Ahead of the Open | July 6, 2022

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GRAIN CALLS

Corn: 4 to 6 cents higher.

Soybeans: 18 to 21 cents higher.

Wheat: 14 to 24 cents to higher.

GENERAL COMMENTS: Grain and soybean futures are expected to open higher after seeing corrective buying overnight in the wake of slightly lower-than-expected weekly USDA crop ratings. Malaysian palm oil futures fell a fourth consecutive session, dropping 2.8% to the lowest level in nearly a year amid recession concerns. Front-month U.S. crude oil is slightly higher this morning. The U.S. dollar index is up more than 400 points this morning to a fresh 20-year high.

Parts of the Midwest received more rain overnight, with thunderstorms producing damaging winds in South Dakota and Iowa Tuesday afternoon through the evening, with concerns a derecho may have damaged some crops, World Weather Inc. said. “Losses should be low relative to the nation’s entire crop with South Dakota most impacted,” the forecaster said. Additional waves of rain will reach the northern and eastern Midwest during the next few days, producing additional relief from dryness in many areas. The southwestern Corn Belt, northern and western Delta and Southern Plains will experience more heat and dryness into the weekend.

Ukraine expects a grain harvest (not including oilseeds) of at least 50 MMT this year, which is “not bad given all the difficulties,” the country’s first deputy agriculture minister said, though down sharply from last year’s record 86 MMT crop. The official says most of Ukraine’s wheat crop will be milling quality and the country would need to export at least 30 MMT of grains in 2022-23.

Ukraine’s grain traders union UGA revised up its forecast for the country’s grain and oilseed production by 2.9 MMT to 69.4 MMT, including 27.3 MMT of corn, 20.8 MMT of wheat and 9 MMT of sunflower seed. UGA says the country will be able to export 10 MMT each of corn and wheat in 2022-23, with total grain and oilseed exports likely to be between 25 MMT and 31.5 MMT.

China reported its first cases of the highly transmissible Omicron BA.5.2 subvariant of Covid-19. The cases were detected in Xi’an; authorities sent parts of the city into lockdown in response. Meanwhile, Shanghai is once again reporting new cases of Covid-19, raising fears of new restrictions.

South Korea purchased 140,000 MT of corn from unspecified origins and 65,000 MT of feed wheat likely to be eastern European origin. Japan tendered to buy 70,000 MT of feed wheat and 40,000 MT of feed barley.

 

CORN: USDA late Tuesday rated 64% of the corn crop either “good” or “excellent” as of Sunday, down from 67% in those categories a week earlier and even with the same date in 2021. Traders expected a rating of 65%. 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 dropped 5.4 points to 364.1. That was 6.8 points below the five-year average for the beginning of July.

December corn overnight fell to $5.71 3/4, just above the five-month low of $5.71 posted Tuesday, before rebounding. The contract is trading around 23.6 on the Relative Strength Index (RSI), well into oversold territory, which may encourage further corrective buying.

SOYBEANS: USDA rated 63% of the U.S. soybean crop in “good” to “excellent” condition as of Sunday, down from 65% from a week earlier but above 59% last year at this time. Traders expected a reading of 64%. On the Pro Farmer CCI, the soybean crop dropped 5.7 points to 354.9, which was 2.5 points below average for the date and the first time the crop rating has been below the five-year average so far during the growing season.

November soybeans overnight fell within 2 cents of the five-month intraday low of $13.04 reached Tuesday before climbing.

WHEAT: USDA reported 54% of the U.S. winter wheat crop was harvested as of Sunday, up from 41% a week earlier and ahead of the 48% average for the previous five years. Harvest progress fell short of analysts’ expectations of 57% complete. USDA also rated 66% of the spring wheat crop “good” to “excellent,” up from 59% a week earlier and exceeding trade expectations for 59%. On the Pro Farmer CCI, the U.S. spring wheat crop improved 7.9 points to 368.3 and 30.5 points above average for the beginning of July.

 

LIVESTOCK CALLS

CATTLE: Steady-mixed

HOGS: Steady-firm

CATTLE: Live cattle futures face conflicting signals, with cash prices last week reaching the highest in seven years, but wholesale beef demand eroding as retailers scale back purchases. Choice boxed beef prices firmed 84 cents Tuesday to $264.66, but movement was light at 109 loads. Last week, overall wholesale market movement totaled 3,379 loads, the lowest weekly total since early May. With retailers likely to do only some fill-in buying following the holiday, beef movement isn’t expected to be strong, especially with retail prices high. Traders will watch for mid-week cash developments after live steers last week averaged $146.16, up $1.61 from the previous week's average.

HOGS: Lean hog futures may see followthrough buying from Tuesday’s strong close, which came despite sharp losses across other ag commodities. The CME lean hog index is down 12 cents today (as of July 1) to $110.58, the fourth straight daily decline, but Tuesday’s performance in futures suggests traders anticipate the cash market will strengthen short-term as July hogs finished at around a $1.50 premium. Pork cutout values rose $5.73 Tuesday to $114.48, a three-week high. Movement was strong at 306 loads. August hogs rose $2.975 Tuesday to $105.95, the contract’s highest closing price since June 24.

 

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