Canola collapses as China and Canada go into a trade dispute.

This morning’s grain trade is mixed, with soybeans higher on the dry Midwest weather forecast into mid-September. The wheat trade struggled as it failed to breach technical resistance, bringing in Algo/AI trade selling, which is still defending its position.

The big story is that China started an anti-dumping probe on Canadian canola in response to Canada placing tariffs on Chinese electric vehicles last week. The trade dispute was about the government's announcement that it strongly deplores Canada's unilateral restrictive trade measures against its opposition to the ministry. This has caused canola to drop the $45/MT limit to $569.70, dragging soybean oil lower.

More than half of Canada’s export of canola heads to China in the market has taken the trade dispute news as ultra bearish. Weakness in canola has soybean oil lower as it could see increased competition to compete in biofuel feedstocks. Meanwhile, soy meal has rallied due to the unwinding of the oil share trade. The last time China was in a dispute with Canada was in 2019, and their trade moved to Ukraine and Australia for sourcing. China also increased its palm oil and other soft oils to compensate for the difference in the import of lost canola.

The Russian Ag ministry indicated that 68 MMTs of wheat were harvested, which is in 68% of the area, with an average yield of 3.4 MT/HA, down 10.5% from the prior year. If this yield trend is carried forward, it will produce a 2024 Russian wheat crop of 83.2 MMTs, but since the spring wheat yield falls below winter, a crop of 81-82.5 MMTs could be a reality. The early Russian corn yield is down 50% from last year at 2.95 MT/HA, which is 47 BPA. Due to the dire Black Sea drought, Russia is expected to be a modest corn exporter in 2024/25. Russian 12.5% wheat bids are rising at $221/MT for October, while Ukraine's 11.5% wheat gained $2/MT, which is presently $211/MT.

This afternoon’s soybean and corn ratings are anticipated to decline another 1-2% from the good/excellent category amid regional dryness. Crop maturity is being pushed and possible corn harvest will now start to reach southern Ohio and southern Illinois due to dryness.

Temperatures will start to cool this week in the Midwest before warming again returns next Monday. Midwest high temperatures are from the 70s to low 80s, which is 2-5° below normal. Low B is in the 40s/50s and lower 60s. There is no evidence of a frost risk for the Central US, with Canada holding in a warm pattern. Near to above-normal temperatures return after September 9.

Live and feeder cattle prices closed higher last week, with August live cattle expiring at $186 versus $180 last year. August feeder cattle went out at $243 versus $249 a year ago. Bullish momentum has obviously slowed. Last week’s negotiated trade developed late in the week, with live sales in Nebraska $1 lower at $184, and the dressed trade was off $2 and $292. Live sales in Iowa were down $1-2 and $185-186. Live trade in Kansas and Texas was steady at $183. The north/south spread has now narrowed to $1, the tightest since March, and $3.50 a year ago.

Cattle slaughtered last week totaled 611,000 head, up 3000 from the previous week and the most since late June. The average carcass weight was 849 pounds, 25 pounds heavier than a year ago. This compares to a 30-38 pound difference in June. The commitment of traders report revealed for August 27, funds sold 3500 contracts against commercials buying 2400. The week-to-week difference price change was a positive $3.80 in October. Seasonally, the cash trends now work lower into October, with support for October cattle being important at $174-175.