Ahead of the Open: Grains, Soy Rebounding After Monday's Setbacks; Livestock Mixed

Posted on Tue, 05/04/2021 - 08:05

GRAIN CALLS

Corn: Up 5 to 10 cents.

Soybeans: Up 8 to 12 cents.

Wheat: Up 3 to 6 cents.

GENERAL COMMENTS: Corn futures rose on Tuesday to hold near an eight-year high, as weather forecasts showed little sign of rain relief for dry southern Brazil, keeping attention on tightening global supplies despite U.S. planting progress.  Shrinking Brazilian corn crop estimates means the U.S. will have to make up the gap in supplies. U.S. corn is the third most competitive offer worldwide as Argentina offers are $40 a MT under U.S. and Ukraine sits between. Soybeans also rallied as tight global oilseed and vegetable oil inventories kept the market supported in the face of concern over reduced vegetable oil demand in India due to a surge in coronavirus cases. Wheat edged up after dropping more than 2% on Monday as the corn rally underpinned wheat prices, countering pressure from improving yield outlooks for some Northern Hemisphere wheat harvests, including in Ukraine.  

National corn planting advanced at a strong 29 percentage points in the seven days ending Sunday night, to 46% complete; that’s just two points behind last year’s pace and a full 10% ahead of the five-year average. Previous fast planting years came in around 47% in 2016, roughly 50% in 2015, and 60+% in 2012. Next week’s comparable planting progress included 64% done in 2020, 66% completed in 2016, 70% back in 2015, and approaching 80% in the 2012. Cool temperatures could slow early corn growth in the Midwest but forecast rain should benefit crops. U.S. soybean planting was 24% complete, slightly above a poll average estimate of 25%. U.S. spring wheat plantings was 49% complete as of Sunday, up from 27% last year and 32% on average the past five years. Winter wheat conditions slipped 1 point to 48% rated “good” and “excellent.”  SRW ratings improved across the board except in Missouri.  Wheat ratings improved in Kansas, Nebraska, Colorado and Texas with the rest of the states declining with considerably worse conditions reported across the Pacific Northwest.

Before the reopening, USDA did not announce any fresh export sales this morning.    

U.S. stock index futures dropped alongside European stocks on this morning as investors continued to rotate out of pandemic winners like technology and into sectors poised to gain from economic reopening. Stocks extended declines on headlines that a Chinese military aircraft flew over Taiwan airspace.  The grain markets backed off their best levels into the break after the news.

Meanwhile, ties between Europe and China appear to be quickly deteriorating again, with governments increasingly moving into line with the Biden administration's view on the standoff with China. U.S. and U.K. diplomats reaffirmed the two countries' relationship, while hitting out at China and Russia.   Oil prices are holding onto gains, with WTI crude is still above $64 per barrel heading into Tuesday's session on optimism that economic activity getting back underway in the U.S. and Europe will underpin demand.  

The U.S. dollar extended gains on Tuesday, partially unwinding a month-long decline as investors weighed chances that interest rates will be forced higher by a roaring U.S. economic recovery and awaited upcoming data and policy speeches for clues. Tuesday's bounce nearly reversed losses sustained on Monday after a disappointing U.S. manufacturing survey report, leaving it 1% above a one-month low struck last week.  However, financial conditions are nowhere near the level where the Fed would consider pulling back its support, New York Fed Bank President John Williams said on Monday, despite the economy being set to grow at the fastest rate in decades this year as it rebounds from the crisis caused by the coronavirus pandemic.  

CORN: July corn touched $6.94 3/4 overnight, coming up just shy of the contract high at $6.98. Prices may be entering a short-term consolidation ahead of the USDA updated global supply and demand updates, include a new Brazil crop estimate and the agency’s first U.S. balance sheet forecasts for the 2021-22 season. Corn used for ethanol in March was 420.0 million bu., up from 410.3 million bu. last March. DDG’s produced in March were 1.803 million short tons, up from 1.647 million a year earlier. Brazilian sugar cane processors are likely to give an unprecedented preference to sugar over ethanol in their industrial strategies in the new season as they try to avoid a larger decline in the production of the sweetener. Mills in Brazil's center-south region could earmark the highest percentage of cane for sugar production since 2012, at 48.2%, said JOB Economia consultancy analyst Julio Maria Borges on Tuesday.

SOYBEANS: July futures opened steady and held above Monday’s low before rallying overnight. Prices remain below resistance at Monday’s high at $15.63 1/2 and last week’s contract high at$15.74 3/4. March U.S. soybean crush was 188.2 million bu., just below the average trade estimate of 188.4 million bu. and 192.2 million last year, USDA said Monday. Trade estimates ranged from 188.0-189.2 million bushels.  Malaysian palm oil futures fell 0.5% overnight after surging 5% on Monday. Prices retreated on forecasts for higher output in Indonesia and demand concerns from the rising Covid-19 cases globally. The Dalian Commodity Exchange in China remains closed for a national holiday through Wednesday.

WHEAT: Wheat is following corn higher after reversing strong gains on Monday and closing lower, which suggested the markets have met upside objectives for the time being. However, weather forecasts showing light rains across the Great Plains. Europe saw some good moisture across northern Italy, southern Germany and western Poland over the weekend aiding crop development, but dryness concerns remain across France and southern UK. Some moisture was noted in parts of Australia, improving planting outlooks. Parts of Ukraine and Russia saw some moderate showers which may have slowed plantings of spring wheat but improved soil moisture.

CATTLE: Steady to weak.
HOGS: Steady to firm

CATTLE: June cattle futures plunged toward last week’s important swing lows, but other contracts continue to show some underlying stability. That hints at a market trying to bottom but not until packers start paying higher prices. Average cash price dropped roughly $2.50 last week to $118.89. While beef prices are soaring with packers continue to enjoy record-high profit margins, ample supplies of market ready supplies have given them little reason to raise bids after accumulated forward purchases in April.   Choice and Select boxed beef values climbed $2.80 and 74 cents, respectively, on Monday. The higher-grade value is now within just 70 cents of the $300 per cwt. level. Movement was light at 77 loads, increasing market bear speculation that the product market is nearing a top.

HOGS Hog futures scored impressive gains to start the week and month, with June, July and August leaving upside gaps open on the charts and closing near session highs. That a sign that April turns marked reaction lows and signals prices may not peak until late this month. The pork cutout value climbed $1.20 Monday, but movement was light at 289 loads. However, cash hog bids eased 82 cents to start the week. May futures hold nearly a $4 premium to the CME lean hog index, with June futures nearly $6 above the index suggesting prices have already anticipated further cash market strength. Cash must lead futures rallies.