Ahead of the Open | June 6, 2022
GRAIN CALLS
Corn: 8 to 11 cents higher.
Soybeans: 8 to 10 cents higher.
Wheat: 27 to 37 cents higher.
GENERAL COMMENTS: Winter wheat futures rose sharply overnight and corn and soybeans also climbed amid ongoing disruptions to global grain trade from Russia’s war with Ukraine. Front-month U.S. crude oil futures are near unchanged after earlier rising to a three-month high near $121 per barrel. U.S. stock index futures signal a firmer open, while the U.S. dollar index is slightly weaker this morning.
Over the weekend, Russia destroyed a major Ukrainian grain export terminal in Mykolaiv. Russia’s attack on Ukraine’s grain infrastructure after last week saying it was open to allowing grain exports via “humanitarian corridors” from Ukrainian ports has heightened supply concerns. Dealers noted Russian warships continued to control access to Ukraine's Black Sea ports with Russian President Vladimir Putin proposing that grain could be shipped via Belarus but only if sanctions against Russia's ally were lifted.
Before Russia’s invasion, around 98% of Ukraine’s grain exports would flow from ports on the Black Sea. But those ports have been shut by a Russian naval blockade, and warehouses, rail yards and other key export infrastructure have been damaged by Russian attacks. Despite the war, Ukraine is still expected to produce around 30 MMT of wheat, corn and other food commodities this year, the Wall Street Journal reported. Traders and farmers, with the support of the Ukrainian government and neighboring nations, are seeking alternative routes to export those grains to avoid global food shortages.
Drier weather is expected this week across the northeastern U.S. Plains, according to World Weather Inc., which will improve planting conditions in an area where spring fieldwork is severely behind. Meanwhile, the Corn Belt, Delta and Southeast are expected to see a favorable mix of rains and sunshine over the next two weeks, which will support crop development. After receiving rains last, West Texas cotton areas are expected to be dry, though the Texas Panhandle will be in line for some rains.
In the last two weeks, traders have signed contracts to export 1 MMT of rice from India for shipment from June through September and are opening letters of credit (LCs) quickly after signing deals to ensure the contracted quantity will be exported. The aggressive stance by traders comes after India recently banned wheat exports.
Large speculators cut their bullish bets in the corn market to the lowest levels since late October as prices slumped in late May. The managed money net long in corn futures and options fell 22,505 contracts during the week ended May 31 to 268,964 contracts, the lowest since the week ended Oct. 26, according to Commodity Futures Trading Commission data. Fund slightly increased a net long in soybeans during the latest reporting period.
CORN: July corn futures rose as high as $7.41 overnight after ending last week at $7.27, down 49 3/4 cents for the week and the lowest closing price since April 1. December corn reached $7.05 overnight after dropping 40 cents for the week. USDA’s weekly crop progress update after today’s should show the crop close to 100% planted.
SOYBEANS: July soybeans overnight rose as high as $17.17 3/4 after dropping 31 1/2 cents Friday to $16.97 3/4, down 34 1/2 cents for the week and the contract’s first weekly decline in the past four.
WHEAT: July SRW wheat rose as high as $10.94 1/2 overnight after ending last week at $10.40, down $1.00 3/4 for the week. July HRW wheat plunged $1.14 1/4 last week.
LIVESTOCK CALLS
CATTLE: Steady-weak
HOGS: Steady-firm
CATTLE: Live cattle futures may face pressure from signs of slower beef demand as boxed beef movement late last week eased from strong early-week levels. Retailers appeared to be actively restocking in the initial days after Memorial Day before backing away from the market somewhat, with movement slowing to just 88 loads Friday. Beef movement this week will indicate whether retailers are done with their restocking or actively buying for Father’s Day and Fourth of July features. Choice cutout values ended last week at $267.26, up $1.84 from the end of the previous week.
Traders will watch cash trade closely to see whether a four-week slide continues. USDA-reported live steers averaged $137.84 through Friday morning, down from last week’s average of $139.07 and the fourth straight weekly decline. August live cattle fell 27.5 cents Friday to $133.85, up $1.45 for the week. August feeders ended at $173.875, up $7.55 for the week.
HOGS: Lean hogs may gain support from continued strength in cash fundamentals. The CME lean hog index is up $1.02 today to $106.05 (as of June 2), the 11th gain in the past twelve days and the highest level since August. While summer-month lean hog futures ended Friday $2 to $4 above that level, the magnitude of that daily gains should produce stronger buyer interest. Seasonally, the cash index should continue to strengthen into summer, especially if hog slaughter rates back down to levels implied by the March Hogs & Pigs Report after more gilts went to market over the past month. Pork cutout values rose $2.00 Friday to $112.02, up $5.86 from a week ago. Movement was strong at about 332 loads.
July lean hogs fell $1.425 Friday to $110.75, down 97.50 cents for the week.
