Ahead of the Open

GRAIN CALLS

Corn: 5 to 12 cents lower.

Soybeans: 4 cents higher to 12 cents lower.

Wheat: 6 to 18 cents lower.

GENERAL COMMENTS:

Corn, soybean and wheat futures extended Monday’s slump overnight as Midwest weather forecasts for cooler, wetter conditions overshadowed deterioration in crop condition ratings. USDA’s crop ratings yesterday were lower than traders expected, but its early in the growing season and based on the trade response, they feel plants still have ample opportunities to recover.

USDA rated 68% of the U.S. corn crop “good” to “excellent,” as of Sunday, a four-point slide from last week and a point lower than analysts expected on average. For soybeans, USDA rated the crop just 62% “good” to “excellent,” a five-point dive from the week prior. Analysts expected USDA to rate 65% of the crop in the top two categories. Eight percent of the crop is now rated “poor” to “very poor,” a three-point rise from last week.

When USDA's weekly condition ratings are plugged into the weighted Pro Farmer Crop Condition Index (CCI; 0 to 500-point scale, with 500 representing perfect), the corn crop dropped 9.5 points to 372.3 points while the soybean crop fell 8.8 points to 358.0 points. Corn is now 4.5 points under its five-year average for this date, while the soybean CCI rating is 13.3 below average. The spring wheat CCI rating dropped another 4.7 points this week to 304.7 points. That’s now 67.9 points below the norm for this point in the growing season.

Consultant Michael Cordonnier continues to forecast the U.S. corn crop will yield an average of 177.5 bu. per acre, which paired with planted acreage of 93.5 million would result in a crop of 15.17 billion bushels. He also held his soybean yield projected unchanged at 50.8 bu. per acre and planted acreage forecast at 88 million, resulting in a 4.42 billion bu. production projection.

Cordonnier maintained his Brazilian corn and soybean crop estimates at 92 million metric tons (MMT) and 134 MMT, respectively, though he has a neutral to lower bias toward the corn crop. He made no change to his Argentine soybean and corn crop estimates, which are 45 MMT and 46.5 MMT, respectively.

Members of the National Oilseed Processors Association (NOPA) will likely report later this morning they crushed 165.12 million bu. of soybeans during May, according to analysts polled by Reuters. That would be up 4.81 million bu. from April but down 4.46 million bu. from year-ago. Last month’s crush surprised to the downside, with processors taking downtime for seasonal maintenance. Some of those facilities restarted operations in May, but analysts still expect crush to come up shy of year-ago levels, especially given tight supplies of the oilseed and some demand destruction due to soaring prices.

In overnight export news, Egypt tendered to buy an unspecified amount of wheat from global suppliers; payment will be at sight. South Korea’s Major Feedmill Group bought around 65,000 MT of animal feed wheat from optional origins. The Philippines tendered to buy a total of around 205,000 MT of milling wheat and animal feed wheat. Japan is seeking 109,062 MT of food-quality wheat from the United States, as well as 74,660 MT of the grain from Canada and 23,750 MT from Australia.

CORN:

Futures’ technical standing took a hit with yesterday’s selloff, with July futures sinking to the lowest price in nearly two months, and followthrough selling overnight. July and December futures violated yesterday’s lows late in the overnight session.

SOYBEANS:

This week’s downturn negated a price uptrend on the daily soybean futures charts. Bulls may still try to take a shot at near-term upside technical objectives in July futures, including $16. The next downside price objective for the bears is closing prices below solid technical support at $14. First resistance is seen at $15.00 and then at $15.25. First support is at $15.55 and then at $15.40.

WHEAT:

Spring wheat continues to be pressured by recent rains in the Northern Plains that temporarily recharged soil moisture, though the dryness threat has not been eliminated. USDA rated just 37% of the spring wheat crop “good” to “excellent,” down a point from last week but just above the 36% analysts surveyed by Reuters anticipated. Of note, 27% of the crop is now rated “poor” to “very poor,” a two-point gain from the week prior. In top-producing North Dakota, just 29% of the crop is rated in the top two categories.

CATTLE: Steady-mixed

HOGS: Steady-weaker

CATTLE:

The steep tumble in corn prices yesterday helped lift feeder cattle futures and the corn market will remain in focus today, while cash cattle market appears to be holding steady to firm. Live steers in major U.S. feedlot regions averaged $120.03 per hundredweight yesterday, up one cent from Friday, USDA reported. Market watchers expect that tone to continue. Choice cutout values yesterday averaged $335.48, down $2.09 from Friday but about 23% higher than the five-year average for this period.

Live cattle bulls have a firm overall near-term technical advantage, with upside price objectives including an August close above solid resistance at the May high of $122.80. The next downside technical objective for bears is closing prices below solid technical support at $116.00.

HOGS:

Futures started the week on a down note amid softness in cash markets. National direct carcasses yesterday averaged $116.89, down $2.27 from the end of last week, while cutout values averaged $128.68, down $3.86. The weak cash markets raised questions of whether futures have established a near-term peak. Still, a 6 1/2-month uptrend remains in place on the daily bar chart. The next upside price objective for hog bulls is to close August prices above solid chart resistance at the contract high of $120.55. The next downside price objective for bears is closing prices below solid technical support at $110.00.