Harvest pressure and US/China Summit hopes are weekend topics.
Grain Overview
Unlike previous nights this week, grain futures were mostly lower overnight (even soybean meal, which has been exploding daily), but true to form, they reversed their overnight trend around 4:00 a.m. CT, which has typically been the reversal of night trading action over the last month.There was a mild early morning bounce off those lows but the trade remains soft on price late in the session.
Wheat prices remain lackadaisical about restricted Black Sea exports, but the reality remains they are running at half of the normal pace. Ukraine’s alternative grain routes to the Danube are running into problems as well. The Zatoka bridge, a key rail link toward the Danube ports, was damaged in early August, and Ukrainian Railways says restoration work is still underway. Without the bridge, waiting times for grain railcars headed toward the Danube could stretch to as long as 26 days. It is another reminder that replacing lost Greater Odesa export capacity may sound manageable on paper, but moving that grain through alternative routes is proving much more difficult in practice. Russian exports of wheat are now the lowest since they were banning exports after the drought in 2010.
Russia’s winter grain planting is running roughly 25% behind normal. As of September 4, just 2.6 million hectares had been planted, including 2.4 million of winter wheat, nearly 900,000 hectares behind the normal pace. Weather may be partly responsible, but poor farm economics and surging diesel costs are also weighing on producers. If these delays turn into lost acres, Russia’s 2027 wheat crop could begin to become a bigger market concern in the spring.
Corn continues to consolidate by pin-balling between 527 and 536, absorbing old-crop corn dumping and new-crop harvest pressure like a champ. That’s high-level consolidation. Keep in mind that those who are selling old-crop corn in August and September will not likely have new crop to put into the market this fall, as they like storing grain. They will obviously have higher sights now and will fill the bins back up for a fast harvest and look to sell on winter optimism of over $6.00 (or again next Aug/Sept).
The soybean weakness this morning is from overbought values and concerns that we have not seen flash bean sales to China for six sessions now. That possibly will change this morning, but if we don’t see something appear, beans will be quickly attacking 1300 to challenge the support zone that has developed over the past two weeks at 1292-1300. The US/China summit is still on for next Wednesday, and the market has priced in high expectations for soybean exports and also other agricultural products like corn/wheat/sorghum. Rain continues in several regions of the Midwest, stalling harvest activity throughout Iowa. Interior basis values remain firm, with talk of some softer soybean basis.
Cattle Overview
Yesterday’s cattle trade had an early morning look of a recovery, but Wednesday turned out to be the third day lower with the biggest losses after the dynamic two-week rally. Selling showed up heavily during the session on rumors circulating that President Trump was considering banning US beef exports and stopping shipments of US feeder cattle into Canada. At this point, we have found no confirmation from the White House or USDA that either action is being taken.
Pres. Trump does have a scheduled speaking engagement after the close, and there is some thinking that it may be more about diesel fuel rather than beef. This afternoon is also the September Cattle on Feed report, with On Feed estimates of 101.8%, Placements at 96.8% and Marketings at 96.1%.
Yesterday afternoon’s boxed beef is not helpful for the cash trade, as it remains sluggish and we could see lower values develop. Cash trade will probably hold until after today’s report at 2:00 p.m. There was some dressed trade in the North at $350, which would be steady, but bids in the South were at $220. Boxed beef ended the day down $3.66 for Choice at $372.15, while Select gave up $2.69 at $351.88. Movement was 101 loads, with 68 Choice, 9 Select, almost 4 loads of trim and the balance ground beef at 19.74 loads.
Santa Teresa, New Mexico is expected to be opening next Thursday, as Ag Sec. Rollins dispelled rumors from last week that there could be delays. They will start out at 750 head/day but can ramp up quickly to 2,000 head/day. Pre-Mexican feeder cattle ban, the Santa Teresa port opening was responsible for 40% of all Mexican feeder cattle imports.
The cattle market is doing the giveback from the August bottom we discussed would likely play out. But we still anticipate that a low was made on August 26, and the current break will find support on retracements of the sharp 7-day rally that occurred from those significant washout lows. We may or may not have another Black Swan season opening this afternoon if Pres. Trump is acting on the rumors, and if there is no story, the three-day break has put December cattle back on top of major support in the 214-216 range that should prompt a recovery early next week, especially if the COF report is a nonevent, as they typically have been.
Soon-to-expire September feeder cattle are at 335.95 and have now dropped to a discount to the index, which yesterday was up $0.43 at $343.17. The lows in feeder cattle were made on August 26 and also priced in the Mexican feeder cattle opening, so weakness in the contracts now is not a surprise, but a retracement of recent strength.
November feeder cattle should find support on any further decline at 315, with major support at the 78% retracement at 310. These are numbers to watch for if the trade chooses to step on the gas with further selling. November feeder cattle could be absorbing 50-60,000 head of Mexican feeder cattle that month. Is that worth a $20 or $30 discount to the feeder index of present cash? November feeder cattle should find considerable support at 310 if the market wants to attack it.