Ahead of the Open | August 2, 2023
GRAIN CALLS
Corn: 2 to 5 cents higher.
Soybeans: 10 to 20 cents lower.
Wheat: 5 to 10 cents higher.
GENERAL COMMENTS: Corn and wheat futures were supported overnight by Russia’s attack on a key Ukrainian inland port on the Danube River, though both markets backed well off their highs. Soybeans traded lower amid forecasts continuing to indicate improved weather over the next 10 days. Key today will be whether strength in corn and wheat can limit selling in soybeans or pressure on soybeans pulls the other markets lower. Outside markets are mixed for grain/soy futures with crude oil and the U.S. dollar both modestly higher.
Russia attacked Ukraine’s main inland port across the Danube River from Romania on Wednesday, reportedly causing “serious” damage. Ukraine’s defense ministry said a grain silo was damaged at the Danube port of Izmail in the Odesa region. The port has served as the main alternative route for Ukrainian grain exports since Russia ended the Black Sea grain deal.
The Kremlin on Wednesday restated its position on the Black Sea grain deal, saying it was ready to return to it “immediately” once its demands were met. Russian President Vladimir Putin spoke via telephone to Turkish President Tayyip Erdogan, reiterating that a parallel deal improving terms for its own grain and fertilizer exports be implemented.
World Weather Inc. says conditions will be the wettest from South Dakota into Kansas and from there east across the lower Midwest into the northern Delta and southeastern states during the next 10 days. The northernmost parts of the Midwest may continue a little drier than usual.
Rating agency Fitch downgraded the U.S. government’s credit rating to AA+ from AAA, citing fiscal deterioration over the next three years and repeated down-the-wire debt ceiling negotiations that threaten the government’s ability to pay its bills. The U.S. dollar index had limited reaction to the news.
CORN: December corn futures attempted to correct overnight but found limited sustained buying. Tuesday’s low at $5.05 1/2 is initial support, followed by the psychological $5.00 mark. Monday’s downside gap from $5.24 1/2 to $5.25 1/2 is stiff overhead resistance.
SOYBEANS: November soybean futures dipped below the 40-day moving average overnight for the first time since climbing above it June 13. Monday’s low at $13.22 3/4 is initial support, followed by the July low at $13.15 1/2. The 5-day moving average at $13.55 3/4 is initial resistance.
WHEAT: December SRW futures failed to find buyer interest overnight on the push above the 5-day moving average at $7.03 3/4. That will remain as initial resistance. Tuesday’s low at $6.69 1/4 is initial support.
CATTLE: Choppy/higher.
HOGS: Choppy/lower.
CATTLE: Live cattle futures are expected to open with a mostly firmer tone after a strong close on Tuesday. But it wouldn’t surprise us to see full two-sided trade as traders await active cash cattle trade. While cash sources are spilt on expectations for this week’s cash trade, active followthrough buying in futures could sway things in feedlots’ favor. Wholesale beef prices firmed $4.32 for Choice boxes and $1.87 for Select on Tuesday, while movement improved to 102 loads. That’s the first indication the wholesale beef market may have put in a seasonal low. As we’ve previously noted, packers’ slowdown of slaughter runs to manage tight market-ready supplies should support wholesale prices.
HOGS: Lean hog futures are expected to open with a mostly weaker tone this morning. While August hogs continue to trade at a discount to the cash index, there are some hints a seasonal top may be near. The CME lean hog index is down a dime to $105.90 (as of July 31), the second drop in the past three days. The pork cutout value dropped $1.95 yesterday in what was likely corrective trade. With movement improving to 319.2 loads amid the price drop, there are no strong signs yet the product market has posted a seasonal top. But with slaughter supplies starting to build, a seasonal top in the production market is likely to come sometime this month.
