Ahead of the Open | January 4, 2023
GRAIN CALLS
Corn: 3 to 5 cents lower.
Soybeans: 5 to 10 cents higher.
Wheat: 6 to 10 cents lower.
GENERAL COMMENTS: Soybean and soymeal futures posted corrective gains overnight, though soybeans came well off their session highs. Corn and wheat futures faced followthrough selling amid technical-based price action and pressure from falling crude oil prices. Front-month crude oil futures are around $2 lower this morning. the U.S. dollar index is down around 500 points. Concerns over the rapid spread of Covid in China continue to hang over markets, though the broad risk aversion seen on Tuesday wasn’t as prevalent overnight.
USDA reported daily sales of 124,000 MT of soybeans to unknown destinations for 2022-23.
Argentina’s weather will be drier than usual for the next 10 days and temperatures will slowly rise above normal. World Weather Inc. says, “Excessive heat is expected in Argentina, Uruguay and a part of Rio Grande do Sul late this week through the weekend and into early next week with highs in the middle and upper 90s to 106 with possible extremes 110 degrees Fahrenheit in Santiago del Estero, causing stress to crops and livestock.” The forecaster says a frontal system is expected to move through Argentina and far southern Brazil during the middle of next week and will bring cooler temperatures and “some” limited rain. Another short-term bout of heat and dryness will occur in Argentina late next week before another cool front is expected shortly after mid-month.
Individual state crop conditions ratings showed further deterioration of the HRW wheat crop during December except for Oklahoma and Colorado, though that failed to attract buying in futures. The “good” to “excellent” ratings for HRW wheat dropped two points in Kansas (to 19%), 22 points in Montana (22%), two points in Nebraska (18%) and 11 points in South Dakota (16%) during December. The “good” to “excellent” ratings for HRW wheat improved seven points in Oklahoma (38%) and 20 points in Colorado (50%) over the past month. Texas did not release updated crop condition ratings. When the updated crop condition ratings (and using Texas ratings from late November) were plugged into the weighted Pro Farmer Crop Condition Index (CCI; 0 to 500 point scale, with 500 being perfect), the HRW crop dropped two points to a rating of 278.3.
CORN: March corn futures dropped below Tuesday’s low and fell as low as $6.66 1/4 overnight. Near-term support is layered in the $6.60 to $6.35 range. The 100-day moving average around $6.72 is near-term resistance.
SOYBEANS: March soybeans posted corrective gains overnight, reaching as high as $15.06 1/2 but the contract struggled to find sustained buying above $15.00. Tuesday’s low at $14.90 is key near-term support. A push above the overnight high would likely trigger stronger corrective gains.
WHEAT: March SRW wheat futures dropped below Tuesday’s low and the 10-day moving average overnight. Near-term support is at the 20-day moving average near $7.60 and the uptrend drawn off the December lows that intersects around $7.55.
LIVESTOCK CALLS
CATTLE: Lower.
HOGS: Lower.
CATTLE: Live cattle futures are expected to open lower amid followthrough selling after sharp losses and a low-range close yesterday. With Tuesday’s sharp decline, February live cattle settled nearly $1 below last week’s average cash cattle price of $157.81, which could limit seller interest this morning. Cash sources still expect firmer cash trade this week, but active followthrough selling in futures could rein in those expectations and give packers a little more bargaining power. Wholesale beef prices posted strong gains on Tuesday, with Choice up $4.97 and Select $3.70 higher amid solid movement of 117 loads. Given the recent surge in wholesale beef prices, packer margins continue to climb, which gives them room to actively bid for cash cattle if needed. February live cattle futures violated multiple levels of support on Tuesday’s plunge. Next support is the 20-day moving average at $156.245.
HOGS: Lean hogs are expected to open lower on followthrough selling after sharp losses and a low-range close on Tuesday. Pressure also will come from weakening cash fundamentals. The CME lean hog index is down 74 cents to $79.45 (as of Jan. 2). While that’s still 85 cents above the seasonal low of $78.60 to date, traders remain relatively cautious. February lean hog futures finished Tuesday $5.625 above today’s cash index quote, which is around $2 below the 10-year average rally in the cash market from now until mid-February. The pork cutout value also declined $1.90 yesterday, though movement was strong at 370.5 loads. Near-term support for February lean hog futures extends from the $84.00 area to the December low at $81.525.
