LEADING OFF: Grain and soybean futures were mostly weaker overnight, with corn and soybeans pulling back slightly after Thursday’s surge and bullish daily reversals. Corn is down 1 to 2 cents, while soybeans are down 6 to 8. Wheat’s rally yesterday was less pronounced, and its pull-back this morning is more pronounced, with futures down 10 to 12 cents. Cotton is down more than 100 points. Traders are starting to lock in on Tuesday’s key USDA grain stocks and acreage reports. Generally favorable Midwest weather may be a negative market factor right now, but bulls at least have a potential story in the high-pressure ridge and heat that will dominate over the next week to 10 days.
Crude oil is down more than $2 and is back where it was trading in early March at the start of the war with Iran. While there have been a few hiccups in re-opening the Strait of Hormuz and in negotiations for a nuclear agreement, there has been no sign that the war could reignite. The dollar index, which surged for several days on rising interest rate hike expectations, is down slightly. Gold is up slightly, and major U.S. equity futures indexes are mixed.
CORN: It’s hard to imagine the market coming under too much pressure today ahead of the weekend, given the forecast calling for intense heat and little rain across much of the Midwest next week and the looming Tuesday USDA acreage and quarterly grain stocks reports. Starting this weekend and through at least next week, temperatures will rise into the 90s in much of the Midwest, and rainfall after this weekend looks to be limited. The west-central and northwest Corn Belt look to be the biggest concern, as much of that region is already too dry. Areas of concern include western Iowa, eastern South Dakota, Nebraska and parts of Minnesota, World Weather Inc. says. Some storms are possible in this region on Saturday, but after that heat and dryness could persist for 10 days.
Elsewhere, the heat could still do more good than harm given the generally favorable soil moisture situation in place and the need for more growing degree days. As of Tuesday most of the Midwest region was drought-free in the weekly Drought Monitor. It showed 35.6% of the region as abnormally dry and 13.3% in moderate drought, with much of that area is Kentucky and far southern Illinois.
Corn conditions in France are deteriorating amid a historic heatwave. The crop was 76% good/excellent as of Sunday, down eight points from the prior week. And further declines are likely with France this week reporting all-time high temperatures.
SOYBEANS: Once again there are no flash soybean export sales this morning, to China, “unknown” or any other country. That is a disappointment given the continued chatter that China was in the market to buy more U.S. beans. There were strong weekly sales totals yesterday for the week ended Friday reported to “unknown” and China. Export sales for the marketing year to date totaled 1.508 billion bushels, down 16.9% from a year earlier. Weekly soybean export shipments were a marketing year low of 8.0 million bushels, down from the previous week’s 20.3 million. While the trade will continue to watch for news of fresh Chinese demand, over the next couple of trading days the focus will be on Tuesday’s USDA report, and the potential for an increase in soybean acres from March intentions.
WHEAT: There are few significant crop threats at the moment, with the poor state of the U.S. hard red winter crop factored in, generally favorable spring wheat conditions in North America, and good conditions in eastern Europe and Russia. The heat wave in western Europe is of limited significance for winter wheat. Australia conditions are mostly favorable, although there are concerns about El Nino’s impact later in the year.
The record-breaking heat wave in France should have a limited impact on the country’s winter wheat crop. Today France AgriMer reported the crop at 74% good/excellent, down two points from the prior week, while the crop is 7% harvested. The heat wave is going to migrate to the east in the coming days, and little rain is expected over the next 10 days.
LIVESTOCK: Thursday afternoon’s USDA quarterly Hogs and Pigs report contained no significant surprises, but does look mildly supportive for prices as it pegged the total June 1 hog herd at 100% of a year earlier, below trade expectations that averaged 101.0% in a range from 100.6%-101.6%. The market hog inventory also came in at 100%, while the breeding herd came in at 98.8% of a year earlier, near the low end of trade expectations and confirming continued sow herd liquidation. The March-May pig crop at 100% of a year earlier was slightly smaller than expected and pigs per litter was at the low end of expectations. We would not expect a major reaction to this report on Friday, but it may be enough to put a bottom in an oversold back-end futures. July and August futures will continue to follow the cash market closely.
Live cattle futures were mixed in very choppy trade Thursday, as Plains direct cash cattle markets stayed very quiet again. The only packer bids reported were at $255 on a live basis in Nebraska, which were down from bids of $260 reported on Wednesday. Needless to say, feedlots passed on those bids. The only negotiated cash trade reported by USDA was in Iowa/Minnesota where just 40 head moved at $408 on a dressed carcass basis. The afternoon Boxed Beef report showed Choice down $2.62 and Select down $3.40.
Feeder cattle futures were up modestly Thursday with gains limited by the surge in corn. But the CME cash feeder cattle index rose another $6.03 this afternoon to a new all-time high of $381.86, which may put another charge in the futures market Friday morning.
