Grains get support overnight on several fronts.
Grain Overview
Grain futures opened higher last night, with wheat and corn prices seeing their opening strength extend on several fronts. Sec. of the Treasury Bessent acknowledged positive outcomes with his Chinese counterparts as the trade deal is coming together. This likely means a soon-to-be-announced reduction in the 10% tariffs on US Ag goods to China. Meanwhile, crude oil prices collapsed, dragging soybean oil and some of the air out of soybeans in the night session.
Crude oil was hit hard overnight as traders pulled some of the Middle East war premium back out of the market. The biggest reason is simply that more oil is getting out than many expected. Saudi exports are recovering, and tankers continue to make their way through the Strait of Hormuz, with some reportedly traveling with their tracking systems turned off. There is also some hope that this week’s UN meetings could open the door to renewed talks between the US and Iran. Nothing has really been solved in the Middle East, but for now the market is seeing enough oil getting through to take some of that fear premium out of prices.
The Ukraine/Russian war continues to escalate again, with Ukraine attacking a major refinery facility near Moscow, while Russia hits heavily into Ukraine’s exporting business. Damaged rail bridges near the Danube River keep grain movement slow. Exports out of the Black Sea from both Ukraine and Russia were down by half compared to last year, and September looks to be even worse. Wheat importers are seeking other sources and finding their tender prices elevated.
The next USDA reports come Wednesday, September 30, at 11:00 a.m. Central. The Quarterly Grain Stocks report will give us September 1 corn, soybean and wheat stocks, with corn and soybean numbers essentially establishing old-crop ending stocks. USDA will also release its Small Grains Summary at the same time, which includes updated wheat production estimates. This can be a market-moving report, especially if USDA finds a surprise in old-crop corn or soybean supplies.
Strength in the corn market overnight solidifies the support on the charts that has developed since the WASDE data was released, with 523-526 becoming major support and a problem for the bears. The cry to get the gap plugged at 509 is keeping many short option sellers nervous. Chicago wheat continues to hold the 710-720 range, with a strong upside price seasonal in play after this week. Soybeans are the weaker link but held 1300 last Friday, and this morning are performing well considering the price drop in crude oil.
Price breaks are being accumulated by end users. Upward trends in grains are hampered presently by harvest pressure, while high-level accumulation continues. The next phase in the grain trade will be led by the cash market, as grain importers deal with tighter corn supplies and a wheat market with difficult logistics, as cheap grain in the Black Sea is not readily available.
Cattle Overview
Cattle futures look to have a positive opening this morning, as not only was this COF report considered friendly on the placement numbers at 91% of a year ago, but the cash trade in the South ended last week at 225-226, almost steady with the prior week, while the dressed trade was at 350.
The On Feed number was just under average guesses at 101%, with the noted heavy cattle over last year the current norm. Marketings were at 97%, putting a little better spin on that category as well.
September feeder cattle went out Friday at 333.55, with the cash index as of Friday’s data at 342.50. That $9.00 discount was a complete flip from last week’s early start that carried a premium. The next 10 days will be a tug-of-war over how the cash trade comes together to settle out the index.
December live cattle held 215 last week and could be set for a recovery back toward 220-221. Meanwhile, November feeder cattle found legs at 316, which was just above the 62% retracement of 315. That level should offer a recovery bounce as well. Last week’s high just above 333 will produce a retracement barrier in the 326-329 level.