Ahead of the Open: Beans firm, Corn Mixed and Wheat on the Defensive

Posted on Tue, 03/23/2021 - 05:17

GRAIN CALLS

Corn: Steady to narrowly mixed
Soybeans: Up 1 to 4 cents
Wheat: Down 3 to 7 cents

GENERAL COMMENTS: The soybean complex is leading gains this morning with nearby soyoil futures surging to the highest price since 2011. Soy processors will keep crushing every bean possible at profitable levels, that plus any type of normal seasonal tail for soybean exports promises to keep stocks uncomfortably tight into the summer. Corn is stuck in narrow ranges with firm soybeans offset by the weakness in wheat prices. Winter wheat ratings improve after recent moisture. Some state wheat condition ratings released Monday afternoon showed widespread improvement this past week. Crops rated “good” to “excellent” rose 8 percentage points in Kansas and Colorado, 5 points in Oklahoma, 2 points in Texas, with SRW ratings rising 7 points in Louisiana and 4 points in Arkansas while Mississippi ratings fell 4 points.   

Trading during the next week will be dominated by positioning ahead of the USDA’s March 31 estimates of quarterly stocks and spring planting intentions.   

Before the reopening USDA did not announced any new daily sales for a second day after last week reporting nearly 3.9 MMT of corn sold to China.

Showers are widespread across the U.S. this morning, with the heaviest 24- hour precipitation totals falling from north-central Oklahoma up through central Kansas and south-central Nebraska. Rains move from west to east through Thursday, with heavy rains seen in the central and eastern Midwest and the Delta and Southeast. Precip maps are a bit more spotty into late month and temps return to above-normal into April.

Meanwhile, Argentina was dry over the past 24 hours, but rains are seen building from Thursday through Saturday, improving late moisture for many areas. Conditions look dry in the 6- to 10-day outlook maps. Rains in Brazil were spotty yesterday with most corn and soybean areas dry, and rains confined to the south through the weekend. The drier 6- to 10-day outlook will aid soybean harvesting and corn planting. Brazilian consultant Safras & Mercado yesterday reported Brazil’s safrinha corn planting at 86%, behind 90% last year and ten points behind the five-year average pace.

Soy and sugar exporters are fighting for room in Latin America's largest port, rushing to secure loading slots as the slowest Brazilian soy harvest in 10 years pushes the grains export window into the sugar season. Congestion was hitting Brazil's Santos port just as consumers worldwide have been turning to top exporter Brazil for sugar and soybean supplies. The glut of shipments waiting to leave is boosting transport costs. Shipowners sharply raised demurrage, the daily fee charged for port delays, from around $18,000 per day to $30,000 per day on trips to Brazil. Chinese soy buyers would normally turn to the United States to avoid Brazilian congestion, but U.S. farmers have little to offer. Due to strong demand, the United States will only have about 10 days of soybean stocks before the U.S. harvest starts in September. The U.S. Department of Agriculture forecast soybean stocks at the Aug. 31 end of the 2020/21 marketing year at 120 million bu., down sharply from 525 million a year earlier. It would be the smallest ending stocks since 2013-14.

The dollar is sharply higher on the world foreign exchange markets this morning, in line with a risk-off tone in global markets, after a weak Asian session, led by declines in Chinese markets. The United States, the European Union, Britain and Canada sanctioned Chinese officials on Monday over human rights abuses in Xinjiang, and Beijing hit back with punitive measures against European lawmakers, diplomats, institutes and families. Also contributing to market caution was a third wave of the COVID-19 pandemic in Europe. Germany is extending its lockdown and urging citizens to stay at home for five days over the Easter holidays, Chancellor Angela Merkel said.

The dollar index has gained more than 2% so far in 2021, as speedy rollouts of COVID-19 vaccines in the United States and the Biden Administration's $1.9 trillion stimulus are seen lifting growth, driving up bond yields and drawing investors. Market participants will be listening to a Congressional testimony by U.S. Federal Reserve Chair Jerome Powell and Treasury Secretary Janet Yellen later in the day for any hints about their tolerance for rising yields, which could determine the future direction for the dollar.

