Ahead of the Open | July 15, 2022
GRAIN CALLS
Corn: 2 to 4 cents higher
Soybeans: Steady to 2 cents higher
Wheat: Winter wheat 2 to 5 cents lower; spring wheat steady to 2 cents lower.
GENERAL COMMENTS: Corn and soybean futures posted mild corrective gains overnight. Wheat faded from their earlier gains as the overnight session ended. Traders continued to monitor weather and macroeconomics. Front-month U.S. crude oil futures are more than $2 higher this morning, while the U.S. dollar index is around 300 points lower on a pullback from the push to new 20-year highs earlier this week.
USDA announced daily sales of 133,000 MT of corn to China for 2022-23. That should give the corn market a boost this morning.
A band of rains is pushing across the central U.S. this morning, stretching from northern Missouri to central Minnesota. The rains are expected to push into Illinois and Wisconsin later this morning before dissipating as the system moves further east. World Weather Inc. says, “The northern and eastern Midwest will get routinely occurring showers and thunderstorms and be seasonably warm to support many crops, although pockets of dryness will remain. Dryness will be a potential issue for the western fringes of U.S. crop areas from the northern Delta to South Dakota. Very little rain and warm to hot weather is expected through the next ten days. The Central and Southern Plains will continue to be excessively hot and dry with highs often in the upper 90s to 110 Fahrenheit. The pattern will prevail through the next ten days.”
Russia’s proposals on how to bring about a resumption of Ukrainian grain exports were “largely supported” by negotiators taking part in talks this week in Istanbul, the Russian defense ministry said on Friday, and an agreement was close. The ministry said work on what it calls the “Black Sea Initiative” will be finalized soon. Russia, Ukraine, Turkey and the United Nations are due to sign a deal next week aimed at resuming Ukraine’s Black Sea grain exports. As we noted yesterday, there are many hurdles ahead even if an agreement is signed and experts have cautioned an agreement will not have an immediate impact. It will take time to ensure there are no mines in the Black Sea shipping channel and get cargo ships to Black Sea ports.
The Chinese economy grew 0.4% versus year-ago in the second quarter, slowing sharply from 4.8% growth in the first quarter. That was the slowest economic growth since a contraction in first quarter of 2020, when Covid first emerged. For the first half of 2022, the economy grew 2.5%. Beijing has targeted the country’s GDP to grow around 5.5% this year after an 8.1% expansion in 2021. Chinese officials warned about the lingering impact of Covid outbreaks and “shrinking demand” at home, while also noting the rising “risk of stagflation in the world economy” amid tightening monetary policy overseas.
CORN: December corn futures are pointed toward a lower close for the week. After ending last Friday at $6.23 1/2, the contract has spent much of this week pivoting around the $6.00 level while holding with the broad range from last week’s low at $5.66 1/2 to Monday’s high at $6.58 1/2.
SOYBEANS: November soybean futures are poised for a sharp decline from last week, trading well below last Friday’s closing level of $13.96 1/2. The contract has pivoted around $13.50 in recent sessions while holding within the wide range from last week’s low at $13.02 1/2 to Monday’s high at $14.38 1/2.
WHEAT: December SRW wheat futures are poised for sharp losses this week after finishing last Friday at $9.06 1/2. The contract is holding above last week’s low at $9.02 1/2.
LIVESTOCK CALLS
CATTLE: Steady/weaker
HOGS: Steady/weaker
CATTLE: Cattle futures are expected to face followthrough selling after weak closes on Thursday. Despite their discount to the cash market, mild pressure might come from what appears to be weaker cash trade this week. While market-ready supplies are tight, packers pulled much of their needs from committed supplies – contracted animals or cattle that were sold “with time” weeks ago. Wholesale beef prices were mixed yesterday with Choice down 30 cents and Select up 65 cents. Movement was relatively light at 110 loads. It appears retailers intend to be selective buyers of beef through the remainder of summer given surging inflation.
HOGS: Lean hog futures are expected to face additional corrective selling after pulling back from recent gains yesterday. Seller interest could be limited in August hogs by the discount the soon-to-be front-month contract holds to the cash index. As of Thursday’s close, the August contract was more than $3.80 below today’s cash index quote (as of July 13), which continues to climb. That discount is slightly more than the five-year average decline of $2.92 for the cash index from mid-July to mid-August. Meanwhile, the pork cutout value firmed another 23 cents on Thursday as sharp losses in ribs and loins were more than offset by gains in the other cuts. Strengthening cash fundamentals should limit seller interest in nearby lean hog futures.
China’s second-quarter pork production climbed to 13.8 MMT, the highest level for the period since at least 2015. China’s first-half pork production jumped 8.2% from year-ago to 29.4 MMT amid an 8.4% increase in slaughter. The country aggressively rebuilt its hog herd following the African swine fever outbreak, but producers starting culling sows later last year amid poor margins. China’s overall hog herd as of June 30 contracted by 1.9% compared to year-ago to 430.67 million head.
