Ahead of the Open | January 3, 2024
GRAIN CALLS
Corn: Steady to 2 cents higher.
Soybeans: 1 to 3 cents higher.
Wheat: SRW steady to 2 cents higher; HRW 1 cent lower to 1 cent higher; HRS steady to 2 cents higher.
GENERAL COMMENTS: Grain markets favored the downside overnight though went into the break near session highs. South American weather remains the focus of the corn and soybean markets, as Brazil is likely to see net drying this week with additional precipitation coming in the second week of the outlook. Outside markets were mixed overnight, as front-month crude oil futures saw moderate corrective buying and the U.S. dollar index continued yesterday’s rally and is over 250 points higher.
State-level winter wheat crop condition ratings released on Tuesday signaled general improvement in the HRW crop over the past month, led by top producer Kansas. When the state crop ratings are plugged into the weighted Pro Farmer Crop Condition Index (0 to 500-point scale, with 500 being perfect), the HRW crop improved 10.5 points from the end of November to 333.8.
California water officials reported the snowpack statewide was 25% of average for this time of year. It’s the worst start for California’s watershed in a decade. The state relies on the snowpack for roughly a third of its water supply, and it also helps protect against wildfires in the dry, hot months in summer and fall. The California Department of Water Resources ahead of its first survey of the water year, which began Oct. 1, said the network of gauges up and down the Sierra measured the snowpack at 19% of normal in the southern Sierra, 27% in the central Sierra and 28% in the northern Sierra. Statewide, the amount of snow saved in the mountains accounts for 12% of what’s average come April 1, when the water year’s last survey is performed.
Markets had been pricing in as much as 160 basis points of interest rate cuts in 2024, double what the Fed had projected. But traders seemingly reassessed their outlook at the start of the new year, with markets now pricing in less than a 150-point cut. Minutes from the Fed’s last meeting are scheduled to be released this afternoon and will help traders gauge the central bank’s thinking around monetary easing.
CORN: March corn futures saw some buying from downtrend line support on yesterday’s close and overnight, coming in at $4.62 1/4. This support stems from the early November lows. Additional support comes in at $4.61. Meanwhile, resistance stands at $4.68 1/4 then $4.71 3/4.
SOYBEANS: March soybean futures continue to trend lower on the daily bar chart, though are nearing the lower end of the recent downward channel. Bulls are seeking to hold support at $12.67 1/4 with backing from $12.64 1/4, while resistance stands at $12.82 1/2, $12.98, then the 10-day moving average at $13.01 3/4.
WHEAT: March SRW futures continued Tuesday’s selling pressure overnight. Bulls fumbled their recent advantage and prices fell to mid-December lows, which will remain initial support at $6.02 1/2. Additional support lies at $5.85, while bulls are targeting resistance at $6.12 1/4 then $6.24 1/2.
CATTLE: Higher.
HOGS: Choppy/higher.
CATTLE: Live cattle futures and feeders are expected to open with a firmer tone on continuation of Tuesday’s technical breakout. After trading in a sideways range for two weeks, February futures surged to the highest close in a month. Cash trade has yet to hit the USDA daily reports, though anecdotal notes are coming in higher for the third consecutive week. Meanwhile, wholesale beef prices could limit buying in futures and packers’ interest in cash cattle. After dropping sharply at midsession yesterday, Choice cutout continued sharply lower, falling $5.37 on the day to $284.34, the lowest quote since late March. Select fell $1.47 to $258.86.
HOGS: Lean hog futures are expected to open mostly higher as technical buying supports the market. Tuesday’s breakdown brought prices to downtrend line support stemming from the October lows. This limited seller interest Tuesday and could support prices once again. The CME lean hog index, which fell another 30 cents to $65.05 (as of Dec. 29), could limit buying as cash prices continue to search for a seasonal bottom. The premium February futures hold to the index slipped to just 27.5 cents, showcasing the pessimistic view traders hold about the cash market. Wholesale pork prices firmed on Tuesday, rising 34 cents to $85.10, led by a $8.05 jump in bellies.
