The grain trade recovers from the week's heavy selling.

Grain futures are recovering Friday morning ahead of the weekend after heavy selling that’s been unleashed on the trade this week. They are reconciling oversold conditions as the EU and Canadian weather models keep in place a pattern of a drier and warmer forecast east of the Mississippi River into the opening days of July. The EU assembly has performed much better in the US over the last 30 days than the GFS. The model features Central US pattern stagnation of July 5. Heat in the E Midwest will only moderate briefly next week.

The grain trade has stayed focused domestically and is ignoring the world weather difficulties that are affecting production. China’s monsoons stay south of the major crop areas for another 10 days. Made 1-June 20 rainfall in Shandong, Henan, and Hebei provinces, where 20% of the Chinese corn and 60% of the winter wheat is produced, has been recorded at just 5-40% of normal. Mexican vegetation health as of June 16 is abysmal, and while desperately needed rainfall is ahead, much of this and the short-term will come via tropical storms, which means corn seeding and E Mexico will be delayed until very early July. Argentine corn yields have fallen precipitously over the last 30 days as corn is impacted by the stunt disease. Meanwhile a pattern of net soil moisture loss resumes in Ukraine.

The strength in the US dollar has been troublesome for ag markets, but weather issues and rising Indian cash wheat prices cannot be ignored. Rallies will eventually occur, but seasonal trends remain negative for domestic values from mid-July to September. Still, this does not mean price spikes cannot occur. The current short position in the grain complexes is near record by the funds for this time of year.

The European Union may trigger a ‘trade war' if it continues to escalate tensions, China's commerce ministry said, accusing the bloc of foul play during its anti-subsidy probe into Chinese electric vehicles. “The European side continues to escalate trade frictions and could trigger a ‘trade war,’” a statement attributed to the commerce ministry’s spokesperson said. “The responsibility lies entirely with the European side. In its countervailing duties investigation, the European side intimidated and coerced Chinese enterprises threatened to apply punitive high tariff rates, and demanded overly broad information,” it added.

The GFS and EU weather models are in poor agreement for the next 3-4 days. The GFS is committed to a lengthy period of mild temperatures and better rain chances for the E Midwest next Wednesday-Thursday. The EU model features pattern stagnation into the late months with additional unwanted rainfall of 3-4″ forecasted in MN/WI and near complete dryness offered to IL, IN, OH, and KY. The EU model projects only temporary moderation temps with highs in the low/mid-90s returning to the E Midwest and mid-South June 30. The EU model has been the better performer for a month, but the trade focused on the 5-day outlook.

Live and feeder cattle futures were under pressure again in early trade on Thursday and finished slightly mixed. Similar patterns have occurred when Packers try to acquire cattle. Yesterday, June cattle, which is close to expiring, had the market's highest close since October and closed over $187, while August cattle are just above $1 82. Light cash developed on Thursday, with small numbers in the north reportedly selling for $310 on a dressed basis, which was $4 higher for the week. Live bids of $197 were passed. Despite higher bids in the northern market, cash cattle trade has been slow to develop this week, as feedlots are seeking even higher prices. Barring something bearish today, cash sources expect trade to eventually be seen at higher prices, though active movement may not come until after this afternoon’s Cattle on Feed Report.

Analysts expect this afternoon’s USDA Cattle on Feed Report to show the large feedlot (1,000-plus head) inventory under year-ago levels for a second straight month. Based on a Reuters poll, USDA is expected to report the June 1 feedlot inventory down 1.0% from last year, while May placements are seen declining 1.5% and marketings inching up 0.5%.