Wheat futures take the limelight, helping the grain trade recover from overnight weather-driven losses.
Grain Overview
Overnight grain trade featured selling, especially during the early morning hours after 1:00 a.m., as pressure reasserted itself following GFS and European weather model updates that trimmed Central Plains temperatures from around 100 degrees into the upper 90s. South Dakota and North Dakota, however, continue to bear the brunt of the heat for several more days.
Early this morning, around 6:00 a.m., wheat futures found renewed buying interest and pushed above both their June and July highs following news that Russia is instituting an export tax on wheat. Under these conditions, any restriction on exports from a major supplier could add further upward pressure to international wheat prices. With Russia forecast to export 47 MMTs of wheat during the 2026-27 marketing year, it is expected to remain the world’s largest wheat exporter, making any changes to its export policy closely watched by importing countries.
At 11:00 a.m. today, USDA will release the July WASDE Crop Production and Supply and Demand reports. Demand will be adjusted to reflect the June Stocks report, which should tighten old-crop corn supplies. Corn demand is already projected to exceed production this marketing year, reducing ending stocks to levels that require continued rationing. A similar situation is beginning to develop in soybeans, where the stocks-to-use ratio is already historically tight. Bottom line, the United States cannot afford to lose much production this year.
Current forecasts continue to advertise a heat dome developing over the western Corn Belt, much of the trade still views the combination of heat and scattered rainfall as generally favorable for crop development. That may be true in areas that have received timely moisture, but crop stress is becoming increasingly evident where rainfall has been lacking.
Keep in mind that the developing El Niño is currently projected to have a 97% probability of persisting into 2027, with an 81% probability of remaining in the strong category through October and November. That would have important implications for South American crop production, particularly in Brazil.
Aside from today’s USDA data, the trade will also be closely monitoring weekend weather forecasts and geopolitical developments for additional price direction. Any signs of increased Chinese demand for US grain will also remain an important market driver. Crude oil is heading into the weekend with the United States actively conducting military strikes against strategic Iranian targets. That always raises the possibility that something could escalate over the weekend, potentially pushing crude oil back toward the $76.00 level seen earlier this week, or even higher.
Cattle Overview
Live and feeder cattle futures tumbled yesterday as word spread that boxed beef prices were weakening and the cash market finally gave way. Selling began in Kansas and Oklahoma, where cattle traded at $248 while other regions initially held out. As the session progressed, however, it became apparent that the Southern trade was also occurring at $248. That is down $7 to $8 from the previous week, depending on the region. Choice boxed beef declined another $1.38 to $339.82, while Select gained $1.10 to $364.10 on just 31 loads. Choice has fallen sharply from the $400 level reached early last week, and the cash market appears to be entering its normal seasonal decline.
The cash feeder index rose $3.70 yesterday to $374.45, but feeder cattle futures continued to crumble despite Wednesday’s strong recovery. Yesterday’s close across all feeder cattle contracts marked new lows for the month of July and extended the decline that has been underway since the June 25 recovery failed to produce new contract highs. The deck is clearly being reshuffled as index funds continue to exit the cattle market, seemingly regardless of what the cash feeder trade is reflecting.
With January feeder cattle trading at roughly a $34 discount to the cash feeder index, it almost feels as though the market is quietly anticipating a gradual reopening of the Mexican border under strict inspection protocols designed to prevent any spread of New World screwworm into the southern United States. That is only speculation, but it is difficult to find another explanation for discounts of this magnitude and the aggressive liquidation taking place.
Yesterday, August live cattle closed lower for the ninth consecutive trading session, something that has not occurred in well over a year. In fact, you have to go back to previous bear markets to find this type of aggressive liquidation. Looking at the August live cattle chart, the June low, which the market is rapidly approaching, aligns closely with the congestion highs from February. A Friday close below 233.97 would add to the already heavy liquidation tone weighing on the market.
August feeder cattle continue to trade below the 20 day moving average on the continuation chart, reinforcing the negative trend. Major support now lies in the 344 to 349 area. That level needs to hold if the current selloff is going to stabilize.