Ahead of the Open | 08-19-21

GRAIN CALLS

Corn: 4 to 6 cents lower.

Soybeans: 4 to 12 cents lower.

Wheat:  13 to 17 cents lower.

GENERAL COMMENTS:  Corn futures are down 5 to 6 cents in early trade and soybeans are 14 to 17 cents lower, with both markets hitting new lows for the week. Winter wheat futures have tumbled 8 to 11 cents. Spring wheat futures are down 3 to 4 cents. The U.S. dollar index has climbed to its highest level since early November. Crude oil futures are facing heavy pressure and at three-month lows.

On Day 3 of the Pro Farmer Crop Tour, scouts measured an average corn yield potential of 196.30 bu. per acre for Illinois, up from 189.4 bu. last year on Tour and 184.4 bu. for the three-year average. Pod counts in a 3’x3’ square came in at 1,280 pods for the state, also up notably from 1,247 pods in 2020 and 1,186 pods for the three-year average.

We also released the results for the western-most three districts of Iowa last night. Corn yields and soybean pod counts were up from last year’s derecho-hit crop. Compared with the three-year average, corn yield potential was marginally lower in District 1 but up from year-ago in Districts 4 and 7. Soybean pod counts were up from the three-year average across all three districts.

The full results for Iowa will be released tonight. Minnesota results will also be released this evening. Our Pro Farmer production and yield estimates (informed by Tour data, but separate) will be released at 1:30 p.m. CT on Friday.

Some areas of the eastern Belt received some rain over the past 18 hours, but the central and western Corn Belt remained dry. But “significant” rains are expected for the Northern Plains today and Friday, with some followup precipitation likely late Saturday into Sunday, reports world Weather Inc. Rains are expected to stretch into the dry northwest Corn Belt. Also of note, western Canada’s Prairies recorded their first frost and freezes on Wednesday, but impact on crops should be limited and no frost is expected outside of Canada. Cool temps are expected to linger into next week.

CORN: Forecasts for heavy rains to hit the Corn Belt today, particularly in the drought-stricken northwest region,  apparently weighed upon the grain markets overnight. Having the Illinois numbers coming from the Pro Farmer Crop Tour easily top year-ago levels may also have helped spur selling. Concurrent losses in the soybean and wheat markets, as well as a big drop by commodity sector-leader crude oil, may have encouraged selling as well. However, the 216,500 metric ton sales figure for the 2020-21 corn crop year topped expectations, while the 2021-22 result at 510,000 MT was in the middle of the forecast range. Exports at 829,200 fell below recent figures. Still, the sales data may limit the downside after today’s reopening.

SOYBEANS: Ideas that forthcoming rains will promote a strong finish for the U.S. soybean crop apparently weighed rather heavily upon futures in overnight trading. Having the pod counts for Illinois beans top year-ago and three-year average totals probably inflated bearish concerns as well. Old-crop soybean sales at 67,700 MT were near the middle of the anticipated range, while the new-crop figure at 2,142,100 MT topped the largest forecast at 1.8 MMT. Shipments of 258,000 MT easily topped recent figures, so this data could mitigate losses at the reopening.
 

WHEAT: Today’s expected Corn Belt rains, especially the prospect of heavy rain in the northwestern part of the region, likely boosted chances of normal plantings and growing season for 2021-22 winter wheat. That largely explains the relative size of the losses suffered overnight, with winter wheat futures losing much more ground than their spring wheat counterparts. New-crop wheat sales of 306,700 MT came in toward the low end of industry expectations, which might add to the downward trend seen in overnight action. Conversely, the weekly shipments total at 591,800 MT topped recent averages.

LIVESTOCK CALLS

CATTLE: Steady-higher.

HOGS: Steady-firm.

Active cases of African swine fever in the Philippines are declining and are confined to just 22 (0.7%) of the nearly 3,000 villages that have recorded outbreaks since 2019, the country’s ag ministry said. It added that the drop in infections and the government-funded hog repopulation program puts the Philippines on track to produce a domestic surplus by 2023.

Beef packer profit margins are nearing an eye-popping $1,000 a head. HedgersEdge.com yesterday estimated they stand at $987.25 a head, with gains in the wholesale product market driving the gains. Choice boxed beef values climbed another $2.02 (Choice) to $3.03 (Select) on Wednesday. Choice beef now stands at $340.08 per cwt., 48 cents away from the June peak. But market-ready supplies remain sufficient, and packers have been in no hurry to share the wealth. Iowa and Nebraska have seen some cash cattle action from $126 to $127, steady to up slightly from the week prior. Kansas and Texas have seen some light trade from $121 to $123, steady with last week.

Average hog weights in the Iowa/southern Minnesota market dipped 0.8 lbs. the week ending Aug. 14 to 277.6 lbs., which is still 1.7 lbs. lighter than last year at this point. The pork cutout value climbed $2.49 yesterday and movement was solid at 349.41 loads. Hams drove the increase, rising $12.69. Cash hog bids fell 81 cents for the national average yesterday. Strength in lean hogs yesterday may have been partially driven by concerns an African swine fever outbreak at a large commercial operation in Bulgaria, which might foreshadow a European ASF outbreak.

CATTLE: Choice beef cutout rose another $2.02 to $340.08 per hundredweight Wednesday. That was quite impressive, but the final quote actually slipped from the midday figure at $240.24. Both fell short slightly short of the June peak at $240.55. Grocer buying may diminish from this point, although we don’t expect their buying for Labor Day features to really taper off for another week (due to the holiday’s relatively late arrival on September 6). Still, Wednesday’s news of a significant amount of country cattle trading, which averaged $126.87 early this week, seems likely to give cattle futures a sustained boost, since national cash cattle prices have not been able to push above the $124.00 level for weeks. Conversely, the beef sales total on the weekly Export Sales report were rather disappointing.

HOGS: The national direct market average for hogs sold yesterday was $97.51, down $0.81 from Tuesday, while the Iowa-Southern Minnesota figure averaged $103.31. The national figure does indicate a modest downward tilt in recent days, but the Iowa-S. Minnesota quote actually topped recent figures extending back to last Wednesday (at $102.25). And while pork cutout did decline from the noon quote, the day-ending figure at $119.33 marked a $2.87 rise from Tuesday. Given the large discounts still built into the nearby contracts, these numbers seem likely to cause a steady-firm opening in hog futures. On the other hand, bears could boost their selling in response to the mediocre pork total on this week’s USDA Export Sales report.