Ahead of the Open | July 26, 2022
GRAIN CALLS
Corn: 15 to 18 cents higher.
Soybeans: 22 to 28 cents higher.
Wheat: 20-plus cents higher.
GENERAL COMMENTS: Corn and soybean futures gapped higher at the start of overnight trading and rallied to the highest levels in over a week following lower-than-expected USDA crop ratings. Wheat futures also surged. Malaysian palm oil futures rose nearly 4% with support from gains of nearly $4 in front-month crude oil. U.S. stock index futures indicate a lower open, while the U.S. dollar index jumped over 700 points.
Midwest temperatures will turn hot once again next week. A returning high-pressure center in the central U.S. will bring back drier and warmer weather for the Plains and Midwest, but no seriously harsh weather is expected through the first half of August, World Weather Inc. said today. This week, the northern U.S. Midwest will experience milder-than-usual weather with limited rain, while the lower Midwest and central Plains “will see waves of rainfall continuing over the next several days.”
Extreme heat in some areas last week further stressed crops during corn pollination and soybean blooming and pod setting, prompting Crop Consultant Dr. Michael Cordonnier cut his corn yield estimate by 2 bu. to 175 bu. per acre. He lowered his soybean yield by 0.5 bu. to 51 bu. per acre. Cordonnier has a neutral to lower bias toward both the corn and soybean yields with long-range forecasts calling for hotter and drier weather to return after brief relief this week.
The Joint Coordination Centre (JCC), established as part of the deal to resume grain exports from Ukraine, has started work in Istanbul, Russian news agencies reported, citing Russia’s defense ministry. The Russian delegation to the JCC will arrive in Turkey today and begin work in a four-way format, alongside Turkey, Ukraine and the United Nations.
French consultancy Agritel pegged the soft wheat crop in France, the European Union’s largest wheat grower, to fall 5.6% this year to 33.44 MMT after adverse weather cut yields. Agritel’s estimate, based on a survey of industry players July 18-22, is slightly above its initial forecast of 33.25 MMT and well above the French ag ministry’s projection earlier this month of 32.90 MMT, down 7.2% from last year.
Traders bought up to seven shipments of French wheat aimed for Pakistan as part of a 300,000-MT tender last week, European traders said on Tuesday, in a further sign that importing countries are turning to western Europe to fill a gap left by missing Black Sea grain.
Severe drought in Pakistan and high fertilizer prices forced it to make large purchases on the world market where supplies have tightened since Russia’s invasion of Ukraine. “It looks like most Pakistan sales made earlier last week are being covered from France, whereas it would have been a typical Black Sea business under normal circumstances, but France looks competitive now," a trader said.
Kazakhstan will produce between 13 MMT and 13.5 MMT of wheat this year, up around 15% from last year’s crop, according to the country’s ag minister. He says the country will need 6 MMT for domestic consumption and the rest will be available for export.
When USDA’s weekly condition ratings are plugged into the weighted Pro Farmer Crop Condition Index (CCI; 0 to 500-point scale, with 500 representing perfect), the corn crop fell 6.2 points to 357.1, which is now 11.6 points below the five-year average. Much of the weekly decline was in Minnesota, Nebraska and Kansas.
SOYBEANS: USDA reported 59% of the U.S. soybean crop in “good” to “excellent” condition as of Sunday, down from 61% the previous week and the sixth straight weekly decline. A number closer to 60% was expected. Based on the Pro Farmer CCI, the soybean crop dropped 2.7 points to 350.7, which is 5.5 points below average.
November soybeans overnight pushed above the 20-day moving average and reached $13.74 3/4, the contract’s highest intraday price since July 19.
WHEAT: An unexpected drop in USDA’s spring wheat crop ratings and concerns over Ukrainian supplies may support wheat. USDA reported 68% of the spring wheat crop in “good” to “excellent” condition as of Sunday, down from 71% the previous week and below analysts’ expectations for an unchanged figure. Based on the Pro Farmer CCI, the spring wheat crop fell 4.6 points to 372.5, still 45.1 points above the five-year average for the date. September SRW overnight rose to $7.92 but held within Monday’s range.
LIVESTOCK CALLS
CATTLE: Steady-mixed
HOGS: Steady-firmer
CATTLE: Live cattle futures may gain support from strength in wholesale beef prices and followthrough from Monday’s climb to three-month highs. Feeders may face pressure from rallying corn. Choice beef cutout values rose 99 cents Monday to $268.11 on light movement of 90 loads. Beef demand will likely remain in a relative lull period until retailers ramp up purchases around the second week of August for Labor Day features. Cash cattle averaged $141.12 last week, down $1.00 from the previous week. August live cattle rose 37.5 cents Monday to $137.75, the contract’s highest closing price since April 26.
HOGS: Lean hog futures likely will gain support from an ongoing strength in cash fundamentals, which should limit followthrough selling from Monday’s weaker close. The CME lean hog index is up another 86 cents to $119.08 (as of July 22), the highest level since June 2021. Pork cutout values rose $1.85 Monday to $127.92, near a 12-month high. Movement totaled 289.5 loads. August lean hogs fell $1.475 Monday to $117.225, while October futures declined $2.20 to $94.125.
