Ahead of the Open | December 11, 2023
GRAIN CALLS
Corn: 1 cent lower to 1 cent higher.
Soybeans: 10 to 15 cents higher.
Wheat: 5 to 8 cents lower.
GENERAL COMMENTS: Soybeans posted corrective gains overnight, while wheat faced pressure. Corn was caught in the middle, mildly favoring the downside. We expect similar price action at the start of daytime trade. Front-month crude oil futures have retreated from earlier gains to near unchanged, while the U.S. dollar index is more than 100 points higher.
USDA reported daily soybean sales of 132,000 MT to unknown destinations for 2023-24.
AgRural says Brazil’s soybean planting reached 91% done as of last Thursday, behind last year’s 95% pace. The Brazil-based consultancy said, “Although the biggest concern remains in Mato Grosso, where rainfall is still below normal and very high temperatures continue to weigh on productivity, the North/Northeast region of the country is also a concern, as scattered precipitation and heat make progress difficult for planting and harm the initial development of crops.”
Brazil’s weekend rainfall was light and sporadic, leaving more concern about center-west, some center-south and many northeastern crop areas in the country due to persistent dryness. Rainfall across these areas is expected to remain erratic. World Weather Inc. says, “Weekend rainfall was rarely more than 0.50 inch in center-west, center-south or northeastern Brazil, although there were a few areas in western and southern Mato Grosso do Sul that received more than 1.00 inch of rain along with a couple of southwestern Mato Grosso locations. Center-west, center-south and northeastern Brazil will continue to experience erratic rainfall during the next 10 days. Temperatures will be warm and net drying is still expected in many areas this week, despite some periodic showers each day.” Conditions in southern Brazil and across much of Argentina’s key crop areas are expected to remain mostly favorable.
Bulk shippers hauling grain from the U.S. Gulf to Asia are sailing longer routes and paying higher freight costs to avoid vessel congestion and record-high transit fees in the drought-hit Panama Canal. Ships moving crops have faced wait times of up to three weeks to pass through the canal as container vessels and others that sail on more regular schedules are scooping up the few transit slots available. The restrictions could continue to impede grain shipments well into 2024, as the region’s rainy season won’t come until spring.
Deflationary concerns are building in China. China’s consumer price index (CPI) fell 0.5% annually in November, the second straight month of consumer price deflation and the sharpest decline since November 2020. The cost of food decreased at the strongest pace in over two years (-4.2% vs. -4.0% in October) amid a further drop in pork prices. Core CPI, which excludes food and energy prices, increased 0.6% from year-ago in November, the same as in October. China’s producer price index dropped 3.0% annually in November, faster than a 2.6% fall in the previous month. This was the 14th straight month of producer price deflation and the steepest figure since August.
CORN: March corn futures pivoted around unchanged overnight and remain in the sideways pattern. Near-term resistance is layered in the $4.94 to $5.02 range. Near-term support is in the $4.82 to $4.70 range.
SOYBEANS: January soybean futures posted an inside day up during overnight trade. Near-term resistance starts at the 10-day moving average at $13.20 and extends to the 20-day average near $13.40 1/2. Near-term support extends from the psychological $13.00 mark to last week’s low at $12.92.
WHEAT: March SRW futures have formed a bull flag on the daily chart. The contract must push above last week’s high at $6.49 1/2 to confirm an upside breakout from the bullish formation. A close below $6.16 1/4 would negate the formation and suggest a short-term top is in place.
CATTLE: Choppy/higher.
HOGS: Choppy/higher.
CATTLE: Live cattle futures and feeders are expected to open with a mostly firmer tone on a continuation of last Friday’s corrective gains. But we’re not confident buyer interest will be strong and fresh selling could develop as attitudes have been to sell any corrective price strength. Until futures find a bottom, the cash market is likely to remain under pressure. Wholesale beef prices are also looking to stabilize, though movement remains strong. Choice beef dropped $1.83 on Friday, while Select was 93 cents lower. Packers moved a strong 167 loads amid the lower prices, extending the recent string of more than 150 loads of product changing hands on a daily basis.
HOGS: Lean hog futures are expected to open with a mostly firmer tone as the market looks to build on last Friday’s gains, though buyer interest will be limited by continued weakness in the cash market. The CME lean hog index is down another 36 cents to $68.76 and has dropped $37.24 from its late-July peak. December hog futures, which expire on Thursday, finished last Friday at a 33.5 cent discount to today’s cash quote. February hogs, which will soon take over lead-month status finished hold a 21.5 cent premium. The pork cutout value firmed $2.30 on Friday and continues to show signs of stabilization in the mid-$80.00 range.
