Ahead of the Open:

Posted on Fri, 01/08/2021 - 08:04

GRAIN CALLS

Corn: Up 1 to 3 cents
Soybeans: Up 10 to 15 cents
Wheat: Steady down 4 cents

GENERAL COMMENTS The grain and soybean markets have been choppy this week, consolidating sharp December gains ahead of key USDA reports Jan. 12 on U.S. production, Dec. 1 inventories, global carryovers and the agency first estimate of winter wheat seedings. Futures started on the defensive overnight but quickly reverse and are near this week’s 6 1/2-year highs in corn and soybeans. Wheat pared its losses but remains about 20 cents below the 6-year highs hit on Jan. 5. Traders were waiting for activity in Russia to resume following holidays this week to gauge the impact of measures to curb the country's exports.

 Before the reopening this morning, USDA announced private exporters sold 204,000 MT of soybeans to China for delivery this marketing year. The sales will add to soybean strength this morning.

Weather leans negative but that has not slowed fund buying interest ahead of the USDA reports. The speculative flow of funds into all assets may be most observable in cryptocurrencies, which are heading for their biggest weekly surge since the last bubble in Bitcoin peaked about three years ago, ahead of a spectacular crash.

Notable rain is expected for Argentina Sunday through Tuesday, with west-central and northern Argentina in line for the greatest accumulation, according to World Weather Inc. Weather models differ as to likely precipitation amounts for east-central areas of the country, but the region should see some showers. The weather watchers said conditions will remain generally favorable for crop areas of Brazil, thought there are some dry pockets, such as from Rio Grande do Sul to Parana and in far northeast areas.  

The Buenos Aires Grains Exchange increased its estimate for 2020-21 wheat exports by 200,000 MT to 17.0 MMT. It also said soybean planting is 93.5% completed and corn is 85.3% sown. The exchange has stated that the heart of the Pampas crop belt, one of Argentina’s most fertile agricultural areas, has experienced more severe dryness than other regions. The dryness is feared to reduce soybean and corn areas with rains further south arriving too late. The Argentinian Grain Exporters Union has ended a month-long wage strike following an agreement with export companies that will allow exports of corn, soy and wheat to resume. Meanwhile, the country’s corn producers met with the Argentine Ag Minister yesterday to review the decision to temporarily suspend corn exports but there was no resolution announced.  

Welcome moisture headed for dry areas of the Black Sea region. Rain and snow are expected for the Black Sea region over the next week, including in Russia’s Southern Region and northwest Kazakhstan, reports World Weather. It reports some of the precipitation in Russia’s Southern Region could be significant.

It has been a worrisome start to the new year for a thawing of relations between the U.S. and China. Hong Kong looks set to become an even more contentious issue. Police there on Wednesday undertook their furthest-reaching action yet against the city’s political opposition, arresting more than 50 activists under the auspices of its national security law. The arrests prompted Antony Blinken, President-elect Joe Biden’s nominee for secretary of state, to say on Twitter that the incoming U.S. administration would “stand with the people of Hong Kong and against Beijing’s crackdown on democracy.”

 Meanwhile, the World Health Organization’s investigation into the origins of Covid-19 was another issue that appeared to boil over this week. Director-General Tedros Adhanom Ghebreyesus issued a rare rebuke of China on Tuesday after Beijing failed to finalize approvals for a WHO team to travel to the country, delaying the mission even after months of back and forth.

And, the New York Stock Exchange said it would delist China’s three state-owned telecom carriers after earlier saying it would not. It was ultimately decided that China Mobile, China Telecom and China Unicom will be delisted, but not before Beijing characterized the saga as an example of how “arbitrary, reckless and unpredictable” American rules and institutions can be. 

The first fallout from rising U.S. Treasury yields has emerged, with a stronger dollar pushing emerging markets currencies lower this week. The 10-year Treasury note rose above 1.1% for the first time since March, raising the prospect of a pause in the dollar’s recent slide, which could undermine the rally in risk assets. Developing economies that are reliant on external financing may find their currencies especially vulnerable to any sustained strength in the greenback.  

CORN: March corn opened slightly lower last night and quickly uncovered new buying interest to rise to $4.99 1/2. Key resistance remains at $5.02 3/4 from Jan. 6.  Support is at $4.87 1/4, then $4.79 1/2.  

SOYBEANS: March opened lower and touched $13.48 1/2 before quickly rebounding to $13.75, just below the Jan. 6 high at $13.78 1/4. Malaysian palm oil futures inched higher on Friday to post a 6% weekly gain, underpinned by tighter supply outlooks ahead of data from Malaysian Palm Oil Board on Monday and USDA world supply and demand estimates on Tuesday. Malaysia will delay the nationwide rollout of its B20 palm oil biodiesel mandate to early 2022, state news agency Bernama reported, following in Indonesia's footsteps to delay its B40 mandate.  China’s Dalian most-active soyoil contract fell 0.02%, while its palm oil contract declined0.5%.  

WHEAT: Futures are struggling to following corn and soybeans higher with prices ending the overnight session closer to session lows than the highs. Japan bought 120,000 MT of milling wheat in their regular weekly tender, including 27,000 from the U.S., 44,000 from Canada, and 48,000 from Australia. USDA will also release its first winter wheat acreage estimate next Tuesday. The average trade forecast calls for plantings to rise 31.528 million acres, up from 30.415 million last season.

Cattle: Steady to slightly firmer
Hogs: Steady to slightly firmer

Cattle: Modest gains Thursday put momentum back on bulls’ side after wide-swinging price changes to start the week.  Boxed beef values climbed about 50 cents on Thursday on a third day of strong wholesale trading. Stabilization of futures, strong packing margins and aggressive retailer buying helped cash action to pick up mostly around the $112 mark yesterday, in line with the upper end of last week’s cash action. USDA reported steer carcass weights dropped 7 lbs. to 913 lbs. during the Christmas week from a week earlier. However, it is only 1 lb. above a year ago, signaling the heavy carcass problem is normalizing.

Hogs:  Futures gapped lower at Thursday’s open, but the weaker start uncovered good demand that lifted most contracts higher into the end of the day. The exception was February, which was under pressure from the rich premium to the cash index. A $2.17 jump in the pork cutout value on continued strong sales turned the market back to the upside.  Slaughter hog weights peaked in the first week of December at a record 218 lbs. Weights are now 3 lbs. lower but still 3 lbs. above the prior five-year average.  Chinese live hog futures tumbled 12.6% on their debut on the Dalian Commodity Exchange today. Analysts said the contract’s high listing price and expectations for supplies to build weighed on futures. The contract is China’s first live-animal physical delivery contract.