Ahead of the Open | September 27, 2023
GRAIN CALLS
Corn: Steady to 2 cents higher.
Soybeans: 4 to 6 cents higher.
Wheat: Steady to 2 cents lower.
GENERAL COMMENTS: Corn, soybeans and wheat each saw corrective buying overnight, though each faded into the break. Soybeans continue to show relative strength, despite mixed outside markets, as front-month crude oil futures are over $1.90 higher and near recent highs and a U.S. dollar index that is over 125 points higher. Stocks saw corrective buying overnight, which was also supportive, as volatility has increased heavily over the past week. Interest rates are lower overnight, which are also supportive for grains.
The Senate’s bipartisan stopgap funding bill, which cleared a procedural vote last night (77-19) would keep federal agencies open until Nov. 17. The White House-endorsed bill includes around $6 billion in new economic and military aid for Ukraine, plus another $6 billion for disaster relief. There is no border security money, nor spending cuts that some House GOP lawmakers have been incessantly demanding. However, Sen. Rand Paul (R-Ky.) says he won’t give consent for speedy passage of the continuing resolution (CR). That means the Senate could potentially vote on final passage of the CR as late as Sunday, which is after government funding expires. Of note: The Senate’s nearly seven-week CR provides a fraction of what President Joe Biden sought for Ukraine in the remainder of 2023. In the House, Speaker Kevin McCarthy (R-Calif.) aims to amend the Senate’s CR with HR 2, a bill related to border security from the House of Representatives. This move is intended to frame the debate as being about border security issues and the deteriorating situation at the U.S./Mexico border. By framing the debate this way, McCarthy and House GOP leaders are attempting to divert attention away from the deep spending cuts that House Republicans are advocating for in various social programs. Bottom line: McCarthy faces key challenges among House Republicans as they seek to influence the content of the Senate’s CR and shape the narrative around key issues like border security, spending cuts and aid to Ukraine. If McCarthy is unable to pass a stopgap with just Republican votes, passing the Senate’s bill appears to be the only way for him to avoid a government shutdown Oct. 1 – or at least keep it brief.
Poland and Ukraine are making strides in their discussions to resolve the ongoing disagreement regarding Poland’s ban on Ukrainian grain imports. Polish Agriculture Minister Robert Telus said both sides are actively engaged in dialogue and are working to establish future mechanisms while addressing emotional aspects of the dispute. The Ukrainian Agriculture Ministry has announced that its chief, Muykola Solsky, will meet with Telus in a week to discuss Ukraine’s proposed licensing system, which aims to implement import licenses for corn, rapeseed, sunflower seed and wheat destined for five eastern European countries within the European Union. Additionally, Telus has urged Ukraine to withdraw its complaint filed at the World Trade Organization (WTO), where Kyiv initiated a dispute settlement process against bans imposed by Poland, Hungary and Slovakia.
China’s industrial profits jumped 17.2% from last year in August after a 6.7% drop in July, buoyed by early signs of economic stabilization. During the first eight months of this year, China’s industrial profits fell 11.7% from the same period last year.
CORN: December corn futures have posted a series of higher lows and higher highs on the daily bar chart, though volatility remains limited. Bulls are seeking continued strength above $4.85 resistance, while $4.75 marks initial support, backed by $4.73 1/2.
SOYBEANS: November soybean futures rallied into 10-day moving average resistance overnight at $13.15. This marks the fourth session of corrective gains, though volatility was seen throughout the period with wide daily price bars, even as the daily moves have been within a nickel. Additional resistance stands at $13.20, while support stands at $13.02, then $12.94.
WHEAT: December SRW futures favored the upside overnight but faded into the break. The 20-day moving average remains initial resistance, currently at $5.97, which is quickly backed by $6.00 then $6.04 1/4. Bulls are attempting to carve out a higher low and higher high on the daily bar chart but are fighting an uphill battle. Initial support stands at $5.76, backed by the contract low at $5.70.
CATTLE: Lower.
HOGS: Choppy/lower.
CATTLE: Live cattle futures are expected to open lower on followthrough selling after sharp losses and low-range closes on Tuesday. While much of yesterday’s losses were macro-induced, falling wholesale beef prices and a lack of crash trade thus far this week do not bode well for today, though a bounce in outside markets and continued tight market-ready supplies could limit selling pressure. Wholesale beef prices dropped $1.94 to $299.54 on Tuesday, falling below $300.00 for the first time since May. Select cutout fell $1.35 to $279.10.
HOGS: Lean hog futures are expected to open mostly lower as the recent consolidation is likely to give way to additional selling. Futures broke a five-week uptrend last Friday, which has led to basing the last two days. Underlying fundamentals continue to deteriorate, as the CME lean hog index fell for the third straight day, falling 39 cents to $86.31 (as of Sept. 25). While the index remains above the Sept. 5 low of $86.01, today’s drop was the largest since the rebound which began at the beginning of September. Wholesale pork prices continue to struggle to consistently stay above $100.00, despite an increase in movement, which was up to 360.6 loads Tuesday, that shows persistent retailer demand. The pork cutout fell 58 cents on Tuesday to $98.28, with the largest drop coming from bellies.
