Grains rally overnight ahead of today’s September 1 stocks and Small Grains report out at 11:00 a.m.
Grain Overview
A firm rally overnight in the grain trade as it continues recovery from Monday’s large losses. This is in reverse of last week, when grains had a sharp rally on Monday and then declined the rest of the week. This week, we had sharp losses on Monday, and now it’s been nothing but recovery. As the trade out there will say, position squaring ahead of today’s NASS September 1 stocks data and Small Grains Report.
What’s interesting in the overnight is the selling vigilantes could not stop the rally at the normal 4:00 a.m. rendezvous. So up next is the 8:30 a.m. wrecking crew using the harvest pressure war cry and the “not enough demand to justify the rally” words.
More problems for Black Sea wheat movement. Ukraine Railways has imposed an indefinite restriction on grain shipments to the Danube ports via Moldova, effective Sept. 27. The affected crossing, due to Russian bombing, is one of only two rail routes used to move grain through Moldova toward Reni, Izmail and Galați. Its maximum capacity was around 116 wagons/day (~8K MT). Not great timing with Black Sea logistics already under pressure.
The Crop Report out at 11:00 a.m. is the Sept. 1 Stocks in the 3 primary grains. The corn estimate is 1.911 Bil Bu, with anything under 1.890 considered friendly. The bean estimate is 321 Mil Bu, with anything under 300 also inciting a friendly response. Wheat is at 1.857 Bil Bu. All Wheat production is just down 4 Mil Bu.
The weather across the Western Midwest has certainly made harvesting difficult, almost nonexistent in some places, with rain and mud continuing through the weekend. Weather forecasts look to open up next week with some sunshine, so the real hedge pressure selling is yet to be felt. This Friday will see some standard selling, but next Friday will be the real weekend harvest pressure.
It’s the last trading day of the month. Wheat peaked on the first day of September, corn the 2nd day of September, while soybeans put their high in on September 11. And now a culmination of bearish events likely punched in the low for the month this past Monday. The events of today’s stocks data, if it does reflect last year’s crop being reduced, will have a very friendly effect as we head into October. If the USDA lowers last year’s crop yields on corn or beans in today’s stocks data, it by default makes this year’s crop already lower going into October 9.
Corn is substantially higher on the month, while soybeans only need to close above 1288 to put in a higher monthly print. The reverse is there for wheat, with substantial losses seen since September 1. Corn, despite weeks of consolidation, is the undisputed leader of the 3rd-quarter grain advance that ends today. The race higher restarts tomorrow as the stocks data will be in a clean rearview mirror.
Cattle Overview
Yesterday was a volatile trading session, but it was boxed inside well-defined chart points. December cattle still maintain resistance at 223, with November feeder cattle bumping into resistance every time they try to climb to or above 333. In yesterdays downside probing, December cattle challenged last Monday’s gap at 218.75 and held by a dime before another sharp rebound. Feeders found legs at our prescribed support in the 326-327 range before they likewise rallied. With light trading volume and minimal news developing, it seemed like with nothing better to do in the cattle futures yesterday, it was like unloading a bunch of open heifers into a pasture when they immediately head to check out the fence on both sides of the pasture.
We have improving boxed beef prices continuing to start the week, with Choice picking up $2.18 yesterday at $382.66 and Select jumping a whopping $6.25 to $364.48. This was on a strong movement of 112 loads, 71 Choice, 8 Select, 12 trim and the balance ground beef. With dressed bids remaining at $350 already being offered in Nebraska, there is a feel out there that the cash trade will be at least steady this week as packers start to reach a bit for cattle after last week’s shortfall in Kansas.
Yesterday’s feeder index slipped just $0.02 to $337.77 as the descent in price has slowed down. Feeder steer demand is said to be robust again at the sale barns. No hiccups have been noted yet at Santa Teresa, New Mexico, and they will likely process an average of 1,000 head/day this week. The October feeder contract discount right now is just at $4.00, and we’ve seen how easily that can quickly flip.
We had an early seasonal low for the fall cattle move, with August 26 remaining a very glaring bottom to measure from. Setbacks of recent strength cannot be overlooked, but October live cattle look ridiculously undervalued compared with what the cash market is looking like heading into October. Despite the tariff-free holiday on beef trimmings, an upward-trend bias should soon get December cattle through 223 and onto the next level of resistance parked at 225. Lower lows and higher highs look to be in play over the next few weeks.
November feeder cattle performed well yesterday, and once 333 is breached on a closing basis, the next major objective will be 338-343. That seems like a big range to have in a forecast, but we have big daily volatility that needs to be lassoed in these market moves. If we can get that kind of recovery rally to stay in play, March feeders have a shot at 328-332, where LRPs or option strategies can be applied.