The overnight grain trade weakens on continued hopes of peace.
Grain Overview
After Monday’s sharp rally, the grain trade continues into today’s sharp price correction as the talk of peace continues. Reportedly, US Sec. of State Marco Rubio will meet Russian Foreign Minister Sergey Lavrov in New York City this morning. The market will be awaiting a response from this meeting. Weakness in the grain trade comes alongside crude oil going into its second day of sharp losses on the optimism that Iran and the US “may” come to an agreement and avoid obliteration, as Pres. Trump stated would happen to Iran if they do not take a deal.
Yesterday’s grain weakness came as Pres. Zelensky discussed with Trump efforts to end Russia’s war in Ukraine, including a potential bilateral ceasefire on energy-related targets. It was just last week that Pres. Trump said he had discussed efforts with both sides to end the conflict and asked Zelensky not to fire on Russia’s energy targets. But still, over the weekend both sides bombed each other’s energy and grain export facilities.
The energy and grain world are getting tired of all the gear grinding from politicians, and as Toby Keith would say, we need “a little less talk and a lot more action.” The grain trade is into its second day of retreat, as just the sign of talking brings hope that the Muslim Ayatollah cleric (not the Iranian foreign ministers who were in New York, as they do not make the final decisions) will give up his nuclear ambitions to open up the SOH, and the prospect that Putin will give up the Donbas and Crimea to get the Black Sea grain movement going again with minimal operational equipment. Both daunting tasks, but the headlines are exciting for the Algo-reading computerized trading systems.
The Chinese summit is at hand, with Pres. Trump meeting with Pres. Xi this evening as he arrives with fanfare, and Thursday becoming the day that the negotiated AI/computer chip and other important trade deals (especially including what agricultural products will get out of this) should be revealed. Will Thursday become similar to the spring event, when the administration built the trade up again to be more than what transpired? That seems to be the trade concern of a “buy the rumor, sell the fact”.
A wetter trend is anticipated the Plains and Western Midwest as the excessive rains in New Mexico moves northeasterly. All long-range forecasts maintain this run for the Central US with above normal temperatures accompanying this moisture. This could delay some harvest but will be beneficial for wheat seedings finally.
An interesting observation on the price retreat since Monday’s high is that, on a percentage basis, soybeans have barely slipped. Could it be that the USDA overestimated last year’s bean crop and that the tightness in some areas that are producing $14.25 beans, with the slightest stall out of harvesting due to weather in some areas, has some crushers getting pinched? We’ll find out next week on the September 30 Stocks Report, with all three grain categories expecting some kind of reduction.
In overnight action, corn is back dancing in the 526-533 price range that it got used to last week, with soybeans nowhere close to the 1290-1300 support range, with the excitement of China yet to occur. Meanwhile, the wheat trade continues to slump ahead of the US/Russian talks this morning, with major support on the wheat trade being challenged for Chicago wheat under 710, while Kansas wheat went under 775-780 in low-volume overnight trade.
Cattle Overview
Cattle futures were tripped up from Monday’s gains on Tuesday, as Kansas News Service reported that federal immigration agents were operating around Liberal, Dodge City and Garden City, including near the major beef plants. Witnesses reported people being stopped and detained going to and from work. National Beef’s Liberal plant subsequently altered or delayed some work shifts. This spooked the market, likely an overreaction, with gaps on Monday’s trade being challenged yet holding.
Cattle trade may be set for a steady-to-better performance today, as yesterday afternoon’s boxed beef remained higher, with Choice gaining $2.54 at $378.89, while Select picked up $2.08 at $357.85. This was on 106 loads, of which 83 were Choice, 6 Select, 5 were trim and the balance ground beef. Yesterday’s slaughter was put at 105,000 head, which was off 3,000 from last week and 14,000 below last year.
Cash trade could set up for a steady performance this week, with October cattle running into the same scenario as the August contract had, with 220 being the pacifier number for now. November feeder cattle are set to hold support at Monday’s gap near 322, with the softer grain trade performance this morning. Whether cattle break lower or not this coming week, cattle futures put in their seasonal low for the summer price break weeks earlier on August 26. Any weakness now is backing and filling of a live cattle trend that is now turning its way higher into the winter.