Ahead of the Open | January 6, 2022
GRAIN CALLS
Corn: 1 to 3 cents lower.
Soybeans: 12 to 14 cents lower.
Wheat: 5 to 15 cents lower.
GENERAL COMMENTS: Soybean futures fell overnight amid profit-taking from yesterday’s seven-month high and may face further pressure from weaker-than-expected USDA export sales. Corn and wheat also fell. Malaysian palm oil futures dropped for the first time in five sessions, while Nymex crude oil was up around $2.00. U.S. stock index futures are slightly lower the U.S. dollar index is little changed.
Brazil-based consultancy AgRural slashed its Brazilian soybean crop estimate by 11.3 MMT to 133.4 MMT due to heat and drought in southern Brazil. It now forecasts Brazil’s soybean yield will be the lowest since 2015-16. AgRural says Paraná has been hit hardest, with drought spreading from western areas of the state in December. The firm also cut its production forecasts for the Rio Grande do Sul, Santa Catarina and to a lesser extent Mato Grosso do Sul. AgRural says “In the rest of the country, the crop is developing well and high yields are expected in Mato Grosso, where the first areas are already being harvested.”
Global food prices inched down 0.9% in December, but the Food and Agriculture Organization of the United Nations (FAO) food price index still marked a 10-year high last year. The FAO food price index jumped 28% last year, as all sub-indices increased sharply from 2020. In 2021, the sub-indices jumped 27% for cereal grains, 66% for vegoils, 17% for dairy, 12.7% for meat and 38% for sugar.
Minutes from the Federal Reserve’s policy-setting committee meeting that were released Wednesday afternoon indicated a “very tight” U.S. job market and rising inflation might require the central bank to raise interest rates sooner than many already expected. The minutes suggested inflationary concerns outweigh the economic risks posed by the rampant Omicron variant of the coronavirus. The probability that the Fed will raise interest rates in March rose to greater than 70%, according to the Fed funds futures market.
CORN: USDA reported net U.S. corn sales of 256,100 MT for the week ended Dec. 30, down 80% from the previous week and down 81% from the average for the previous four weeks. Exports of 985,100 MT were up 7% from the previous week but down 2% from the prior four-week average. Sales were expected to range between 500,000 MT and 1.2 MMT.
SOYBEANS: Net weekly U.S. soybean sales were a marketing-year low at 382,700 MT, down 27% from the previous week and down 63% from the average for the previous four weeks. Top buyers included China, at 353,900 MT, including 264,000 MT switched from unknown destinations and decreases of 3,700 MT. Sales fell short of expectations ranging from 400,000 MT to 1.3 MMT. Soybean futures’ open interest rose by about 24,000 contracts over the past three days as prices rallied, the largest three-day increase since mid-October.
WHEAT: Net weekly U.S. wheat sales were a marketing-year low at 48,600 MT for 2021-22, down 76% from the previous week and down 87% from the prior four-week average. Sales were expected to be 150,000 to 400,000 MT. Exports of 210,900 MT were down 37% from the previous week and 17% from the prior four-week average.
LIVESTOCK CALLS
CATTLE: Steady-weak
HOGS: Steady-firmer
CATTLE: Live cattle futures may continue a week-long retreat amid eroding cash prices and slower slaughter pace. Cash cattle traded around $138 in the Southern Plains and $220 in the northern dressed market yesterday, and with futures under pressure, some feedlots sold cattle at prices $1.00 to $2.00 below last week’s average. Also, lagging slaughter so far this week may be stirring concern over a backlog of animals. Packers slaughtered an estimated 340,000 head of cattle so far this week, down 18,000 from the same period last week. Any futures declines may be muted by continued strength in wholesale beef. Choice cutout values rose 11 cents yesterday to $266.93, the highest daily average since Dec. 7. Weekly U.S. beef sales posted a net reduction of 3,900 MT, a marketing-year low that reflected reductions primarily for South Korea (2,300 MT), China (1,200 MT) and Japan (400 MT). February live cattle fell 57.5 cents yesterday to $137.25, the contract’s lowest close since $136.925 on Dec. 21.
HOGS: Futures may extend yesterday’s surge on strengthening cash fundamentals and bitter cold temps across the Midwest. The CME lean hog index is up another $1.12 today to $73.87, the highest level since Nov. 17. February lean hogs ended yesterday $8.405 above today’s cash index. Wholesale pork has also firmed, with cutout values up 45 cents yesterday to an average of $85.92, led in part by a gain of $4.72 in bellies. Movement totaled 326.53 loads. Net weekly U.S. pork sales totaled 19,400 MT for 2021, up “noticeably” from the previous week but down 6% from the previous four-week average, USDA reported. February lean hogs surged $2.125 yesterday to $82.275, while April jumped $1.675 to $88.675, the contract’s highest close since Oct. 1.
