Ahead of the Open | February 14, 2022

GRAIN CALLS

Corn: 3 to 6 cents lower.

Soybeans: 12 to 16 cents lower.

Wheat: HRW and SRW 7 to 11 cents lower, spring wheat 1 to 4 cents lower.

GENERAL COMMENTS: Soybean futures opened overnight trading higher and near nine-month highs before turning lower. Corn and winter wheat futures also traded lower overnight. Malaysian palm oil futures closed at a record high on expectations for greater demand from India. Nymex crude oil is slightly lower after rising earlier to a seven-year high near $95. U.S. stock index futures are slightly firmer, while the U.S. dollar index is nearly 200 points higher and near a two-week high.

Dry weather will raise crop moisture stress for the drier areas in central and northern Argentina as well as in far southern Paraguay and western most Rio Grande do Sul, Brazil, according to World Weather Inc. The weather forecaster says the remainder of Brazil will experience showers and thunderstorms periodically with the interior south getting just enough to support crops. Northern Brazil, especially from Minas Gerais to Mato Grosso will continue to be wet this week but will start to dry down a little next week as a high-pressure system settles into the region.

India cut its tax on crude palm oil (CPO) imports to 5% from 7.5% as the world's biggest edible oil importer tries to rein in local prices of the commodity and help domestic refiners and consumers. The reduction in the tax will widen the gap between the CPO and refined palm oil import duties, effectively making it cheaper for Indian refiners to import CPO, industry officials told Reuters. Reports of the tax cut sent Malaysian palm oil to a record high.

U.S. National Security Advisor Jake Sullivan told CNN on Sunday there’s “a distinct possibility that there will be major military action very soon.” A weekend call between the Russian and U.S. presidents proved inconclusive. But for weeks, various Biden administration officials have said a Russian invasion of Ukraine is “imminent.” Russian officials have said they do not intend to invade Ukraine. Russian President Vladimir Putin this morning indicated he is open to more conversations for a potential peaceful resolution.

The National Cotton Council (NCC) projected U.S. cotton acreage will rise 7.3% this year to 12.0 million acres, based on its annual producer survey. Assuming the state-level 10-year average abandonment rates and five-year average yields, NCC estimated 2022 harvested area at 9.8 million acres with an overall abandonment rate of 18.9%. U.S. production is estimated to be 17.3 million bales with an average yield of 850 pounds per acre.

China sold 520,183 MT of state-owned wheat reserves at last week’s auction, 99.3% of the volume put up for sale, at an average sales price of 2,590 yuan ($407) per metric ton. China continues to sell nearly all of the state-owned wheat put up for sale, though prices are down from recent weeks.

Taiwan tendered to buy 54,920 MT of U.S. milling wheat.

CORN: March corn futures fell as low as $6.44 1/4 overnight after surging 30 cents last week to $6.51, the highest settlement for a nearby contract since mid-July. Soybean futures and speculative money flow will be critical to corn market direction this week. Large speculators hold a sizable net long position in corn, which may make the market vulnerable to a fund-driven selling if upside momentum falters.

SOYBEANS: March soybean futures fell as low as $15.51 1/2 overnight after gaining 29 1/2 cents last week to $15.83. Price action this week will be key in determining whether the market established a near-term top at the contract high of $16.33 posted Feb. 10. Speculative funds hold a large net long position, which may make the market vulnerable to long liquidation.

Large speculators increased their bullish bets in the soybean market in early February to the highest level since May, according to the Commodity Futures Trading Commission’s Commitments of Traders report. The managed money net long in soybean futures and options increased 11,827 contracts to 166,315 contracts for the week ended Feb. 8, the highest since the week ended May 11.

WHEAT: March SRW wheat overnight fell as low as $7.83 3/4 after gaining 34 1/2 cents last week to $7.97 3/4, the highest closing price since Jan. 25. Corn and soybean markets will be key to price direction in wheat as traders monitor Russia/Ukraine tensions. Managed money’s net short in SRW wheat increased 3,100 contracts during the week ended Feb. 8 to 29,552 futures and options contracts, the largest since July 2020, according to CFTC data.

LIVESTOCK CALLS

CATTLE: Steady-weaker

HOGS: Steady-weaker

CATTLE: Live cattle may face followthrough pressure from a weak close Friday as funds liquidated long positions. The late-week slump, despite firmer cash prices, suggested a two-week rally may be topping out. With cash trade unlikely to establish until midweek, money flow will be key to futures price direction early this week. Live steers averaged $140.35 last week through Friday morning, up from the previous week’s average of $139.76. Choice cutout values fell 30 cents Friday to $274.52, a five-week low. With packers boosting slaughter in recent weeks and fed cattle supplies near seasonal lows, cash prices may retain support over the short term.

April live cattle futures fell 70 cents to $146.175, down 70 cents for the week. March feeder cattle fell 50 cents on Friday to $166.225, up 12.5 cents for the week.

HOGS: Lean hog futures may see followthrough pressure from weakness late last week, which indicates the market may have put in a near-term peak. Early week price action will be telling, with continued pressure signaling a deeper corrective pullback is underway. A strong price rebound would signal the downturn was just a correction in a bull market. Cash market fundamentals remain supportive. Pork cutout values soared $8.48 Friday to a four-month high at $109.96, led by a gain of over $22 in hams. Movement totaled about 282 loads. The CME lean hog index is up $1.18 to $88.92, the highest since Oct. 12.

April lean hog futures fell $1.20 Friday to $102.225 but gained $2.30 for the week, the market’s sixth weekly gain in the past seven.