Ahead of the Open | September 26, 2023
GRAIN CALLS
Corn: Steady to 2 cents lower.
Soybeans: Steady to 2 cents higher.
Wheat: SRW steady to 2 cents higher; HRW steady to 2 cents lower; HRS 2 to 5 cents higher.
GENERAL COMMENTS: Soybeans and wheat saw gains into the break but are well off overnight highs, corn saw slight losses most of the night after condition data came in better than expected. Outside markets saw some volatility overnight, with stock futures remaining volatile as interest rates continue to add concerns. Front-month crude oil futures are modestly lower and the U.S. dollar index is around 80 points lower to start the day.
Senate negotiators, comprising both Republicans and Democrats, are edging closer to a deal on a short-term spending measure aimed at preventing a government shutdown after Oct. 1, according to several reports. The proposed legislation would extend funding for a period of four to six weeks, which is a shorter timeframe than Democrats’ initial preference of extending funding into December but could facilitate passage in the House. Should the Senate successfully pass the stopgap bill and forward it to the House, Speaker Kevin McCarthy (R-Calif.) faces a challenging decision regarding whether to hold a vote. It remains uncertain whether the Senate bill will incorporate emergency disaster aid or assistance to Ukraine for its ongoing conflict with Russia. These elements, favored by the White House, have not garnered support from some House Republicans, particularly in the case of the Ukraine aid package. Bottom line: If McCarthy decides to put the Senate’s bill up for a vote, some GOP House renegades have indicated their readiness to attempt his removal from office.
Crop consultant Dr. Michael Cordonnier lowered his corn and soybean yield estimates, noting crops are maturing faster than normal, meaning recent rains came too late to have much benefit. Cordonnier cut his corn yield by 1.5 bu. to 171.5 bu. per acre, reducing the production forecast to 14.93 billion bushels. He cut his soybean yield by 0.5 bu. to 49.0 bu. per acre, lowering his production estimate to 4.05 billion bushels.
As of Sunday, USDA rated 53% of the corn crop as “good” to “excellent,” up two percentage points from last week. Traders expected the top two categories to be unchanged. The portion of crop rated “poor” to “very poor” declined two points to 18%. USDA rated the soybean crop 50% “good” to “excellent,” down two points from last week. Traders expected no change in the top two categories. The portion of crop rated “poor” to “very poor” held at 18%. When USDA’s weekly condition ratings are plugged into the weighted Pro Farmer Crop Condition Index (CCI; 0 to 500-point scale, with 500 representing perfect), the corn crop increased 3.7 points to 336.6, which was now 1.4 points (0.4%) above last year. The soybean crop rose 1.4 points to 332.6, though that was still 5.5 points (1.6%) below last year at this time. Illinois led the increase in condition ratings for both crops, rising 3.5 points for corn and 2.9 points for soybeans.
CORN: December corn futures saw limited volatility overnight though prices favored the downside. Futures were supported by 10-day moving average support at $4.79 1/4 and initial resistance at the 20-day moving average at $4.81 3/4 limited buying efforts. These levels will remain key after the open, a break below support leads to a likely test of $4.75. A rally higher will likely test $4.90 resistance.
SOYBEANS: November soybean futures saw corrective buying overnight but went into the break on session lows. The psychological $13.00 level will remain key as well as the Sept. 19 low of $13.08 that capped buying efforts so far today. Support lies at $12.93 3/4 then $12.84 1/2.
WHEAT: December SRW futures saw strength over initial resistance of $5.89 1/4 overnight, though prices have pulled back from the highs. This will remain a key level after the open and is backed by $5.96 1/4, then $5.98. A series of lower highs and lower lows remains on the daily bar chart, today’s finish will be key in determining if the recent bout has any legs or is simply corrective buying. Support stands at $5.76 then the contract low at $5.70.
CATTLE: Mixed.
HOGS: Choppy/higher.
CATTLE: Live cattle futures are expected to open mixed after pivoting around unchanged for the majority of Monday’s session. USDA’s Cold Storage Report showed beef stocks rising as expected, though slightly less than average for the month of August. Inventories fell sharply from the August 2022 record for the month. The average cash cattle price firmed 69 cents to $184.73 last week as packers purchased the most head since June. This implies the potential for lower volume this week, though tight market-ready supplies will limit the downside. Wholesale beef prices continue to flounder, as Choice cutout fell $1.85 to $301.48 and Select rose just two cents to $280.45 on Tuesday.
HOGS: Lean hog futures are expected to open mostly higher, continuing Monday afternoon’s relative strength. The CME lean hog index continues to consolidate around $87.00 ahead of what is expected to be a large seasonal drop, as the index fell 38 cents to $86.70 today (as of Sept. 22). The steep discount that October futures hold to the index is likely to limit losses in the near-term. Wholesale pork prices rose $1.60 to $98.86 Monday, down from the midsession quote that was over the $100.00 level. Cutout continues to struggle maintaining demand over the $100.00 mark, though losses below the level remain limited.
