Pres. Trump renews strikes against Iranian strategic targets in retaliation for Iran’s missile attacks on civilian ships.
Grain Overview
A nervous grain trade started mixed last night but slowly gained overnight. At around 3:00 a.m. CT, Pres. Trump, who is in Turkey, made statements that the Iranian cease-fire was likely over while the US was conducting extensive strategic attacks, much heavier than those of 10 days ago. This boosted crude oil back into the 74.00 range, lifting grains, with corn challenging its 200-day MA and the 50% retracement just above 465, while November soybeans pushed over 1200.
More rumors are circling that China has been buying US beans, and that is providing underlying support to beans while the threatening Central US weather pattern has index funds buying. Soybean oil led the overnight strength in beans, while soybean meal relaxed after its recent strong recovery from the 300 level. Crush margins remain strong. The rumor is that Chinese buying is for another 5-7 cargoes of new-crop purchases. The buyer has been caught; China’s government division, COFCO, is buying for its soybean reserves. As soon as we hear that China has lowered its 10% import duty, private firms can start buying. It’s anticipated we may see this on Friday, adding to volatility.
After putting in a June 30 low, counter-seasonal activity allows grains to produce a new rally that can carry into the July 17-21 window, which, when overlaid with prior years when such a rise occurred, tends to have a stalling effect after July 21 into the end of the month. Opportunities to finish up old-crop corn sales will be highlighted next week if Friday’s crop report, Chinese tariff announcements, and threatening weather align to provide further bullish price inputs. 470-480 will become a strategic target for December corn, pulling low crop September into the 450-460 range. Soybeans have the ability to target the 1240-1250 range, which was the March congestion highs.
A high-pressure Ridge is expanding into the Midwest on July 19, with limited rainfall for the Great Plains and ESW Midwest. There are differences between the GFS and the Euro (ECMWF) models, which struggle to read the heart of the corn belt during that window. Bottom line: Eastern Belt is fine on both models. The fight is over Iowa and Illinois heading into pollination: GFS says watered; ECMWF says drying. That’s the spread that decides whether corn weather premium builds or bleeds this week. With the Friday, July WASDE report coming up, an end-of-the-week volume volatility flash is building.
Cattle Overview
Yesterday’s cattle trade tested strategic price levels for August live cattle, near trendline support from the March and June lows, and a 78% retracement of the June low. August cattle held this level for the day and recovered moderately into the close. Meanwhile, August feeders maintained support valuation just under 360, while bull spreading also found support, but deflating deferred values again.
The cash feeder index picked up $2.08 and is now at $ 3.73.19. Box beef values remain mixed, with choice slipping $0.71 to $3 85.77, but were near $3 and 65.89, a mere two-cent gain. Cash cattle will be struggling moving forward, slipping in price with box beef valuations now seasonally on the decline after July 4 and the summer doldrums set in the typically lasts until Labor Day, when school lunch program buying returns.
There are now 32 cases of NWS reported in the US: one in New Mexico (a dog) and the other 31 in Texas. They are all contained and have not been making much headline news. Extreme protocols in the US are keeping it contained. Deferred weakness can only be explained by the fact that there must be internal workings within the USDA to ultimately reopen the border to Mexican feeder cattle before Mexico establishes a new industry of feeding cattle in Mexico, buying US and Brazilian corn, and sending boxed beef into the US with unlimited export controls. If the border were open, any individual animal entering the US would be visually screened and deemed safe upon entry. This is only a working theory, but it is the one that makes sense with January feeder cattle trading at a $28 discount to the present cash market.