Ahead of the Open | January 18, 2022
GRAIN CALLS
Corn: 3 to 7 cents lower.
Soybeans: 13 to 17 cents lower.
Wheat: 4 to 8 cents higher.
GENERAL COMMENTS: Soybean futures fell to a two-week low overnight after weekend rains in South America. Corn futures also fell, while wheat gained. Malaysian palm oil futures fell to a two-week low yesterday. Nymex crude oil rallied to a seven-year high. U.S. stock index futures are about 1.0% lower, while the U.S. dollar index is up for the third straight sessions.
USDA reported daily sales of 239,486 MT of soybeans for delivery to Mexico and 126,000 MT of grain sorghum for delivery to “unknown destinations,” both during the 2021-22 marketing year. USDA also corrected a daily sale announcement last Friday that should have reported 100,422 MT of soybeans for delivery to Mexico during 2021-22. USDA’s previous report incorrectly listed corn.
Rains reached many areas of Argentina and Brazil over the weekend, potentially boosting crops that have been stressed by persistent dryness. In Argentina, weekend rainfall was greatest from northeastern Buenos Aires and Entre Rios to northern Cordoba, where 1.00 to 2.00 inches fell, according to World Weather Inc. In Brazil, some needed dryness was seen in central and northern parts of the country, while rain fell on some southern areas. “Brazil’s bottom line looks to be mostly very good in the next 10 days, although there will be some new concern for crops in western Mato Grosso do Sul, western Parana and in a part of Rio Grande do Sul where dryness is expected to prevail along with that in Paraguay,” World Weather said.
Crop Consultant Dr. Michael Cordonnier cut his Brazilian soybean crop estimate again this week, citing irregular rains in Parana and Rio Grande do Sul. Cordonnier cut his Brazilian soybean crop estimate another 1 MMT to 134 MMT. He left his Brazilian corn crop estimate at 112 MMT. Cordonnier lowered his Paraguay soybean crop estimate by 1 MMT to 7 MMT. He left his Argentine soybean and corn crop forecasts at 43 MMT and 51 MMT, respectively.
China imported a record 28.4 MMT of corn in 2021, up 152% from 2020. The country’s wheat imports, at 9.8 MMT last year, were also a record and up 16.6% from 2020. Chinese buyers stepped up imports or corn and wheat, to fill the domestic gap in corn supply. But China’s appetite for imported grains showed signs of waning in the final months of last year, as a bigger domestic corn crop pushed down domestic prices, while feed demand from the livestock sector weakened on plunging hog margins.
China sold all 501,283 MT of state-owned wheat reserves put up for auction last week. The average selling price was 2,713 yuan (just over $427) per metric ton, up slightly from the previous week.
The National Oilseed Processors Association (NOPA) is expected to report soybean crush totaled nearly 185.0 million bu. in December, according to a Reuters poll. If realized, that would be up 3.1% from November and 1.0% from last year – and the second largest monthly crush on record. Soyoil stocks at the end of December are expected to rise to 1.892 billion lbs., which would be up 3.3% from November and 11.4% higher than a year earlier.
Turkey purchased at least 175,000 MT of milling wheat from unspecified origins; purchases are ongoing. Japan is seeking 72,351 MT of U.S. and Canadian milling wheat in its weekly tender.
CORN: March corn fell as low as $5.88 1/4 overnight after dropping 10 1/2 cents last week. Support is seen around the 50-day moving average at $5.88 3/4, near the overnight low, and at last week’s low of $5.85 1/4.
SOYBEANS: March soybean futures overnight fell as low as $13.49 3/4, the contract’s lowest intraday price since $13.42 on Jan. 3. March soybeans dropped 40 1/2 cents last week. Technicals have weakened after March futures fell under the 10- and 20-day moving averages at $13.85 and $13.63 1/2, respectively, setting the market up for a possible test of the Dec. 30 low at $13.34 1/2.
LIVESTOCK CALLS
CATTLE: Steady-firm
HOGS: Steady-mixed
CATTLE: Live cattle may extend last week’s gains as the wholesale beef market rose to two-month highs, though the upside may be limited by slumping cash cattle prices. Choice cutout values ended last week at $284.31 and rose another $3.55 on Monday. Live steers last week averaged $136.61, down from a $138.41 average the previous week and the fifth weekly decline in the past six. Packer margins have climbed to the highest levels since late November, suggesting they have the ability to raise cash bids. But cash direction this week likely will hinge on slaughter rates, which declined the past two weeks due to Covid-related worker absences. Cattle slaughter last week totaled 621,000 head, up 1,000 head from the previous week but still down from 652,000 head the same week in 2021.
HOGS: Lean hogs may find support on followthrough from last week’s gains and wholesale market strength. The latest CME lean hog index jumped $1.58 to $75.90, the highest since Nov. 16. Pork cutout values ended last week at $89.07 and rose another $2.87 on Monday. One key to market direction this week whether cutout values can lure sufficient retailer buying to sustain prices above $90.00. The market rose above $90.00 several times over the past month but quickly fell back as retail interest faded. February hog futures jumped $3.05 last Friday to $80.90, the highest closing price since Jan. 6 and a gain of $1.05 for the week.
China's 2021 pork output reached 53.0 MMT last year, just below the 53.4 MMT produced in 2017, prior to the African swine fever (ASF) outbreak that decimated the country’s hog herd. China slaughtered 671.3 million hogs in 2021, up 27% from a year earlier. The country’s hog herd totaled 449.2 million head at the end of December, up from 437.6 million head at the end of the previous quarter.
