Ahead of the Open | December 28, 2021
GRAIN CALLS
Corn: 4 to 5 cents lower.
Soybeans: 6 to 8 cents lower.
Wheat: 10 to 15 cents lower.
GENERAL COMMENTS: Soybean futures faded to losses after rising to five-month highs earlier in overnight trade. Corn was also lower and wheat futures dropped sharply. Malaysian palm oil was lower while Nymex crude oil is moderately higher after rising to the highest levels in a month. The U.S. dollar index is slightly weaker this morning.
Crop Consultant Dr. Michael Cordonnier broadly cut his South American crop estimates for a second week in a row, citing hot, dry conditions eroding yield potential in southern Brazil, Argentina and Paraguay. Cordonnier projects Brazilian production at 140 MMT for soybeans (down 2 MMT) and 114 MMT for corn (down 1 MMT). For Argentina, he forecasts the soybean crop at 48 MMT (down 1 MMT) and corn production at 52 MMT (down 1 MMT). Paraguay's soybean crop was cut 500,000 MT to 8 MMT.
Ukrainian farmers were able to plant only 6.2 million hectares, or 94% of the expected area to winter wheat due to dryness in central portions of the country. Some of the planted area will have to be replanted as seeds did not sprout. Despite the dryness, consultancy APK-Inform says the winter wheat crop is in mostly satisfactory condition.
Large speculators raised their net long position in the corn market for the third consecutive week as prices rose earlier this month, data from the Commodity Futures Trading Commission (CFTC) showed. The managed money net long in corn futures and options rose 18,618 contracts to 360,416 contracts during the week ended Dec. 21, according to the CFTC’s weekly Commitments of Traders report. Large speculators’ net long in soybean futures and options rose to 72,924 contracts, the highest since late August, CFTC data showed.
Corn and soybean bulls have good technical power, while wheat lags. The speculative shorts (sellers) in the grain futures have now likely been mostly squeezed out of their positions over the past couple weeks of price gains. New speculative longs (buyers) have now entered the markets, especially in corn and soybeans. Grain market bulls now need to beware the rest of this week: The bigger fund traders may try to press the new and weaker long traders out of the market by taking profits on their better-established long positions amid the thin holiday trading conditions this week.
Indonesia's crude palm oil output is expected to rise 2.6% next year to 51.01 MMT as the crop recovers from El Nino and La Nina-related disruptions, the head of the Estate Crop Fund said today. Demand in 2022 for exports was seen rising to 27.9 MMT, versus 27.08 MMT expected in 2021.
CORN: March corn overnight reached 6.17 3/4, the highest intraday price since $6.25 on June 11, before fading to losses. Market bulls have a solid near-term technical advantage with prices in a 3 1/2-month uptrend. The next upside objective for bulls is closing March futures above solid resistance at the May high of $6.40 1/2.
SOYBEANS: March soybeans overnight rose as high as $13.84 1/2, the contract’s highest intraday price since $13.86 on July 20. Market bulls have a solid near-term technical advantage with futures in an accelerating seven-week uptrend, but prices have reached overbought levels based on the Relative Strength Index. The next near-term upside objective for bulls is closing March futures above solid resistance at $14.00. March soymeal hit a contract high at $412.90 overnight.
WHEAT: Large speculators expanded their net short position in SRW wheat futures and options to 11,007 contracts, the biggest in two months, according to CFTC’s Commitments of Traders data. March SRW wheat fell as low as $7.90 3/4 overnight, a one-week low.
LIVESTOCK CALLS
CATTLE: Steady-weaker
HOGS: Steady-weak
CATTLE: Live cattle futures may face pressure from a softening cash market, though declines may be limited by strength in wholesale beef. Live steers last week averaged $135.64, down $1.55 from the previous week and the third consecutive weekly decline. Choice cutout values rose $1.65 yesterday to an average of $264.59, while Select rose $2.23. Movement totaled a solid 116 loads. If packers can continue to command higher beef prices and movement stays strong, that may indicate retailers are stocking up for beef features in early 2022. February live cattle futures fell 35 cents yesterday to $139.275, after earlier reaching a three-week high at $140.325.
HOGS: Lean hog futures’ recent rally may lose momentum on signs of erosion in the cash and wholesale pork markets. The CME lean hog index is down 50 cents today, the third consecutive daily decline and raising questions over whether the cash index has actually established a seasonal low. Pork cutout values fell $5.14 yesterday to an average of $86.33, led by a decline of nearly $20 in hams. Movement was strong at 370 loads. February lean hogs yesterday rose 42.5 cents to $83.65, the highest closing price since $84.25 on Nov. 24. Chart levels to watch include the November high at $84.675 and the 100-day moving average around $81.20.
