Trade consolidates ahead of a three-day weekend.
Grain Overview
Overnight grain trade has been mixed, with corn, soybeans and wheat spending time on both sides of unchanged. A lot of what we are seeing this morning looks like consolidation ahead of the long Labor Day weekend, with markets closed Monday. That should encourage more position squaring than usual as traders head into the 3-day break.
Yesterday’s dominant story from Putin’s comments about a peace deal is still on the back of traders’ minds, but they realize it’s talk for Putin to develop support for his agenda and party members in the upcoming elections. After his comments yesterday morning, Russia struck several freighters in the Black Sea, and now we have overnight reports indicating Russia struck another vessel in Ukraine’s Chornomorsk port. It’s like the old saying goes, “things have to get worse before they get better”.
Weather is becoming less of a driving force as the U.S. crop moves toward maturity, shifting more attention toward demand and expectations for the September 11 WASDE. Demand remains one of the stronger pieces of the market, particularly for corn and soybeans, while China has continued to show up for new crop U.S. beans. Private crop estimates are also beginning to roll in, with several analysts moving corn yields below USDA’s August estimate.
It’ll be interesting to see what StoneX produces from their desktop again for yield. Just lowering their yield to below trend line is a friendly feature, as they always hold the mantle for the high watermark yield guess. If lower production ideas continue to gain traction while demand remains strong, the balance sheets tighten quickly. That combination should continue to provide underlying support on breaks rather than giving the bears a lot of room to work with.
After next Friday’s WASDE/Crop Production report, the following week will find laborious trading, as gains that may be attached to China’s summit with the US on September 24 will come with anticipation that they may purchase corn or wheat. As the market tries to produce further gains, it will be hampered as harvest is underway in the South, with areas farther north also pushing maturity due to the heat. Of note, in China farmers are not selling as they have concerns about disappointing yields in some areas and are holding out for better values.
We will start watching our big production friends in South America as they get underway with this year’s planting of their soybean crop. They are starting to see rains on the dry soils that are seasonal as they come out of the typical dry July/August period. Planting gets underway in the north, where Mato Grosso is the biggest producer of beans. Of note on soybeans is that we have seen 3 consecutive daily soybean sales to China this week totaling 530,000 MTs for new crop. We will likely see another new crop sale again this morning to China or an unknown on soybeans.
The numbers to watch today is if December corn attempt to press early week highs at 548-549.6. Rallies will not likely exceed and/or close above that and will wait for the three-day weekend to pass. But for corn today to likely struggle in the 544-547 range. November beans are showing a gain of $0.27 on the week and are parked a dime under their high. 1320-1324 looks like the high watermark good resistance that might hold until Monday night.
The monster Chicago wheat is off $0.30 from last Friday’s close creates lots of room to dillydally today and try to rally as peace talks are proving to be cheap headlines, with the cheap prices that were quickly offer up yesterday have found solid support on the fire sale. Price trends all remain optimistic with row crops remaining the more dominant climbing commodities.
Cattle Overview
Yesterday’s cattle trade sent a shot over the bow of the bear trade that has become excessively one-sided. After weekly Black Swan season openers, the dramatic bearish headlines have started to disappear. With a three-day weekend ahead of the trade and volume lighter on Fridays, buying back short contracts found unwilling participants to offer them a way out, as a double bottom arrived on the cattle charts with the lack of new overwhelming bearish news. This sets the stage for a basing effect on the December and February live cattle contracts as we move forward, while the cattle trade tries to keep the October contract in play for a 210 cash market.
The December and February cattle do not have the 300,000 MTs of beef hanging over them, as that business is done by November 30. Also, there is difficulty getting Mexican feeder cattle into the US, as the Douglas, Arizona port has been closed since Monday and is not scheduled to reopen until Tuesday. This is questioning the ability of Santa Teresa, New Mexico to open until October 1. It was a given that they wanted 30 calendar days of activity to judge and announce the next opening. 30 days, subtract seven days of no activity, is not a true measure of the proficiency of satisfying a zero-tolerance to NWS importation. That story has yet to develop and could create a friendly spin to current market activity.
Yesterday’s boxed beef activity in the afternoon had Choice off $1.88, with Select lower by $2.86, yet movement improved to 117 loads. 87 were Choice, no trim, and 16 loads were ground beef. There were prices being paid yesterday at 219 in the South, and dressed trade in the North came in at 344-345. The dressed trade was just $1 lower than last week’s weighted average. Thursday slaughter was put at 105,000 head, which was steady with a week ago but 16,000 head under last year.
Yesterday’s rally poked the bears, as December live cattle proved solid support in the 211-212 range as building blocks for consolidation of trade, which has to occur first to end the downtrend. Price advances will initially struggle to get through 218-220. October feeder cattle have also proved difficult to keep closes below 315, with support prevalent on attempts to push below 313. Upside resistance will have this market stalled at 325-326, with major resistance at 329-330 until any news develops that further ports of entry for Mexican feeder cattle are delayed.