Turnaround Tuesday shows up like clockwork; row crops lead overnight strength.
Grain Overview
A small Turnaround Tuesday is getting underway in the row crops, with soybeans raising their head despite the disappointment that we will only have state-sponsored buyers from China buying beans, who will take the required amount by year-end. With the harvest delays, as reported yesterday in the Crop Progress reports, crushers continue to struggle to find what is supposed to be an abundance of old-crop beans yet lying around out there. Cargill Iowa Falls is pushing a positive basis of +1.25 on the November contract. Granted, this will fall away quickly once some harvest can get underway, but it just shows how tight things are out there (bean carryout to high?).
Meanwhile, the corn market also tries to stabilize after being the one grain commodity that did not take out the prior week’s lows, reflecting independent strength. Wednesday’s stocks number is anticipated to be lower, but it will be interesting if the USDA will reduce it by lowering last year’s yield or playing with feed residual to keep the carryout from dropping too far. Heavy steers out there versus last year demand a lot of corn. Fat steers going over 1,450 pounds take a lot of groceries to get to the desired Yield Grade 4+ to help create the extra beef over last year.
In an unsurprising move, Russia rejected all proposals for a new grain deal. Ukraine used the “grain corridor” to smuggle weapons the last time. Ukraine reportedly says a Black Sea grain ceasefire is unlikely for months, with Russia rejecting proposals. Alternative routes can handle only ~50% of Ukraine’s needs, leaving ~30 MMT potentially un-exported. This challenges the recent hopes of a possible restart. Despite this news, Kansas City wheat futures lead the weakness on the board overnight, with moisture helping optimism for the fall-planted wheat crop after such a devastating summer.
Heavy rains are forecast to return over large portions of the Midwest into next week, and that is building concerns the bean crop will have quality problems. As of yesterday, 17% of the beans are harvested compared to 18% last year. That trend looks to fall farther behind, keeping the interior basis strong again as farmer-stalled sales work against the profitable board crush that still holds at $2.45/Bu. Iowa, Northern Illinois and southern Wisconsin are in a struggle getting their bean and corn crops harvested with the rains planned through next week. They will eventually get harvested; the problem is, what kind of quality problems will they have? How many pods are going to split open?
Last week we had a spike high on Monday in the grains; yesterday we got a spike low. Turnaround Tuesday is in the mix, but any real recovery movement will wait for 11:00 a.m. CT and NASS to give us their assessment of our stocks data. We’ll do an overview of this in today’s video as soon as the flash numbers are out and they are issued.
Cattle Overview
The cattle trade stalled up against the prior week’s high, with December cattle bumping just under 223 and November feeders challenging the 333 range and finding interested selling in a market that looks to be boxed for a bit. The cash feeder index was off yesterday by $1 at $337.79, showing that deferred feeders, as always, have some work to do as they are spooked by the incoming supply of Mexican feeder cattle that does begin to ramp up in the weeks ahead. Last week’s 5-area average live steer price came in at $221, down $1 on the week, while the average dressed price only slipped $2 to $348.
An explosive move in the Choice rib primal, which is counter-seasonal right now, as it should be heading lower but refuses to do so, helped boxed beef maintain strength yesterday, with Choice up $1.65 and Select picking up $2.47. This leaves a favorable tone for the cash beef market this week, with October cattle, as far as we’re concerned, on target to hold near 220 or better to outperform the settlement of the August contract.
We will try to keep you chart-knowledgeable here. In Dec cattle 223 is that downtrend resistance that goes back to the May high, while the 100-day MA, if it finds renewed life, will bring in heavy resistance near 225. Support is last weeks gap at 218.75-219.
November feeder cattle danced with its prior multiple highs yesterday at 333, actually making a new monthly high before retreating, and now initial support should be found at 326.75-327.00 if they run a scare today. 324.00 should offer up significant support if they find reason to head there.