Ahead of the Open | February 2, 2024
GRAIN CALLS
Corn: Steady to 2 cents higher.
Soybeans: Steady to 2 cents higher.
Wheat: SRW 4 to 6 cents higher; HRW 8 to 10 cents higher; HRS 6 to 8 cents higher.
GENERAL COMMENTS: Corn and soybeans saw action on both sides of unchanged overnight while wheat futures favored the upside. Each fell from overnight highs following this morning’s non-farm payrolls report released from the Bureau of Labor Statistics, which sent risk assets lower. Outside markets were volatile after this morning’s report, with front-month crude oil futures trading modestly lower and the U.S. dollar index surging over 700 points higher on higher interest rates.
January non-farm payrolls (NFP) surged above expectations, with the U.S. adding 353,000 jobs, well above the expected 180,000 jobs in a Reuters poll. Hourly earnings increased more than expected and the unemployment rate remained steady at 3.7%. December NFP were revised higher to 333,000 jobs, above the prior report of 216,000 jobs. A red hot jobs market and the strong jump in wages indicate rates are likely to stay higher longer than expected.
The UN Food and Agriculture Organization global food price index dropped another 1.2% from December as decreases in the price for cereal grains and meat more than offset an increase in sugar, while vegoils and dairy were nearly unchanged. The January index was down 10.3% from last year and the lowest since February 2021. Compared to year-ago, prices declined 1.2% for meat, 17.8% for dairy, 18.6% for cereal grains and 12.7% for vegoils, while sugar prices rose 15.8%.
The International Monetary Fund (IMF) has expressed a high level of uncertainty regarding China’s economic outlook for this year, mainly attributed to factors such as a significant property market downturn and sluggish external demand. IMF’s annual review indicates China’s economic growth will slow in 2024 and continue to ease in the following years. However, Chinese authorities hold a more optimistic view of the recent economic developments in China compared to IMF’s characterization of a “subdued recovery.” IMF staff should “study carefully” the nation’s growth trend, said Zhang Zhengxin, IMF’s executive director for China, urging the organization to carry out a more appropriate assessment of the nation’s prospects to help “stabilize” confidence.
CORN: March corn futures continue to trade near the $4.47 mark, which has acted as a pivot for the last two sessions. Bulls are targeting resistance at $4.50, quickly backed by the 20-day moving average at $4.51 1/2 then $4.53 1/4. Meanwhile, support stands at $4.43 1/2. $4.40, then the contract low at $4.36 1/2.
SOYBEANS: March soybean futures saw action on both sides of unchanged overnight. Bulls are seeking to overcome initial resistance at $12.06, firmer resistance stands at $12.15 1/4 then $12.17 1/2. Support stands at $12.01, $11.94 1/4, then $11.87 3/4.
WHEAT: March SRW futures added to Thursday’s gains overnight. Downward trendline resistance which capped gains last week, currently at $6.11, stifled overnight gains. Further resistance stands at $6.16 1/4. Bulls are seeking to hold support at $6.04 1/4 with significant backing at $5.96 on another reversal lower.
HOGS: Choppy/higher.
CATTLE: Live cattle futures and feeders are expected to open higher on continued technical strength. The recent consolidation pattern was short-lived, as April futures surged on Thursday, breaking out technically. Futures were also supported by reports of sharply higher cash cattle trade on Thursday. Cash cattle trade turned active as packers raised bids $2 to $4 from last week, depending on location. After weeks of holiday- and weather-related slowdowns, packers are planning for bigger kills – and they were short-bought on needs. The severe winter weather caused a sharp decline in carcass weights, leaving packers needing to increase cattle purchases to make up the difference. Wholesale beef prices were mixed on Thursday, as Choice cutout rose 40 cents to $294.94 and Select dropped 92 cents to $283.25.
HOGS: Lean hog futures are expected to open with a mostly firmer tone, though some additional corrective selling is possible. The overarching trend in futures remains bullish, though there could be some consolidation after the recent strong leg higher. The CME lean hog index is up another 33 cents to $72.71, though slowing from gains the past three days. That relatively small jump could pressure nearby futures, particularly the February contract, as it maintains a premium to the index. Wholesale pork prices found underlying support following weakness earlier in the week. Cutout rose $1.03 to $88.59, with impressive gains in butts and hams offsetting a $5.85 drop in bellies.
