Ahead of the Open | July 5, 2022

GRAIN CALLS

Corn: Steady to lower

Soybeans: Steady to lower.

Wheat: Steady to lower.

GENERAL COMMENTS: Grain and soybean futures may face followthrough pressure at today’s open after plunging to multi-month lows late last week amid improving weather prospects for the Midwest. Grain markets resume trading at 8:30 a.m. CT following the holiday weekend. Livestock markets also open at 8:30 a.m. CT. Malaysian palm oil futures extended a recent slump to hit the lowest prices since September, while front-month crude oil is down slightly. The U.S. dollar index surged more than 1,100 points higher this morning to a 20-year high.

Rains of at least one inch to well over two inches fell over much of the Midwest yesterday, bring relief to dry soils as the corn crop nears pollination. U.S. weather “is turning more favorable for summer crops with rain already reported in the northwestern Corn Belt during the weekend,” World Weather Inc. said. “Significant rain is expected this week across the dry areas of Indiana, Illinois, Ohio and Kentucky with a little relief in Michigan as well. Most of the U.S. Midwest will get rain next week as well.”

Russian-installed authorities in the southeastern Zaporizhzhia region of Ukraine, partly under Russian control, said today an agreement had been reached to sell grain abroad, mainly to the Middle East, TASS reported. The state-run news agency cited Yevgeny Balitsky, the head of the Russian-installed administration of the Zaporizhzhia region, as saying the planned deals included sales to Iraq, Iran and Saudi Arabia. He said Russian agricultural traders and state companies were buying grain from the region’s farmers. Ukraine has accused Russia of stealing grain from territories that Russia’s army has seized. Meanwhile, Turkish customs authorities have detained a Russian cargo ship carrying grain that Ukraine says is stolen, the country’s ambassador to Turkey said on Sunday.

Ukraine is holding talks with Turkey and the United Nations (UN) to secure guarantees for grain exports from Ukrainian ports, President Volodymyr Zelenskyy said Monday. “Talks are in fact going on now with Turkey and the UN (and) our representatives who are responsible for the security of the grain that leaves our ports,” Zelenskyy said at a news conference. “This is a very important thing that someone guarantees the security of ships for this or that country – apart from Russia, which we do not trust. We therefore need security for those ships which will come here to load foodstuffs.”

Brazilian farmers continue to report variable safrinha corn yields due to irregular rainfall and pest pressures, but good yields in central Mato Grosso are compensating for lower yields in other areas. As a result, Crop Consultant Dr. Michael Cordonnier raised his Brazilian corn crop estimate by 2 MMT to 112 MMT and he says production “might move a little higher” by the time harvest is complete. Brokerage StoneX raised its Brazilian corn crop estimate by 2.5 MMT to 119.3 MMT. The safrinha corn harvest in Brazil was 31% done as of late last week, according to AgRural. StoneX also raised its Brazilian soybean crop estimate by 2.6 MMT to 127 MMT.

Statistics Canada reported all-wheat plantings at 25.4 million acres, above the 24.7 million acres traders expected. Canola seedings totaled 21.4 million acres, just above expectations for 21.3 million acres.

Indonesia raised the palm oil export quota in a bid to cut soaring inventories of the edible oil, a trade ministry official said on Tuesday, without providing specific details. Industry officials warned farmers faced an “emergency” due to falling prices amid the inventory backlog caused by a three-week export ban that ended May 23.

As grain prices tumbled late last month, large speculators reduced bullish bets in the corn market to the lowest level since mid-October and cut bullish bets in soybeans to the lowest since late January, data from data from the U.S. Commodity Futures Trading Commission showed. The managed money net long in corn fell 36,649 futures and options contracts during the week ended June 28 to 228,615 contracts, the smallest net long since the week ended Oct. 19. The combined selling across corn and soybeans was the equivalent of 333 million bushels, the most for any week since November, Reuters reported.

JPMorgan Chase & Co. commodity strategist Tracey Allen said about $15 billion moved out of commodity futures markets during the week ended June 24. It was the fourth straight week of outflows and brought to about $125 billion the total that has been pulled from commodities this year, a seasonal record that tops even the exodus in 2020 as economies closed.

Egypt purchased around 444,000 MT of wheat, including 214,000 MT Russian, 170,000 MT French and 60,000 MT Romanian. South Korea tendered to buy up to 140,000 MT of optional origin corn to be sourced from the U.S., Black Sea/eastern Europe, South America or South Africa. South Korea tendered to buy up to 130,000 MT of optional origin feed wheat, excluding Argentina, Pakistan, Denmark and China. Jordan purchased 120,000 MT of optional origin milling wheat. Japan is seeking 122,420 MT of wheat from its weekly tender.

CORN: December corn futures fell 12 1/4 cents Friday to $6.07 1/2, the contract’s lowest closing price since Feb. 28 and a drop of 66 1/2 cents for the week. Last week’s selloff dropped corn well into oversold conditions, which may spur some corrective buying early this week. Traders will watch for USDA’s next weekly crop condition updates after today’s close.

SOYBEANS: November soybeans plunged 62 3/4 cents Friday to $13.95 1/4, the contract’s lowest settlement since $13.92 3/4 on Feb. 3 and a drop of 29 cents for the week. New-crop soybeans may face further pressure from fund liquidation and broader concerns over a possible recession.

WHEAT: Futures also took heavy pressure last week, fueled in part by expanding winter wheat harvest, but bargain-hunting and corrective buying could provide a boost today. September SRW wheat futures fell 38 cents Friday to $8.46, down 90 1/2 cents for the week and a four-month closing low. September HRW wheat fell 38 1/4 cents to $9.13 1/2, down 85 3/4 cents for the week.

LIVESTOCK CALLS

CATTLE: Steady-firmer

HOGS: Steady-weaker

CATTLE: Live cattle may find support early this week from cash prices that climbed to seven-year highs last week, though gains may be limited by pessimism over beef demand. July 4 was the last big “beef holiday” until Labor Day and beef demand typically slumps until retailers start making purchases for Labor Day features around mid-August. But even if the beef market slumps and pulls cash cattle prices lower, nearby live cattle futures already hold sizable discounts to the cash market. Wholesale beef continued to weaken as retail demand faded. Choice beef cutout values ended last week at $263.82, down $1.16 from a week earlier and the third straight weekly decline.

August live cattle surged $2.025 Friday to $134.60, the highest closing price since June 22 and up $1.225 for the week. August feeder futures fell 90 cents to $174.50, up $2.00 on the week.

HOGS: Lean hog futures may extend a two-week slide on expectations for further weakness in the cash market. The next CME lean hog index is down 14 cents to $110.70, the third straight decline. Pork cutout values ended last week at $108.75, down $3.45 from a week earlier and the second straight weekly decline. Recent cash erosion suggests the summer high has been posted. But July futures finished last Friday slightly below the cash index and August hogs ended at around a $7.75 discount. The current price structure already anticipates a seasonal pullback in cash prices.

August lean hogs rose 87.5 cents Friday to $102.975, down $3.80 for the week and the second straight weekly decline.