Happy Mother’s Day weekend market watchers!  

We honor and thank all the mothers out there for raising us right and putting up with us through the years.  We are truly grateful for your love, kindness and patience.  

Speaking of the need for patience, it has been difficult to be so with continued short covering in the grain markets from volatile weather patterns that seem to be gaining more attention from the markets.  Freeze concerns for winter wheat in Russia have brought fresh bullish news back to the wheat complex.  

USDA’s monthly WASDE and Crop Production reports released Friday also added supportive news for the wheat markets.  US wheat ending stocks for 2023/24 came in at 688 million bushels, lower than previous and lower than average trade expectations of 695 million bushels.  Wheat ending stocks for the coming marketing year also came in slightly below previous estimates (766 vs. 769 million bushels), but well below average trade guesses that were actually expecting an increase to 777 million bushels.  US wheat production for this year was pegged at 1.858 billion bushels, down 30 million bushels from average trade guesses, but still 46 million bushels above last year.  

Hard red winter wheat production (traded as the KC wheat futures), which represents over 55 percent of all winter wheat output, was increased 10 million bushels to 705 million bushels while soft red winter (traded as the Chicago wheat futures) production declined to 344 million bushels from last year’s 449 million bushels and average trade guesses of 404 million bushels. Some felt these expectations were quite high to begin with as a 60 million bushel decline between USDA and average trade guesses is quite a swing.  

July Chicago wheat futures, now the front-month, made new daily highs on Friday at $6.65 ¼, after an inside day on Thursday, which suggests more upside follow-through on Monday.  The KC wheat contract traded to a high of $6.76 ¼ on Friday, putting in a fresh session high right near the close before closing 3-cents off these highs at $6.73 ¼. While this was up solidly on the day, it failed to make a high above the May 6th high at $6.79.  Short covering continues by managed money, but I’m getting concerned that the wheat market could be getting ahead of itself, especially the KC contract.  

Rains are forecast over the weekend into next week in Kansas and Oklahoma.  Recent cooler and wetter weather conditions have been excellent for filling of wheat kernels, but will do little to increase bushels other than through test weight.  If conditions can remain on the wetter and cooler side for a couple more weeks, we could see a better-than-expected finish to this year’s crop in areas.  

However, there remain large areas where it is too little, too late with rainfall spotty and wheat conditions poor from heat and drought especially given crop maturity is well ahead of average.  Last Monday’s winter wheat conditions update saw a slight, one percent improvement in Good-to-Excellent ratings at 50 percent versus 49 percent last week and expected by traders.  Oklahoma saw a 6 percent jump in G/E ratings to 52 percent while Kansas increased only one percent G/E, Nebraska up 4 percent while Colorado was down one percent from the week prior.  

Alternatively, soft red winter wheat areas saw declines in weekly condition ratings.  Spring wheat planting is nearly half complete and remains well ahead of schedule. 

Globally, wheat ending stocks were lowered slightly for this past year with 2024/25 wheat ending stocks coming in 2.8 million metric tons below trade expectations and 4.2 million metric tons below last year.  That is a decent adjustment for global stock levels although wheat export availability was only reduced by 1.0 million metric tons from last year.  

Russian wheat crop estimates have been reduced to 88.0 million metric tons from last year’s 91.5 million metric tons as has confidence in export pace due to disruptions in grain export companies, but only 1.5 million metric tons lower.  Stats Can released quarterly grain stocks for Canada on Tuesday trimming wheat stocks to 11.756 million metric tons from trade estimates at 12.2 million metric tons and last year’s 13.901 million metric tons.  Other grain stocks also came in lower than expected.  

Shifting to row crops, the bulls favored corn while the bears positioned for soybeans.  US corn ending stocks for this past year and the coming year both came in 100 million bushels below previous USDA estimates as well as 68 million bushels below trade guesses.  New crop was a whopping 430 million bushels below USDA’s February Outlook Forum estimates and 185 million bushels short of average trade guesses.  This was driven partly by a reduction in production as well as increase in last year’s demand and we’re expecting more upward revisions of demand in the new crop numbers from where they now stand.  

The USDA now sees US corn crop production at 14.860 billion bushels, slightly lower than the average trade guesses of 14.867 billion bushels, but well below the February Outlook Forum forecasts above 15 billion bushels. Average yield is seen at 181.0 bushels per acre.  Global corn ending stocks were also trimmed 5.0 million metric tons while new crop came in 5.1 million metric tons below trade guesses.  Despite announcements out of China for larger corn production and expectations of lower imports, the USDA holds PRC corn imports at 23.0 million metric tons.  

Brazil corn production was revised lower by only 200,000 metric tons while Argentine production was increased by 1.0 million metric tons, which was a surprise given leaf hopper issues there.  Soybeans ending stocks in the US were higher for both old and new crop.  While US soybean yield was increased just slightly to 52.0 bpa, total production was revised just 3.0 million bushels versus trade guesses and 55.0 million bushels below the Outlook Forum.  

Brazil soybean production was reduced 1.0 million metric tons from last month, but came in 1.8 million metric tons higher than average trade guesses.  Argentine soybean production was unchanged from last month.  China imports were also unchanged at 105.0 million metric tons. US corn and soybean planting continues progressing, but at a slower pace due to rain delays.  

Both US corn and soybean plantings came in 3 percent behind expectations this past week.  There are scattered showers over the weekend, but I would expect progress to catch up quickly.  However, this also supported these markets, especially corn, in the past week.  

Higher priced corn markets creates headwinds for the cattle complex.  We saw that this week with damage done on feeder and fed cattle charts.  Feeder cattle dropped to the lowest level since mid-April while fed cattle contracts traded down to the 20-day moving average, but managed to hold around that level as cash trade developed towards the end of the week.  

The highest cash trades of the week traded $187 in Nebraska while Kansas topped out at $185.  These are decent levels and trading well above the futures.  

Demand this time of year usually peaks around Memorial Day and we’re expecting that timeframe to be reached soon.  With rising debt levels and interest rates, consumer confidence fell in April dropped to the lowest level in nearly two years.  Next week’s inflation reports will be critical in painting the picture of the Fed’s next move, which is far from certain.  

The equity market however has continued to shake off any major concern of a slowing economy with the Dow Jones extending an 8-day winning streak after the recent selloff.  We’re now back to early April levels and look to be heading higher. This could help support the cattle complex heading into the summer grilling season and I believe we will see some recovery in cattle in the week ahead.  Despite further weakness in Friday’s trading, the feeder and fed cattle futures contracts managed a strong recovery off those lows leading into the close. 

If you’ve sold physical cattle here and/or have an LRP soon to expire, I think this is an area to reown a long position in the market to protect that upside gap.  

Sidwell Strategies is the one-stop shop to protect cattle with futures, puts, LRP or a combination of all, which is probably the best strategy overall. If you’re ready to trade commodity markets, give me a call at (580) 232-2272 or stop by my office to get your account set up and discuss risk management and marketing solutions to pursue your objectives.  Self-trading accounts are also available.  It is never too late to start and there is no operation too small to get a risk management and marketing plan in place.  

Wishing everyone a successful trading week!  Let us know if you'd like to join our daily market price and commentary text messages to stay informed!

Brady Sidwell is a Series 3 Licensed Commodity Futures Broker and Principal of Sidwell Strategies.  He can be reached at (580) 232-2272 or at brady@sidwellstrategies.com.  Futures and Options trading involves the risk of loss and may not be suitable for all investors. Review full disclaimer at http://www.sidwellstrategies.com/disclaimer.