Ahead of the Open | May 4, 2022
GRAIN CALLS
Corn: 5 to 8 cents higher.
Soybeans: 7 to 10 cents higher.
Wheat: 20 to 30 cents higher.
GENERAL COMMENTS: Winter wheat futures surged overnight after India cut its wheat crop forecast and amid reports it is mulling export restrictions, while corn and soybeans also rose as traders watched weather in the U.S. Midwest and Plains. Nearby U.S. crude oil rallied more than $4. U.S. stock index futures signal a firmer open, while the U.S. dollar index is down around 250 points.
India’s government slashed its estimate for the country’s 2021-22 wheat production by 5.7% to 105 MMT, citing the early onset of summer. The country is considering restricting wheat exports, Bloomberg reported.
India will allocate more rice instead of wheat for a food welfare program that entitles millions of poor citizens to 5 kilograms of free grain per month, according to a federal government order. The allocation of wheat for the Prime Minister’s Poor Welfare Grain Program has been cut to 7.1 MMT from 18.2 MMT. The allocation of rice has been raised to 32.7 MMT from 21.6 MMT previously.
The Federal Reserve is widely expected to raise its benchmark funds rate by 50 basis points at the conclusion of the two-day Federal Open Market Committee meeting this afternoon. Fed Chairman Jerome Powell’s post-meeting press conference will be closely scrutinized for potential signals on how high officials think interest rates may rise and plans to shrink the central bank’s $9 trillion balance sheet.
La Niña could exacerbate dryness in the U.S. West. “The dice are loaded for a lot of big fires across the West,” said Park Williams, a climate scientist at UCLA. “And the reason for that is simple: The vast majority of the western U.S. is in pretty serious drought.” High temperatures and a lingering La Niña will have major impacts on urban and agricultural water use across the American West, including California’s increasingly extreme fire season, based on a NOAA forecast. La Niña typically brings dry winters to Southern California and the Southwest.
The market for sunflower oil has improved in the European Union as producers have adapted to the shortfall in Ukrainian shipments and some supplies have arrived by rail and truck, EU vegetable oil group FEDIOL said. The war in Ukraine, the world’s largest supplier of sunflower oil, triggered panic buying, leading to shortfalls across the supply chain.
Ukraine exported 923,000 MT of grain in April, according to APK-Inform. That was down from 2.8 MMT for the month last year. The total included 768,486 MT of corn and 127,130 MT of wheat. Ukraine also exported 151,529 MT of sunflower oil and 169,681 MT of oilseeds, mostly sunseeds.
South Korea purchased 50,000 MT of U.S. milling wheat. Taiwan purchased 55,000 MT of corn – expected to be sourced from South Africa. Tunisia tendered to buy 100,000 MT of soft wheat and 75,000 MT of feed barley – both optional origin.
CORN: July corn futures traded within Tuesday’s range overnight and are hovering around the 10-day moving average at $8.02. Funds were heavy sellers the previous two sessions, unloading nearly 30,000 futures contracts, according to Reuters, though strength in wheat and crude oil and concerns over planting delays could stem further liquidation pressure.
SOYBEANS: July soybeans overnight fell as low as $16.23 1/4 to near a four-week low before rebounding with support from strength in crude oil and palm oil. Funds sold an estimated 28,500 futures contracts in soybeans the past two sessions.
WHEAT: July SRW wheat rose as high as $10.89 overnight after dropping 10 cents Tuesday to $10.45 1/2, the fifth consecutive lower settlement and the contract’s lowest closing price since April 7. News out of Indian and ongoing concerns over supply disruptions from the Russia/Ukraine war are supportive for prices.
LIVESTOCK CALLS
CATTLE: Steady-mixed
HOGS: Steady-weaker
CATTLE: Live cattle may see pressure from weakness in wholesale beef prices, though signs of a bottom in futures could limit declines. Choice cutout values fell $3.00 Tuesday to $259.55, a six-week low, but movement was strong at 176 loads, indicating retailers are being selective buyers. The next two weeks are typically marked by strong demand as retailers stock up on beef for early summer features. June live cattle rose 12.5 cents Tuesday to $135.325 and May feeder futures rose 97.5 cents to $162.40.
HOGS: Lean hog futures may extend this week’s drop to 3 1/2-month lows on further chart-driven fund liquidation. Fund selling has narrowed the discounts summer-month futures contracts hold to the cash index. While futures appear oversold, more near-term price pressure is possible and a market bottom is unlikely until money flow shifts. Cash fundamentals continued to slip, with the CME lean hog index down 44 cents to $101.15, the fifth straight daily decline. Pork cutout values fell $1.02 Tuesday to $105.56 on movement of 310 loads. June lean hogs fell $2.775 Tuesday to $102.20, the lowest closing price since $101.875 on Jan. 19.
