Ahead of the Open | July 23, 2021
GRAIN CALLS
Corn: unchanged to 2 cents lower.
Soybeans: 2 to 6 cents lower.
Wheat: Little-changed to 6 cents higher.
GENERAL COMMENTS:
Corn and soybean futures fell overnight but remain in this week’s trading ranges and are supported by concerns over dryness in the northwest Corn Belt. Wheat futures rose modestly, lifted by dry conditions in the U.S. and Russia. Nymex crude oil futures were little-changed, while the U.S. dollar index climbed to a new 3 1/2-month high.
Ridge building in the western U.S. late in the first week of August “is likely to verify, which will set the stage for a cool bias to temperatures during mid- and especially late August in the heart of the Midwest as well as the southeastern United States,” World Weather Inc. said. “Heat and dryness will be most significant in the Plains and western Corn Belt during the first week of the outlook, but… rainfall will continue below average in the Plains and western Corn Belt even when the ridge moves to the west and the northwesterly flow pattern evolves aloft in early August.”
Temperatures cooled for Canada’s Prairies this week, easing moisture stress. However, rain remained largely absent, with the exception of Alberta. “Drought has forced crops to advance in development faster than usual at the expense of potential yield and quality,” World Weather said. The weather forecaster expects scattered rains over Canada’s southern Prairies next week. But Saskatchwan’s ag ministry warns, “Any rain received now will not help increase crop yield but it will help maintain yields through the heat.”
Argentina’s 2021-20 wheat crop is deteriorating due to dryness in northern and central areas of the country’s farm belt, the Buenos Aires Grain Exchange said yesterday. But conditions were optimal for southern areas, which are heavily planted to wheat. The exchange held its harvest forecast at 19 MMT.
France’s farm ministry rated 75% of the country’s soft wheat crop good or excellent as of July 19, a one-point slip from the week prior but still ahead 57% a year earlier. Heavy, late-season rains have eroded yields and crop quality, with some concerned about the crop’s suitability for milling. The rains have also slowed harvest.
China imported record volumes of soybeans the first half of the year, but its purchases are expected to slow the second half of the year given a collapse in hog sector profitability and a big jump in wheat and rice use in feed, according to some analysts and Chinese industry sources cited by Reuters. Crushing margins are in the red, which will also clip demand. Some speculate the country’s total imports could fall short of 100 MMT, which compares to USDA’s 102 MMT forecast.
USDA reported a daily sale of 100,000 MT of soybeans to Mexico for 2021-22 delivery.
CORN: December futures fell as low as $5.56 overnight but could still end today above last week’s close of $5.52. Technical signals are neutral to bullish, suggesting sideways to higher trade over the near-term. A close above the July 6 gap crossing at $5.73 1/2 would open the door for a possible test of the July high at $6.11 1/4. A close below the 10-day moving average around $5.50 1/2 would temper the near-term friendly outlook.
WHEAT: Futures firmed overnight but held within tight ranges. Stochastics and the RSI reflect overbought conditions, but remain neutral to bullish, signaling that sideways to higher prices are possible near-term. If September extends its recent rally, the 75% retracement level of the May-July decline crossing at $7.28 1/4 is the next upside target.
CATTLE: Steady-weaker
HOGS: Steady-firmer
CATTLE: USDA’s monthly Cold Storage Report yesterday showed a solid month-to-month drawdown in frozen beef stocks during June, a period where stocks typically hold about steady. That points to strong beef demand at home and abroad. USDA’s monthly Cattle on Feed and biannual Cattle Inventory Reports later today are expected to show contraction in feedlots and the U.S. cattle herd. The July 1 feedlot inventory is expected to be down about 1% from year-earlier levels, and feedlot placements in June are expected to have declined about 4.1%. On cash markets, live steers in top U.S. feedlot regions yesterday averaged $120.21, down from last week’s average of $122.82, according to USDA.
HOGS: Pork cutout values yesterday rose 22 cents to $122.31, but movement was light amid a seasonal slowdown in processing. This week’s slaughter of 1.869 million head through Thursday is up 28,000 head from last week but down 16,000 head from year-ago. Cash hog bids dropped $1.47 on a national average basis on Thursday. USDA yesterday reported pork stocks fell 20.3 million lbs. during June, which compares to the usual drawdown of 27.6 million lbs. for the period. But stocks of 442.15 million lbs. are also 3.9% lighter than year-ago levels.
