Ahead of the Open | June 1, 2021

GRAIN CALLS

Corn: Up 19 to 25 cents.

Soybeans: Up 20 to 25 cents.

Wheat: Up 20 to 40 cents.

 
GENERAL COMMENTS:  Grains and soybeans soared overnight to start the new trading month and remain up double-digits at the break. July and Dec corn continued to drive trade volume, with the U.S. crop likely to face stress, particularly in northern and northwestern U.S. and into Canada with forecasts turning hot and dry through mid-month.  Holiday weekend rains were heavy across the central and southern Plains, scattered elsewhere. There are new worries about China's crops from Jiangsu to northeastern Sichuan and northward to Inner Mongolia with up to ten days of net drying expected.

Temperatures dipped below freezing over Memorial Day weekend in the Upper Midwest and Northern Plains, raising questions about slowed development and the possibility some replanting will be needed given the more advanced development of crops for this time of year. USDA’s first condition rating for corn will be released today. Last week, USDA rated 78% of the Iowa corn crop and 71% of Illinois’ corn crop “good” to “excellent.” World Weather Inc. commented that in North Dakota, “Temperatures in the 30s and a few extremes in the upper 20s were cold enough to induce some damage” to crops, with canola, sugar beets, dry beans and pulses likely seeing the most damage. It adds some corn and soybeans were also likely damaged but assessing that will take time.  USDA releases it initial U.S. corn crop conditions after the close today with high ratings expected.

Before the reopening this morning, USDA did not announce any new private exporter sales this morning.    The lack of new daily sales may limit new buying in corn and soybeans this morning.

CFTC Report showed managed money traders again mostly selling in grain and soybean contracts, reducing net longs more than 23,000 contracts in corn and meal, with funds cutting net longs by 13,200 contracts in soybeans and almost 10,000-contract reduction in SRW wheat That selling was about half what was expected for both corn and soybeans. Meanwhile commercials cut net short positions by almost 33,600 futures and options and more than 11,300 in Soybean as of May 25.  Despite corn prices trading well off their early May highs, speculators are not yet comfortable with the short side. Money managers boosted their gross shorts by 69% in the latest three weeks, but the May 25 total was unusually low at just 39,186 contracts. The five-year average for the week is about 270,000 gross shorts.  Fund have avoided an escalation in short soybean bets. Their gross shorts stood at 10,589 contracts as of May 25, relatively unchanged since late last year, though they cut outright longs by 20% in the latest two weeks.   

Global stock markets were higher with a stronger opening expected on Wall Street this morning as investors looked ahead to U.S. jobs data on June 4 for reassurance the biggest global economy is improving following the previous month’s big hiring miss. Meanwhile OPEC+ is meeting in Vienna today, where the oil producers are expected to sign off on an output increase in July. All eyes are on the alliance’s expectations for beyond July, and whether they think there’s a need to keep hiking output as a crude oil glut built during the pandemic recedes. OPEC’s Joint Technical Committee estimated on Monday that by the end of July stockpiles in developed nations will be below the average levels seen during 2015 to 2019 -- a key benchmark for the group. With Brent futures rising above $70 a barrel, the meeting is closely watched not just by oil traders, but also by inflation forecasters.

CORN:  New-crop futures are leading higher. After successfully bouncing away from support last week, the markets are adding back some weather premium and looking for signs the weakness last week spurred better buying from overseas imports.  Brazilian agribusiness consultancy AgRural on Monday said it cut its production estimate for Brazil's second corn crop in the Center South region due to a prolonged drought that worsened in the first week of May. The smaller crop estimates continue to provide underlying price support and may boost U.S. exports. Corn futures on the Dalian Commodity Exchange were narrowly mixed overnight.  Chinese officials continue try to talk down commodity prices including corn.  Memorial Day weekend gas prices rose to highest since 2014 and provide a solid backdrop to ethanol production outlooks this summer.

SOYBEANS:  Soybean futures are new two-week highs on weather after bouncing away from key technical support levels last week. Malaysian palm oil futures fell for a second straight day on Tuesday, as a two-week lockdown threatened to hit domestic consumption of the edible oil amid a sluggish export pace in May, but expectations of lower production limited losses. Malaysia starts a two-week nationwide lockdown on Tuesday. Essential manufacturing and service sectors, including the palm oil supply chain, are allowed to operate but the closure of most businesses is likely to affect local palm oil consumption. China’s soyoil futures on the Dalian Commodity Exchange rose 1% and the palm oil futures gained 0.1%. Chinese soybean prices rose Friday but still closed lower this week. Soybean processors in the U.S. will likely report they crushed 5.133 million short tons (171.1 million bu.) of soybeans during April, according to analysts surveyed by Reuters. That would be a notable retreat from 188.2 million bu. crushed in March and last year’s 183.4 million bu., which was the strongest April crush on record.

WHEAT: Spring wheat is leading the markets higher on hot temperatures forecasts this week across U.S. and Canadian crop areas.  However, ag consultancy IKAR now forecasts Russia’s 2021 wheat crop at 79.5 MMT, up 500,000 MT from its previous forecast. The consultancy cited improving weather for crops in Russia’s southern regions and a large sowing area for spring wheat in Russia’s central region.  Saudi Arabia bought 562,000 MT of wheat for August and September delivery. Better U.S. export sales are needed to sustain today’s rallies.

CATTLE: Weak
HOGS: Steady to firm

JBS USA, the world's largest meat supplier, says it was the target of an “organized cybersecurity attack." In a statement, JBS, which has its U.S. headquarters in Greeley, Colorado, said the attack affected some of its servers supporting its North American and Australian IT systems.  JBS, a leading processor of beef, pork and other prepared foods in the U.S., said it was "not aware of any evidence at this time that any customer, supplier or employee data has been compromised or misused as a result of the situation."

CATTLE: Cattle futures fell late last week to close near weekly lows, setting up an important test of bulls’ convictions early this week. It may take another week to build a new base of support. Beef production last week fell an estimated 5.9% from the week prior, according to USDA’s weekly update. This comes at a time when beef prices are soaring. Choice climbed another 99 cents to $330.97 per cwt. on Friday but Select set back $3.20. But the lower grade is still above $300 a hundredweight. Movement slowed to 80 loads. But the cash market remains disconnected from the product market, with last week featuring steady to slightly higher trade.  Meanwhile, Argentina today announced it has temporarily shut down 12 beef exporters, citing “irregular” operations and the government has seized more than 220 MT of meat. The minister says another five firms is also under investigation. This comes amid a 30-day ban on beef exports four the country, which ranchers responded to with a sales halt of their own.

HOGS:  Lean hog futures ended last week and the month of May on a strong note with nearby contracts hitting new contract highs and nearby futures soaring to their highest level since 2014. That sets the stage for follow-through buying as traders return from a long holiday break. But if price fail to extend gains this week it could increase the potential for seasonal highs. The pork cutout value edged 22 cents higher on Friday, with movement edging higher. Cash hog bids fell $1.89 for the day after strong gains to start the day. Last week’s kill edged 0.6% lower from the week prior, with pork production sliding 0.9%, with holiday downtime curbing the weekend kill.