Ahead of the Open | December 20, 2021
GRAIN CALLS
Corn: 2 to 3 cents lower.
Soybeans: 3 to 4 cents higher.
Wheat: 5 to 10 cents lower.
GENERAL COMMENTS: Wheat futures extended last week’s declines overnight as concern over a Covid resurgence pressured global stocks and commodities. Corn futures were also lower, while soybeans firmed late on dryness concerns in South America. Malaysian palm oil rose slightly, while Nymex crude oil sank more than $3 to two-week lows. The U.S. dollar index is more than 175 points lower this morning.
Some rain fell on southern Brazil over the weekend, but not enough to stop net drying in the region. The situation was similar in northern Argentina. Periodic rains will occur across cropping areas of both countries this week but conditions are expected to be seasonably warm and mostly dry. “South America weather will continue to follow La Nina traditions with Argentina and southern Brazil getting less-than-usual rainfall, but enough to hold together crop development,” World Weather Inc. said. “This trend will continue for the next couple of weeks, but rainfall will be lighter than usual and temperatures slightly warmer biased.”
The Argentine government on Friday capped the volume of corn and wheat for the 2021-22 cycle that can be exported, in a bid to head off domestic grain shortages and tamp down rising food values. The government said corn exports would be limited to 41.6 MMT while wheat would be limited to 12.5MMT. Argentina is the world's second largest corn exporter and a key global supplier of wheat.
Russia plans to implement a stronger wheat export tax formula with a higher multiplier if prices rise to $375 per MT and would increase again if prices reach $400 per MT, according to a proposal released late Friday. Russian wheat with 12.5% protein loading from Black Sea ports was at $334 a metric ton last week. Russia also plans to cap grain exports at 11 MMT from Feb. 15 through June 30, including 8 MMT of wheat.
China imported 790,000 MT of corn in November, the lowest volume in 19 months, down 39% from October and 36% below year-ago. China’s imports of wheat at 750,000 MT in November were down 7.2% from last year. Arrivals of sorghum surged 117% to 530,000 MT and barley imports jumped 37% to 1.53 MMT.
Large speculators raised their net long position in the corn market for the second straight week, data from the Commodity Futures Trading Commission's weekly Commitments of Traders report. The managed money net long in corn futures and options rose 13,479 contracts to 345,980 contracts in the week ended Dec. 14. Large speculators also raised their net long position in soybeans and increased their net short position in SRW wheat.
CORN: March corn futures fell as low as $5.87 overnight after gaining 3 1/4 cents last week to settle at $5.93 1/4, the highest closing price since $5.95 on July 1. Bullish technicals and signs of strengthening exports may support prices this week, though weekly export numbers will have to remain strong in coming weeks to keep futures elevated.
SOYBEANS: March soybeans overnight rose as high as $12.94 3/4 after ending last week at $12.88 1/2. Along with dryness concerns in South America, soybeans may see support from soymeal strength.
WHEAT: March SRW futures fell as low as $7.57 3/4 overnight after ending last week at $7.75, down 10 1/4 cents for the week and the third straight weekly decline. Adverse weather in the U.S. Plains has raised concerns over the HRW crop, but U.S. wheat remains uncompetitive on global markets.
LIVESTOCK CALLS
CATTLE: Steady-weaker
HOGS: Steady-firm
CATTLE: Live cattle futures fell for the third consecutive week and may extend declines on expectations for further erosion in the cash market during a holiday-shortened week for packers. Live steers in five top U.S. feedlot areas averaged $137.18 last week, USDA reported Friday, the second weekly drop since the average posted a 4 1/2-year high at $140.44 in early December. Choice cutout values rose 4 cents Friday to an average of $263.01, down from $264.54 at the end of the previous week. The wholesale market likely must establish a low before packers start raising cash cattle bids again after the holidays.
Cattle futures may also face pressure after Canada reported a case of atypical bovine spongiform encephalopathy (BSE) in an 8-1/2-year-old beef cow in the province of Alberta. The carcass did not enter the human food or animal feed chains, the World Organization for Animal Health (OIE) said.
HOGS: February lean hogs rose 22.5 cents last week and may extend gains on growing conviction the cash market has established a seasonal low, but wholesale market weakness may limit the upside. The CME lean hog index dropped 8 cents to $72.33. Early-week strength in pork cutouts indicated lower prices stirred fresh retail demand. But cutout values ended last week on a soft note, dropping $5.67 Friday to an average of $85.82, down from $86.19 at the end of the previous week and led by a drop of over $22 in hams. The slump in hams may be the start of that market’s typical seasonal decline once Christmas ham buying is completed. But at current levels, ham prices aren’t pricey by historical standards, which could limit seasonal pressure.
China imported 200,000 MT of pork in November, the same amount as October but down 38.7% from last year. Through the first 11 months of this year, Chinese pork imports at 3.54 MMT fell 10.3% from the same period last year.