The level of demand at a two-year Treasury auction later in the session and the 7-year Treasury note auction Wednesday will also be closely watched for interest rate direction.   

CORN:  May corn futures opened higher and is trying to hold support at the rising 20-day and 40-day moving averages. The contract is about a dime below initial resistance at the break this morning. Futures remain inside of the price range from February for a fifth consecutive week. Weekly U.S. corn export inspections slipped to 77.2 million bu. in the week ended March 18, though the previous week’s total was again revised notably higher, from 86.8 million to record 89.5 million bushels.  Last week’s total was still the third-best of the marketing year. Cumulative shipments are now almost 600 million bu. ahead of last year’s pace, with the USDA looking for an 822 million bu. increase in export this year. Corn has a bullish potential on yield risk for the Brazilian winter corn, Chinese demand, strong U.S. weekly export loadings and American drivers returning to pre pandemic gas consumption rates.     

SOYBEANS:  May soybean futures pushed above last week’s highs overnight before paring gains into the break. Soyoil surge to new highs overnight before paring or erasing gains in some contracts this morning. May soymeal futures are trying to bounce back from the lowest level since Dec.18, boosting crush margins. Malaysian palm oil futures rose 2.3% overnight, extended gains for a second session speculation demand amid growing U.S. plans for green energy. China’s Dalian most-active soyoil contract rose 3.4%, and the palm oil contract was up 4.7%.  Malaysia's exports of palm-based biodiesel are likely to fall this year to their lowest since 2017 due to European Union restrictions and the coronavirus pandemic, the Malaysian Biodiesel Association (MBA) said on Tuesday. The European Union accounts for nearly 80% of Malaysia and Indonesia's exports of palm methyl ester (PME), the bio component of biodiesel that comes from palm oil. Exports, however, have slowed since the bloc in 2019 moved to cap the use of palm oil for transport fuel at 2019 levels due to deforestation concerns, with an aim to phase out its use by 2030.  

WHEAT: Futures extended monthly declines weekly declines with HRW futures leading to the downside on improving crop ratings and more rain overnight. Better-than-expected weekly inspections data on Monday failed to provide much support with Traders focused on falling weather concerns.  However, the Northern Plains remains in severe drought with similar conditions in the Canadian Prairies. However, some longer-range forecasts offer hope for some relief. Crop in Europe and Black Sea region remain in good shape but there are some talking about greater winterkill in some Russia areas. 

CATTLE: Steady-weak
HOGS: Steady-firm

Cattle: Futures seen pressured by disappointing beef cold storage data on Monday. USDA reported frozen beef inventories dropped 8.46 million lbs. during February, which fell well short of the average 27.2 million-lb. drawdown over the period. Stocks of 510.90 million lbs. were a record, including record boneless beef supplies.  Average steer prices came in at $114.23 last week, up marginally from the week prior and roughly in line with where trade has been for seven straight weeks. Choice and Select boxed beef values firmed 96 cents and $3.10, respectively, on Monday, but movement was light at 83 loads.

Hogs: Stronger cash bids Monday, up an average of $2.55 at plants will lend support. Still, a close below Monday’s lows would be negative heading into the USDA’s Hogs & Pigs report on Thursday. The pork cutout value edged 27 cents higher to start the week, but movement was again light at 259.60 loads. Meanwhile, frozen pork stocks climbed nearly 34 million lbs. from Jan. 31 to Feb. 28, which was a bit more than the average 30.6 million-lb. rise for the period. But stocks of the meat are still 24% below a year-ago.  Chinese pork prices dropped an average of 1.1% to 34.44 yuan ($5.30) per kilogram from March 15 to March 19, according to a pork price index that tracks 16 provincial-level regions that’s monitored by the country’s ag ministry. Pork prices are down 27.5% from year-ago levels, according to the index. Live hog cash prices continue to slide while Chinese hog futures prices remain elevated. This raises questions if the current sell off is due to increased supply and herd recovery, or if its liquidation due to disease worries.