Ahead of the Open | January 31, 2024
GRAIN CALLS
Corn: 2 to 4 cents lower.
Soybeans: 4 to 6 cents lower.
Wheat: 8 to 10 cents lower.
GENERAL COMMENTS: Corn, soybeans and wheat each saw renewed selling pressure following Tuesday’s corrective gains, with wheat futures leading the way lower. There is a general “risk-off” attitude in the marketplace ahead of this afternoon’s interest rate decision by the Fed. Front-month crude oil futures were modestly weaker overnight while the U.S. dollar index traded mostly higher, though has since posted mild losses.
The Federal Open Market Committee (FOMC) is widely expected to hold interest rates unchanged at the conclusion of the two-day monetary policy meeting this afternoon, though traders will be looking for indications of when rate cuts will begin. Special attention will be paid to wording in the post-meeting statement and Fed Chair Jerome Powell’s press conference.
The USDA attaché in Ukraine reported, “By the end of 2023, Ukraine independently resumed operations of its major marine ports on the Black Sea, Chornomorsk, Odesa, and Pivdennyi. It increased the throughput of the Danube River export routes. The total volume of grain exports (wheat, corn, and barley) soared from around 2 MMT in September 2023 to 5.2 MMT in December 2023. Based upon the high December 2023 export rate, if Ukraine maintains average monthly exports of around 4 MMT for all grains combined for the remainder of the marketing year, they will export the vast majority of the harvest and reach the export estimates” of 29.2 MMT for corn (up 8% from 2022-23) and 17.7 MMT for wheat (up 3% from 2022-23). In the January WASDE Report, USDA forecast Ukraine’s 2023-24 exports at 21 MMT for corn and 14 MMT for wheat.
China’s official purchasing managers index (PMI) rose to 49.2 in January from 49.0 in December, though that was the fourth straight month of contraction in factory activity, as Beijing struggled to spur economic recovery amid deflationary pressure, feeble demand and persistent weakness in the property sector. January’s new orders sub-index contracted for the fourth consecutive month, while the new export orders index shrank for the 10th straight month.
CORN: March corn futures saw mild renewed selling pressure overnight. Resistance stands at $4.47 1/2 with further backing from $4.50 then $4.52 1/4. Meanwhile, bulls are seeking to hold support at $4.42 1/4, $4.40 1/4, then $4.36 1/2.
SOYBEANS: March soybean futures struggled against initial resistance at the 10-day moving average, currently at $12.20, overnight. That spurred some additional selling. Further resistance stands at $12.36. Bulls are seeking to hold support at $12.06 3/4, $12.03, then $11.94 1/4.
WHEAT: March SRW futures turned lower once again overnight. Bulls failed to hold initial support at the 40-day moving average at $6.04 1/4, marking that as initial resistance. Further resistance stands at $6.12 1/4. Meanwhile, support stands at $5.96, $5.93 1/2, then $5.87 1/4.
CATTLE: Choppy/lower.
HOGS: Choppy/higher.
CATTLE: Live cattle futures and feeders are expected to open mostly lower as consolidation is possible from recent highs. The early signs of a bull flag are forming on the daily bar chart, consolidating recent gains and preparing for another leg higher. This afternoon’s Cattle Inventory Report could provide a significant catalyst to move prices. Analysts polled by Urner Barry expect USDA to show the U.S. cattle herd 1.8% below year-ago as of Jan. 1 at roughly 87.7 million head in, which would be the smallest herd dating back to 1951. The annual calf crop is expected to be down 2.4% to just under 33.0 million head, which would mark the lowest calf crop on record since 1941. Beef replacement heifers will be a key category, as pre-report estimates range from a decline of 2.7% to a rise of 4.1% from the year-ago level. Wholesale beef prices slipped on Tuesday as movement increased to 134 loads. Choice cutout slipped $3.35 to $296.07 and Select dropped $1.77 to $287.05.
HOGS: Lean hog futures are expected to open with a firmer tone, though some consolidation is possible as prices have marched higher for seven consecutive sessions. Futures have been supported by the rebounding CME lean hog index, which is up another 88 cents to $71.48 (as of Jan. 29), the biggest gain during this month’s seasonal rally. The premium that futures hold, particularly February futures, could limit buyer interest. Wholesale pork prices slipped on Tuesday despite gains in every cut except bellies, which fell $9.35. Cutout dropped 52 cents to $88.55, though movement firmed to an impressive 389.6 loads. Packers continue to offload inventory, taking advantage of higher cutout values, though the gains seen in most cuts points to robust retailer demand, despite lent being just a couple of weeks away.
