Ahead of the Open | December 6, 2023
GRAIN CALLS
Corn: 1 to 3 cents higher.
Soybeans: 2 to 5 cents higher.
Wheat: SRW 8 to 10 cents higher; HRW 5 to 8 cents higher; HRS 3 to 5 cents higher.
GENERAL COMMENTS: Wheat futures led the way higher overnight, as soybeans and corn both saw spillover strength. The increase in export demand has encouraged buyers of each market, as China’s recent purchases of U.S. SRW wheat has gained market attention. There has been chatter that Chinese buyers could have switched some corn purchases from Brazil to the U.S. Outside markets were mixed, as front-month crude oil futures are trading on five-month lows and the U.S. dollar index is trading around 150 points lower.
This morning, USDA confirmed daily sales of 372,000 MT of SRW wheat and 136,000 MT of soybeans for delivery to China during the 2023-24 marketing year.
Russia’s winter crop conditions are better than average, with only 4% rated poor, a meteorological official said. The head of Russia’s state weather center Hydrometcentre noted the five-year average is an 8% poor rating. World Weather Inc. says, “Bitter cold in Russia will shift southeast into Kazakhstan and eventually to Mongolia and eastern China during the coming week to 10 days. Winter crops are expected to be adequately protected from the cold by snow that covers the ground in the coldest areas.”
China’s major state-owned banks sold U.S. dollars in the onshore spot foreign exchange market for a second day on Wednesday to support the yuan currency, three sources with knowledge of the matter told Reuters. The dollar selling was reportedly mild compared to Tuesday. Chinese exporters usually convert their FX receipts into the yuan towards year-end for various payments, including year-end bonus handouts, which typically supports the Chinese currency. But with the Chinese economy sputtering and the U.S. dollar surging until recently, the yuan has come under pressure.
CORN: March corn futures continued Tuesday’s breakout overnight, rallying above 40-day moving average at $4.90 1/4. That area will mark initial support, with backing from $4.86 1/2, then $4.85. Resistance lies at $4.93, which brought active selling in mid-November, with backing from the psychological $5.00 mark.
SOYBEANS: January soybean futures saw spillover gains but continued to struggle garnering much bullish momentum. Bulls are targeting resistance at yesterday’s high of $13.15 1/4 then downtrend line resistance at $13.20. Firmer resistance lies at the 10-day moving average at $13.27 1/4. Support lies at $13.05, the psychological $13.00 mark, then $12.94.
WHEAT: March SRW futures continue surging higher as prices work on the seventh day of gains in a row. Bulls are eyeing resistance at the psychological $6.50 mark, with backing from $6.58, then the 200-day moving average at $6.69 1/2. Support lies at Tuesday’s high of $6.36 1/4, then the 100-day moving average at $6.26 1/2.
CATTLE: Choppy/lower.
HOGS: Choppy/lower.
CATTLE: Live cattle futures are expected to open with a weaker tone, as cash trade started off sharply lower to start the week. Trade took place at $171.00 in Kansas on Monday, sharply lower from last week’s average of $174.45. It will be hard to shake that precedence as the week goes on, despite a bounce in cattle futures. Futures remain near oversold territory, which could limit selling pressure today. Wholesale beef prices remain under pressure, as Choice cutout fell $1.24 to $293.75 and Select dropped $3.70 to $259.13 on Tuesday. Movement remained firm at 155 loads, indicating packers have significant amounts of beef to move as dressed weights near their seasonal peak, which could lead to active year-end features.
HOGS: Lean hog futures are expected to open with a mostly weaker tone in continuation of Tuesday’s weakness. The CME lean hog index fell another 24 cents to $69.60 (as of Dec. 4). While that is tamer than the recent daily drops, December futures indicate traders’ belief that the index will continue to erode into the contract’s expiration on Dec. 14. Wholesale pork prices rose 24 cents on Tuesday to $84.67. Pork prices have been trending lower, though continue to show relative strength compared to beef and the cash hog market, showing robust retailer demand with movement of 372.22 loads yesterday.
