Ahead of the Open | November 7, 2022
GRAIN CALLS
Corn: 2 to 3 cents lower.
Soybeans: 1 to 3 cents lower.
Wheat: 2 cents lower to 2 cents higher.
GENERAL COMMENTS: Soybean futures overnight fell from six-week highs posted Friday amid demand concerns after China denied it was easing its strict zero-Covid policy. Corn and winter wheat also weakened as traders looked ahead to Wednesday’s USDA Crop Production and Supply & Demand Reports. Malaysian palm oil rose 1.7% on strong demand from top importer India, while front-month crude oil futures were slightly weaker. U.S. stock index futures signal a firmer open, while the U.S. dollar index is down more than 400 points.
China will persevere with its “dynamic-clearing” approach to Covid-19 cases as soon as they emerge, Chinese health officials said on Saturday. Speculation grew last week China would relax its zero-Covid policy, buoyed on Friday when a former disease control official said Beijing would make “substantial” changes to its policy in the coming months.
China’s exports fell 0.3% from year-ago in October, the first drop since May 2020 amid lackluster overseas demand. Its imports declined 0.7%, the first drop since August 2020 as domestic demand slumped amid strict Covid restrictions. That left China with a trade surplus of $85.2 billion, up marginally from $84.8 billion in September but well shy of expectations for an increase of $96.0 billion. China’s trade surplus with the U.S. narrowed to $34.2 billion from $36.1 billion in September.
China imported 4.14 MMT of soybeans in October, matching the lowest for any month since October 2014. Chinese soybean imports plunged 46.4% from September and were 19.0% below year-ago as weak crush margins reduced demand. Through the first 10 months of this year, China imported 73.18 MMT of soybeans, down 7.4% from the same period last year.
Ukraine has exported almost 14.3 MMT of grain so far in the 2022-23 season, down 31% from the 20.6 MMT exported by the same stage of the previous season, agriculture ministry data showed. Exports since July 1 included 5.4 MMT of wheat, 7.7 MMT of corn and 1.2 MMT of barley.
China sold all 40,476 MT of state-owned wheat reserves put up for auction last week. The average selling price of the wheat from the 2014, 2015 and 2016 crops was 2,865 yuan ($398.88) per metric ton, up from 2,843 yuan ($392.14) the previous week. China has sold all of the wheat put up for sale at the three weekly auctions that began in mid-October.
China imported 630,000 MT of meat last month, down 20,000 MT (3.1%) from September and 30,000 MT (5.1%) less than last year. China doesn’t break down meat imports by class in its preliminary data, though the reduction was due to fewer pork imports. Through the first 10 months of the year, China imported 6.03 MMT of meat, down 25.0% from the same period last year.
USDA’s Animal and Plant Health Inspection Service (APHIS) confirmed highly pathogenic avian influenza (HPAI) in a commercial breeder chicken flock in Lawrence County, Mississippi. This is the first commercial HPAI discovery in Mississippi after the state reported a case in wild American blue-winged teal in Issaquena County in October.
Large speculators at the beginning of November increased their bullish bets in the corn market to the highest level since mid-June, data from the Commodity Futures Trading Commission showed. The managed money net long rose 7,586 corn futures and options contracts during the week ended Nov. 1 to 271,960 contracts, the highest since the week ended June 15. Large speculators also booted a net long in soybeans, while in SRW wheat, large speculators expanded their net short to the largest since June 2020.
CORN: December corn overnight fell to $6.76 1/4, matching the market’s intraday low during the last full week of October. Downside levels to watch include $6.74, the low during the last half of October, and $6.71 1/2, the low for the full month. USDA will update weekly harvest progress after today’s close. Last week, USDA reported the U.S. corn harvest at 76% complete as of Oct. 30, up from 61% a week earlier and ahead of the 64% average for that date the previous five years.
USDA’s Nov. 9 Crop Production and Supply and Demand Reports are expected to feature only minor adjustments. USDA is expected to lower its estimate for U.S. corn production to 13.887 billion bu. from 13.895 billion bu., based on a Reuters survey of analysts.
WHEAT: December SRW wheat traded within Friday’s range overnight after ending last week at $8.47 3/4, up 18 1/2 cents for the week and the first weekly gain in five. The status of the deal allowing Ukraine grain exports will remain in the market’s focus as the agreement’s Nov. 19 expiration nears.
USDA will update its weekly crop condition ratings after today’s close. A week ago, in the initial national ratings for U.S. winter wheat, USDA rated the crop at 28% “good” or “excellent” as of Oct. 30, far under expectations for 41% and a record low. The crop was 87% planted, up from 79% the previous week and ahead of the 85% five-year average.
LIVESTOCK CALLS
CATTLE: Steady-mixed
HOGS: Steady-weaker
HOGS: Lean hog futures may extend last week’ sharp declines on bearish technicals and erosion in cash fundamentals as rising slaughter expands supplies. Last week’s hog slaughter was an estimated 2.577 million head, the highest for the year and up 0.8% from the previous week, but down 1.3% from year-ago. Hog slaughter will continue to rise seasonally but is consistent with levels suggested by USDA’s September Hogs & Pigs Report. As slaughter levels rise, the CME lean hog index likely will face more seasonal pressure. Pork cutout values ended last week at $96.72, down $4.62 for the week and near a nine-month low. Movement was slower at 291 loads.
December lean hogs fell 40 cents Friday to $82.975, the contract’s lowest close since Oct. 14 and a weekly decline of $3.175.
