Ahead of the Open | December 12, 2022
GRAIN CALLS
Corn: 3 to 5 cents higher.
Soybeans: 20 to 22 cents lower.
Wheat: HRW and SRW 10 to 14 cents higher, spring wheat 5 to 7 cents higher.
GENERAL COMMENTS: Soybean futures extended Friday’s weakness overnight after USDA hiked its global supply outlook and weekend rains fell in Argentina. Corn and wheat traded firmer. Malaysian palm oil futures fell 6.4% on weakness in other vegoils, while front-month crude oil posted modest gains but remained near one-year lows. U.S. stock index futures signal a firmer open and the U.S. dollar index is down slightly.
Rainfall amounts were greater than expected across areas of Argentina over the weekend, but this week’s forecast shows a return of hot, dry conditions. Weekend rainfall will provide temporary relief from drought stress, though much more is needed to induce a trend change, according to World Weather Inc. Rainfall in Brazil during the weekend was greatest in Goias, eastern Mato Grosso, eastern Minas Gerais and southeastern Bahia, World Weather reported. While conditions remain favorable for much of the country, crop stress in far western areas and Rio Grande do Sul in far southern Brazil will be closely monitored.
Russia bombed the southern part of Ukraine over the weekend, where some export facilities lost power. The Ukrainian port of Odesa was not operating on Sunday. Assessments are ongoing regarding grain export impacts and other infrastructure damage. “There are problems, but none of the traders are talking about any suspension of shipments. Ports use alternative energy sources,” Ukrainian Agriculture Minister Mykola Solsky said, according to Reuters. Two other ports —Chornomorsk and Pivdennyi — authorized to export grains from Ukraine under a deal between Russia and Ukraine were partially operating, he said.
Russia wants to adjust the Black Sea grain initiative to ensure more food supplies go to the world’s poorest countries in Africa and Asia, state-run TASS news agency quoted Deputy Foreign Minister Sergei Vershinin saying. “The four-sided deal was reached under the slogan of ensuring food security mainly of the poorest countries of Asia, Africa and Latin America,” he said. “Unfortunately, today the figures do not confirm that most grain is supplied particularly to those countries. We believe there should be adjustments.”
The world’s biggest central banks will this week complete the most aggressive year for interest-rate hikes in four decades with their fight against inflation still not over even as their economies slow. The European Central Bank and the Bank of England are likely to follow the Federal Reserve with half-point moves, analysts note. And higher borrowing costs are also ahead for Switzerland, Norway, Mexico, Taiwan, Colombia and the Philippines.
Large speculators in early December slashed their bullish bets in the corn market to the lowest level in over two years, based on the Commodity Futures Trading Commission's Commitments of Traders data. The managed money net long in corn futures and options dropped 71,418 contracts during the week ended Dec. 6 to 120,213 contracts, the smallest net long since September 2020. In SRW wheat, speculators expanded their net short by 9,314 contracts to 63,382 contracts, the largest net short since May 2019
CORN: March corn overnight reached 6.50 3/4, the contract’s highest intraday price since Dec. 2. Prices posted modest gains last week after USDA’s monthly Supply & Demand Report Friday brought few major surprises but did little to alter the longer-term tight supply outlook.
WHEAT: March SRW wheat traded within the previous session’s range overnight after ending last week at $7.34 1/4, down 26 3/4 cents for the week. Key downside levels include a 14-month low of $7.23 1/2 posted Dec. 6.
LIVESTOCK CALLS
CATTLE: Steady-weaker
HOGS: Steady-weaker
HOGS: Lean hog futures may face pressure from ongoing erosion in the cash market. The CME lean hog index is down another 48 cents to $81.99 (as of Dec. 8), the lowest since Jan. 27 but $11.04 above last year at this time. We expect a seasonal low soon, but buyer interest in futures will remain limited until the cash index posts a clear bottom and starts to firm. Pork cutout values jumped $3.59 Friday to $88.56, still down 38 cents from the end of last week. February lean hogs fell 70 cents Friday to $84.00, down $6.425 for the week and the lowest close since Oct. 14.
China's most active hog futures contract plunged 6.6% Monday to 17,895 yuan ($2,566) per MT, its lowest level since the contract launched almost two years ago. The January contract has dropped amid concerns over weak demand ahead of the Lunar New Year holiday next month, normally a peak season for meat consumption in China. Spot hog prices in the world’s largest pork producer are also falling sharply this month. “The main reason is that pig farms expected that the price would rise in December, so there was a large backlog of fattened and secondary-fattened pigs slaughtered this month,” said Yuan Song, chief analyst at trading company Juxing Agriculture Group, according to Reuters.
