Ahead of the Open | August 18, 2022

GRAIN CALLS

Corn: 1 to 3 cents lower.

Soybeans: 3 to 5 cents lower.

Wheat: 12 to 20 cents lower.

GENERAL COMMENTS: Corn and soybean futures extended this week’s declines overnight on an outlook for timely rains across much of the Midwest over the next two weeks, while winter wheat futures dropped to seven-month lows. Malaysian palm oil futures fell 3.5% to near two-week low as rival edible oils declined. Front-month crude oil futures rose nearly $2. U.S. stock index futures signal a firmer open, while the U.S. dollar index is slightly higher.

Weather for the Midwest leans bearish for corn and soybean futures. A “good mix” of rain and sunshine is expected for the U.S. Delta, Southeastern States and Midwest during the next two weeks, World Weather Inc. said. Heavy rain is expected in the southern U.S. Plains late Saturday through Monday, with coverage of 1 to 3 inches and locally much more near the Red River. All of northern and western Texas and much of central and southern Oklahoma will be impacted. “The moisture will be good for future planting of wheat and improved pasture and range conditions later this autumn, but much of it will come too late for summer crop production,” the forecaster said.

Another ship carrying corn left Ukraine’s Chornomorsk port, Turkey’s defense ministry said on Thursday, bringing the total number of vessels to leave Ukraine’s Black Sea ports to 25. An additional four vessels are expected to arrive at Ukrainian ports today to be loaded with grain.

The U.S. and Taiwan agreed to start trade talks under a new initiative to reach agreements with “economically meaningful outcomes,” with a Taiwan official saying China’s “economic coercion” would also be discussed. The office of the U.S. Trade Representative said the two sides had “reached consensus on the negotiating mandate” and it was expected that the first round of talks would take place early this fall.

China’s state stockpiler Sinograin and top state-owned grains trader COFCO have formed a joint venture to operate the country’s grain reserves, state media reported on Thursday. The venture, called the China Enterprise United Grain Reserve Co. Ltd, will be 51% owned and controlled by Sinograin. The move is part of the Beijing’s efforts to reform the grain reserve system and better ensure food security.

Brazil is expected to reduce fertilizer consumption to 43 MMT in 2022, as farmers are poised to cut applications when the planting of crops like soybeans begins in September, consultancy MB Agro said. Last year, Brazilian farmers used an estimated 45.85 MMT of crop nutrients, according to a fertilizer industry group.

Taiwan purchased 34,025 MT of U.S. milling wheat.

CORN: Net U.S. corn sales during the week ended Aug. 11 totaled 99,300 MT for the 2021-22 marketing year, down 48% from the previous week and down 8% from the average for the previous four weeks. For 2022-23, net sales totaled 750,000 MT, primarily for “unknown destinations” (286,000 MT), Mexico (216,400 MT) and China (136,500 MT). New-crop sales topped trade expectations ranging from 300,000 to 700,000 MT.

SOYBEANS: Net weekly soybean sales for 2021-22 totaled 96,900 MT, primarily for China (80,800 MT, including 70,000 MT switched from unknown destinations). For 2022-23, net sales of 1.303 MMT were primarily for China (779,000 MT) and unknown destinations (273,000 MT) and up sharply from the previous week’s 477,200 MT and well-above expectations ranging from 300,000 to 650,000 MT. New-crop sales were the largest for either 2021-22 or 2022-23 since the end of March.

WHEAT: Net weekly wheat sales totaled 207,200 MT for 2022-23, down 42% from the previous week, down 46% from the prior four-week average and a marketing-year low. Sales were expected to range from 250,000 to 650,000 MT.

September SRW wheat overnight fell as low as $7.40 1/2, the contract’s lowest intraday price since mid-January.

LIVESTOCK CALLS

CATTLE: Steady-mixed

HOGS: Steady-weaker

CATTLE: Live cattle futures may gain support from cash strength and a tightening outlook for slaughter supplies. Light cash cattle trade started at $141 in Texas and $150 in the northern market Wednesday. The wide variance in the two markets continues and makes it difficult to gauge the final price for the week. But those initial levels suggest prices will rise roughly $1 from last week’s average of $144.39. Choice beef cutout values fell $1.10 Wednesday to $264.34, but movement was strong at 145 loads. USDA reported net weekly beef sales at 18,900 MT for 2022, up 29% from the previous week and unchanged from the prior four-week average. 

October live cattle gained 17.5 cents to $145.85, the highest close since April 22.

HOGS: Lean hog futures may face pressure from weakness in wholesale pork and signs of a peak in cash benchmarks. The CME lean hog index is expected to decline 44 cents to $120.62, the fifth drop in the past six sessions. Pork cutout values fell $2.68 Wednesday to a five-week low at $118.47, led by a slide of more than $12 in bellies. Movement slowed to 273 loads. Still, Wednesday’s price action suggests sharp losses earlier this week were corrective in nature and not a longer-term shift in market attitude. Wednesday’s lows now stand as key near-term support. A drop through those lows would be a stronger sign of a seasonal top and suggest an extended pullback, despite futures’ big discounts to the cash index.

USDA reported net weekly pork sales at 13,600 MT for 2022, down 37% from the previous week and down 43% from the prior four-week average.

China imported 120,000 MT of pork in July, unchanged from June but down 65.1% from last year. Through the first eight months of this year, China imported 930,000 MT of pork, also down 65.1% from the same period last year.