The first week of May started off as a continuation of April with heavy selling pressure and a dismal outlook for grain prices. But by midweek, and after trading to two-year lows in wheat and one-year lows in corn, the grains seemed to find a bottom, at least for now.
The grains started the first week of May on the defense with early selling tied to South America. Brazil’s record soybean production is causing a bit more of an issue than expected. The large increase in soybean supplies has flooded the ports and is starting to cause a bit of a logistic nightmare. This has resulted in Brazil’s cash bids for both corn and soybeans to crash, making them a lot more attractive in the export market.
Brazil’s crop progress as of April 28 had soybean harvest at 95% complete versus 95% average. First corn crop harvest was estimated at 80% complete versus 83% average. Cattle needs some correction The first week of May had the cattle market on the defense. After seeing the market being supported by a sharply higher cash trade, cattle are seeing cash bids fade back lower as packers become a little more reluctant to buy. This in turn is pulling premium out of the futures market.
Cattle were overbought and in need of a correction, so maybe it would be good to see a $5 to $7 cut before pushing back higher. That would be healthy for the market as it would clean up the weak longs and give new traders an opportunity to enter.
The Federal Reserve interest hike of 0.25% was worked into the marketplace and with the comments that followed the rate announcement it’s sounding like the Federal Reserve will take a wait and see stance on any more increases.
The biggest concern for beef will be domestic demand once the BBQ season starts at the end of May. Will the average consumer pick the higher price beef or will they take the cheaper pork or poultry? Wheat took the biggest hit early in the week with selling tied to Stats Canada’s negative acreage estimate as well as from the lack of demand for U.S. wheat. Rain in the southern Plains also added pressure, but it is questionable if it will be of any benefit to the winter wheat crop. Technically wheat broke through support and is vulnerable to see another leg lower. That also means that wheat has no weather premium or war premium, as most contracts are sitting at or near 2-year lows.
Source:agweek.com
Photo Credit: GettyImages-wwing
Categories: North Dakota, Crops