3.93 to $379.75, while Select was higher by $1.96 at $360.45. This occurred on 110 loads: 78.5 were Choice, 9 loads were Select, with almost 11 loads of Trim and 11 loads of Ground Beef. Tuesday slaughter was estimated at 106,000 head, 1,000 head less than a week ago and 16,000 head less than a year ago.
There were some light sales quoted, steady with last week at $345 dressed, with a few live sales at $218, which was off $1.00. Meanwhile, this week is setting up with asking prices in the South at $225, a gain of $3.00 if achieved.
They say you have to walk before you can run, but in the case of cattle, they need to crawl first before they can walk. Yesterday’s violent losses from the opening trade, which were trimmed back to just moderate losses by the close, are suggestive of a base being built where at least a sideways trade can start from. The cattle trade has seen an aggressive downtrend since June from what were almost weekly Black Swan season openers. A sharp downturn in the economy would be an unknown to watch for that could affect the cattle trade, but that is not expected.
Look for 210 to be a number to be reckoned with for October cattle. Even though it can be hammered on, the closes will be important. While October feeder cattle still have a 306 target that November may have already satisfied, a sideways move to possibly better prices could now be established.
USDA also has to watch the building cases of NWS south of Santa Teresa, NM in Mexico, which may delay the September 24 opening. Douglas, Arizona, continues to receive cattle, with at best around 700 head/day passing through.