It’s crop report day today, and USDA numbers will be under review.
Grain Overview
A weak grain trade greets the morning of the September WASDE/Crop Production report, as crude oil and diesel fuel give back half of their sharp gains yesterday, with the grain trade also in full retreat from yesterday’s strength. November soybeans pushed through recent resistance at 1324 yesterday on rumors that China may soon reduce its 10% import tax on US soybeans ahead of Xi’s visit Sept 24. Private importers have not had the opportunity to buy US beans because of the tariff, while China’s state buyers have been doing the purchasing.
The current tally shows China has bought almost half of the promised 25 MMT of beans through today. Seasonally, they typically buy through the end of the year before the switchover to the availability of South American supplies at the end of January. No formal announcement on reducing the tariff has yet occurred, setting up the soybean retreat in price overnight.
With the USDA data out at 11:00 a.m. CT today, it might be simple to explain “Just the facts, Jack” on what to watch for when the action goes chaotic seconds after the data dump. What truly matters are the carryout numbers that flash on the screen. With the average guess around 1.52 Bil Bu on corn, a flash of anything under 1.490 Bil Bu will have corn popping back up into the 540+ range. A soybean carryout number under 290 Mil Bu will also be seen as friendly, pushing beans back toward yesterday’s highs.
There is a lot being made of the wide range of guesses on yield heading into today’s corn report. To “Dumb it down” so to speak is to acknowledge that all yield guesses are lower than last month. Even StoneX lowered its guess by almost 2 BPA from last month, setting up the expectation that yield will be under 179 BPA. The yield number only matters alongside what should be increasing demand numbers, pushing today’s carryout below the magical round number of 1.50 Bil Bu sets the stage for a price pop.
Wheat prices have almost retreated to price levels seen before Putin said the war with Ukraine would continue into the winter. Headlines that there is at least communication between two sides that are vehemently far apart have reopened an end-user buying opportunity with the recent break. Even Saudi Arabia should be grateful for the price break so they can retender wheat again after canceling Monday’s tender over higher prices. There will be no Black Sea reopening occurring any time in the months ahead, and end-users are going to have to reestablish new contractual wheat purchases as disruptions continue to limit expected supplies from Ukraine and Russia.
Today will incur a lot of statistical pricing noise as CTAs try to fine-tune their algorithm headline readers to see what kind of dump and bump occurs within seconds of the release of the USDA numbers. The grain trade remains in a structural bull market. Reducing supplies and increasing demand are in charge of a newly defined uptrend that got underway in early July. There’s no ignoring the fact that July was recorded as the second-hottest since 2012. Nowhere near that year, but certainly statistically important in acknowledging that production losses from the Western Corn Belt are in play, while disease in the East has also hampered yields.
No matter what is said in today’s data, if it causes a bearish spin, the downside raw support will be revealed and end-user buying should materialize late in the session or into Monday. Big numbers to watch for support are 521-526 Dec corn, 1290-1300 November beans and 710-720 December Chicago wheat. There are the “Facts, Jack.”
Building harvest pressure will always be a drag on the grain price uptrend, but it was so in 1995, yet prices moved progressively higher into March 1996.
Cattle Overview
Live cattle had a rough-and-tumble session yesterday but still went out like a champ with another friendly close. The recovery ride from last week’s double bottom continues to reveal that the weekly Black Swan season openers may have come to an end, and the bearish price push of two weeks ago went too far and revealed raw support.
Yesterday’s softening boxed beef values helped produce an intraday break, with Choice down $2.40 at $378.37 and Select slipping $0.28 to $352.06. Movement was strong at 114 loads, including 66 Choice, 10 Select, just over 18 loads of trim and 19 loads of ground beef. Funny thing is, the trade is looking for the start of the 300,000 MT of additional beef trimmings, and that has yet to become a reality this week. Packers have inventory and are trying to hold back, but the board reveals a market that looks steady, if not better, this week.
Dressed bids in the North are quoted at $340-348, and that’s a range from $5 lower to as much as $3 above last week’s average price. Meanwhile, the South maintains offers at $225, which would be a pickup of a few bucks over last week. Probably argue much of the action will not take place until Friday afternoon.
As we showed in yesterday’s video, a significant low occurred last week and now we are in the first leg of recovery, with major resistance likely to hold against the October contract in the 219-221 range. We also revealed that October feeder cattle will find like-minded major resistance at 329-331. Part of the friendly spin on feeder cattle is that the USDA has yet to announce an opening date for Santa Teresa, New Mexico, as the next port of entry for Mexican feeder cattle.
Mexico’s SENASICA reported on September 8 that active NWS cases in Chihuahua dropped from 227 to 64, a 71% decline. Sonora was holding at 25 active cases. Authorities have also released 73.9 million sterile flies across Chihuahua and Sonora. If this progress continues, it improves the odds of USDA moving forward with another port of entry, possibly around the end of September or early October. For now, however, Santa Teresa remains officially listed as “to be determined.”