Ahead of the Open | August 1, 2023
GRAIN CALLS
Corn: 1 to 3 cents lower.
Soybeans: 2 to 4 cents higher.
Wheat: SRW and HRW 5 to 10 cents lower; HRS steady to 2 cents higher.
GENERAL COMMENTS: Corn, soybeans and spring wheat held above Monday’s lows during two-sided overnight trade, while the winter wheat markets extended recent losses. Grain and soy futures are short-term oversold but whether corrective buying surfaces during daytime trade will largely be dependent on fund activity with the start of a new month. Outside markets are price-negative for grain/soy futures with crude oil down around 60 cents and the U.S. dollar index more than 550 points higher this morning.
USDA cut its corn and soybean crop ratings more than anticipated. As of Sunday, USDA rated 55% of the corn crop as “good” to “excellent,” down two percentage points from the previous week. The portion of crop rated “poor” to “very poor” increased two points to 15%. USDA rated 52% of the soybean crop as “good” to “excellent,” down two points from last week. The amount of crop rated “poor” to “very poor” increased one point to 15%. On the weighted Pro Farmer Crop Condition Index (CCI; 0 to 500-point scale, with 500 representing perfect), the corn crop dropped 4.7 points to 344.3, which was 11.5 points (3.2%) below last year at this time. The soybean crop fell 2.5 points to 335.8, which was 18.1 points (5.1%) below year-ago.
Crop consultant Dr. Michael Cordonnier kept his yield estimates at 174 bu. per acre for corn and 50.5 bu. per acre for soybeans, though he has a neutral to lower bias toward both crops. Cordonnier estimates production at 15.01 billion bu. for corn and 4.17 billion bu. for soybeans.
USDA slashed its spring wheat crop ratings. USDA rated 42% of the U.S. spring wheat crop as “good” to “excellent,” down seven points from last week. The “poor” to “very poor” rating held at 16%. On our weighted CCI, the spring wheat crop plunged 9.6 points to 326.8, which was 48.7 points (13.0%) below last year and the lowest rating of the growing season.
World Weather notes, “U.S. crop weather will be wettest across the Central Plains and the southwest half of the Midwest into the Delta and southeastern states during the next 10 days. Rain in the Northern Plains and upper Midwest this weekend into next week will be good for summer crops, but will come too late for spring cereals and canola.”
CORN: December corn futures pivoted around unchanged overnight after Monday’s technical breakdown. The contract is trading well below the short-term, intermediate and long-term moving averages. Initial support is at Monday’s low at $5.08, followed by the psychological $5.00 mark. Strong near-term resistance is Monday’s overnight gap from $5.24 1/2 to $5.25 1/2.
SOYBEANS: November soybean futures paused around the 200-day moving average overnight after Monday’s technical breakdown. Near-term support is the 40-day average at $13.24, followed by the July low at $13.15 1/2.
WHEAT: December SRW futures dropped below Monday’s low overnight, extending the pullback from the July 25 high. Near-term support extends from $6.80 to the $6.60 area. The psychological $7.00 mark is near-term resistance.
CATTLE: Mixed.
HOGS: Choppy/higher.
CATTLE: Live cattle futures are expected to open with a mixed tone in what’s likely to be more consolidative trade. Futures attempted a downside breakout from the short-term consolidation range on Monday but failed to find sustained selling. The average cash cattle price dropped $1.38 last week to $184.81. Trading volume was extremely light as most feedlots refused to move cattle at lower prices. With fresh contract supplies available starting today, packers will likely remain reluctant to bid up for supplies. Another week of reduced slaughter runs and limited cattle purchases could help the wholesale beef market forge a seasonal low. Choice boxed beef dropped 22 cents on Monday, while Select firmed 19 cents. Movement was light at 86 loads.
HOGS: Lean hog futures are expected to open with a mostly firmer tone after a strong close on Monday. Cash fundamentals remain supportive and futures are trading at discounts to the cash index. The CME lean hog index is up 19 cents to $106.00 (as of July 28), rebounding from a 3-cent loss on Monday. August lean hog futures narrowed their discount to the cash index to $1.875 with Monday’s gains. With 10 market days until the August contract expires and 12 days until it is cash-settled, traders may narrow the discount a little more. The pork cutout value firmed $3.74 on Monday as primal bellies jumped $15.75, tough all cuts except butts posted gains.
