Ahead of the Open | July 12, 2021

GRAIN CALLS

Corn: 2 to 4 cents higher

Soybeans: 1 to 4 cents higher

Wheat: Mixed; spring wheat 4 to 7 cents higher, winter wheat 1 to 3 cents lower.  

GENERAL COMMENTS:

Ample rains fell across much of the Midwest over the weekend, though northern and northwestern areas of the Corn Belt along with the Northern Plains saw limited precip. Areas of southern Minnesota and northern Iowa that largely missed on weekend rains have a chance at picking up some precip Tuesday and Wednesday before warmer temps move back into the Northern Plains and western Corn Belt. Once the warmer temps move back in, they are expected to trend warmer than normal over the remainder of the two-week period, though World Weather Inc. does not expect extreme readings. Bottom line: Crop stress will persist in dry northern and northwestern areas of the Corn Belt, while conditions are favorable across the rest of the Midwest.

USDA will update its U.S. and global balance sheets at 11:00 a.m. CT. USDA will not issue survey-based estimates for U.S. corn, soybean and cotton crops but it will incorporate acreage estimates from the June 30 Acreage Report. Don’t expect any change to corn and soybean yield projections. USDA is expected to trim U.S. old-crop corn carryover but raise its new-crop carryover projection versus its June forecasts. Its soybean carryover projections are expected to inch lower for both marketing years. Wheat carryover is expected to slide.

 USDA will also issue its first all-wheat production estimate, including the first survey-based forecasts for other spring wheat and durum.

On the global front, attention will be on USDA’s Brazilian corn crop peg, though that figure is likely to remain higher than most private estimates, which are in the low-90-MMT range or lower.

China plans to add 10.85 MMT in storage capacity for its grains stockpiling program, the state-controlled Global Times reported. The government stockpiler Sinograin plans to build 120 storage facilities this year. State media previously reported the country has more than 650 MMT of grain storage capacity.

CORN: Corn futures were supported overnight by short-covering ahead of this morning’s USDA reports. Some analysts are attributing the overnight strength to less-than-expected weekend rainfall across northern areas of the Corn Belt, but that seems like a stretch to us. As of July 6, managed money accounts trimmed their net long position to 217,410 futures contracts, which was the smallest since October 2020 but leaves them plenty of room to liquidate more contracts.  

SOYBEANS: Soybean futures are also boosted by mild corrective buying overnight. Light position evening is expected ahead of this morning’s USDA reports. Funds mildly increased their net long position to 77,301 soybean futures contracts as of July 6. But that’s still the smallest net-long stance since August 2020.

WHEAT: Spring wheat futures were supported overnight by ongoing crop concerns, while the winter wheat markets favored the downside. Managed money accounts were net short 16,363 SRW futures contracts, but net long 20,065 HRW futures and net long 8,826 HRS futures contracts as of July 6.

CATTLE: Steady/weaker

HOGS: Steady/firmer

CATTLE: Futures broke down technically last week, which is expected to trigger a weaker open this morning. If early seller interest is limited, some corrective buying should surface and may support futures. While August live cattle are trading below the cash market, the upside is likely limited with wholesale beef prices falling. Boxed beef values extended their price selloff last Friday, with Choice boxes down $3.38 and Select down $2.65, while movement slowed to just 109 loads on the day. With restaurants fully restocks after reopening in the spring and summer features mostly covered, packers are having to lower prices to attract retailer demand.

HOGS: Lean hog futures are expected to open with a firmer tone this morning. July hogs, which expire on Thursday, must track the cash index, which should limit price movement in that contract. Deferred contracts should be supported by their discounts to the cash index. The average national direct cash hog price firmed $2.04 last Friday to a weighted average of $111.86. Packer margins are mildly negative, but strength in the product market is keeping packers from cutting deep in the red. The pork cutout value slipped 45 cents last Friday, but remains strong overall at an average of $116.44.

Reports out of China signal a resurgence in African swine fever cases in the top hog-producing province Sichuan. Chinese farmers are reportedly culling herds before they lose hogs to the disease.