Ahead of the Open | June 21, 2022

GRAIN CALLS

Corn: 17 to 21 cents lower.

Soybeans: 20 to 27 cents lower.

Wheat: 12 to 18 cents lower.

GENERAL COMMENTS: Winter wheat futures fell overnight to the lowest levels in over two months on increasing harvest pressure from U.S. and European crops. Corn and soybean futures gapped lower at the start of overnight trade on prospects for a break in recent heat waves in the Midwest. Malaysian palm oil futures ended little-changed after drooping near a six-month low earlier in the session. Front-month U.S. crude oil futures are up nearly $2.00. U.S. stock futures signal a stronger open, while the U.S. dollar index is down more than 400 points this morning.

A high-pressure ridge over North America will shift to the west over the next couple of weeks, eventually leading to less heat in the central and eastern U.S. and potentially increasing rainfall chances from the Northern Plains into the lower eastern Midwest, World Weather Inc. said today. The expected changes in North America “will come slowly and most of this week will still be hot and dry in the Southern Plains, Delta, Tennessee River Basin and lower Midwest,” the forecaster said. “Very little rain will occur this week in the eastern Midwest… although the region will cool down after mid-week.”

Economists surveyed by the Wall Street Journal put the probability of the economy being in recession sometime in the next 12 months at 44%, up from 28% in April and 18% in January. “Since the Journal began asking the question in mid-2005, a 44% recession probability is seldom seen outside of an actual recession,” the Journal said.

China imported only 126,727 MT of corn from Ukraine in May, down sharply from 695,585 MT in April and 1.26 MMT last year. China imported 1.9 MMT of corn from the U.S. in May, virtually the same amount as last year. In the first five months of this year, China imported 6.4 MMT of corn from the U.S., down from 6.7 MMT during the same period last year. China’s corn imports in May from all origins fell 34.1% from a year ago, while shipments in January-May were down 2.9%.

Indonesia had issued permits to export 867,682 MT of palm oil products under its Domestic Market Obligation (DMO) program as of Monday. Separately, the government issued export permits for 535,998 MT of palm oil products under the export acceleration program where a quota of 1.16 MMT was allocated. Meanwhile, Indonesia set its July crude palm oil reference price at $1,615.83 per MT, down from the current $1,700.12 per MT. The July reference price would place the export levy and export tax at a maximum $200 per MT and $288 per MT, respectively.

Saudi Arabia purchased 300,000 MT of wheat from unspecified origins. Algeria tendered to buy a nominal 50,000 MT of optional origin milling wheat. Japan is seeking 168,330 MT of wheat in its weekly tender. Bangladesh tendered to buy 50,000 MT of optional origin milling wheat. Tunisia tendered to buy 75,000 MT of soft wheat and 50,000 MT of feed barley – both optional origin, excluding the Black Sea region.

Large speculators in mid-June reduced their bullish bets in the SRW wheat market to the lowest level in 3 1/2-months, data from the Commodity Futures Trading Commission showed. The managed money net long in SRW futures and options shrank 5,736 contracts during the week ended June 14 to 6,939 contracts, the fourth straight weekly decline and the smallest net long since the week ended March 1. In corn, the managed money net long rose for the first time in four weeks. The soybean net long also rose.

CORN: July corn futures gapped lower at the opening of overnight trade and fell as low as $7.63 3/4, while December fell as low as $7.02 1/2, the contract’s lowest intraday price since June 7. Traders await USDA’s next weekly crop condition ratings after today’s close. Last week’s ratings showed slight deterioration in the crop.

SOYBEANS: July soybeans gapped lower and fell as low as $16.76, the contract’s lowest intraday price since June 1. November soybeans also fell near a three-week low. USDA’s condition ratings will be closely studied after the three-day weekend. USDA reported 70% of the crop in “good” to “excellent” condition as of June 12, while the crop was 88% planted.

WHEAT: July SRW wheat fell as low as $10.04 overnight, the contract’s lowest intraday price since April 4. Futures’ weakness indicates traders expect a good jump in harvest progress last week. A week ago, USDA reported spring wheat planting 94% done as of June 12, up from 82% the week prior, while the winter wheat harvest was 10% complete, up from 5% a week earlier.

LIVESTOCK CALLS

CATTLE: Steady-firmer

HOGS: Steady-mixed

CATTLE: Live cattle futures may find support from expectations last week’s cash strength will extend into this week. Supplies of market-ready cattle were already tight and recent heat-related death losses further trims the immediate supply of cattle. Despite those bullish factors, nearby live cattle futures continue to trade at discounts to the cash market. Live steers averaged $143.67 last week, up from the previous week’s average of $140.14. Choice cutout values rose 24 cents Monday to $266.50 after falling near a three-week low at the end of last week.

August live cattle ended last week at $136.575, up 37.5 cents for the week. August feeders rose $1.65 to $172.95, down $1.525 for the week.

HOGS: Lean hog futures may struggle to extend last week’s strong gains amid signs of weakness in cash fundamentals. The CME lean hog index reached a 10-month high last week but is weaker today. Strong gains last Friday pushed July futures above the cash index, though August hogs continue to hold a mild discount. It’s unlikely traders will put too much weather premium into July hogs as they remain rather cautious. Pork cutout values fell $2.74 Monday to $111.87, down from a four-month high above $114.00 posted at the end of last week. July lean hogs rose $1.425 to $110.30, up $5.525 for the week. August hogs rose $1.85 to $107.875.

China imported 130,000 MT of pork during May, down 10,000 MT (7.1%) from April and 65.7% less than last year. Through the first five months of this year, China’s pork imports at 680,000 MT fell 65.2% compared with the same period last year.