Ahead of the Open | May 12, 2022

GRAIN CALLS

Corn: 1 cent lower to 2 cents higher.

Soybeans: 12 to 14 cents lower.

Wheat: 4 to 6 cents lower.

GENERAL COMMENTS: Grain and soybean futures were mixed to lower overnight ahead of USDA’s Supply and Demand Report that’s expected to reflect shrinking global stockpiles. Malaysian palm oil futures fell 2.1% as traders awaited clarity on Indonesia's export ban. Front-month U.S. crude oil futures fell nearly $2 but have rebounded to trade just slightly lower. U.S. stock index futures signal a weaker open, while the U.S. dollar index is up over 500 points.

USDA’s May 12 Supply & Demand Report at 11 a.m. CT will be the first official release of balance sheets for 2022-23, which will incorporate March planting intentions. The big question with corn is whether USDA lowers its yield from trendline to reflect the slow planting pace as of early May — something that has happened only five years in the past, with 2013 being the most recent. Globally, focus will be on how much more “Ukraine factor” is added to the old-crop grain and oilseed balance sheets and the new-crop assumptions for both Ukraine and Russia. There are also major uncertainties with what USDA will do with harvested acres and yield in its first U.S. winter wheat crop estimate. Traders’ significant uncertainties about what the data will show is evident in the wide range of pre-report estimates.

Brazil’s National Supply Company (Conab) estimated the country’s 2021-22 corn production at a record 116.2 MMT, an increase of nearly 600,000 MT from the previous forecast. Conab also raised Brazil’s soybean crop forecast for 2021-22 to 123.8 MMT from 122.4 MMT previously.

China’s ag ministry expects the country’s corn acreage to decline 1.9% to 42.524 million hectares (105.1 million acres) but production is projected to hold virtually steady at 272.6 MMT due to a likely increase in yield. The ministry forecasts corn imports will fall 10% to 18 MMT in 2022-23. Soybean planted acreage is expected to rise 18.3% to 9.933 million hectares (24.5 million acres) and production is projected to increase 18.8% to 19.5 MMT. The ag ministry forecasts 2022-23 Chinese soybean imports at 95.2 MMT, up 2.4% from its estimate for this year.

China will auction another 500,000 MT of state-owned soybean reserves on Friday, according to the National Grain Trade Center. It previously said 314,000 MT of state-owned reserves would be auctioned this week.

Russia will increase grain exports this year due to a good harvest, President Vladimir Putin told a government meeting on Thursday. He said the country’s grain production will reach 130 MMT, including a record 87 MMT of wheat.

Strategie Grains cut its EU wheat export forecast for 2021-22 by 1.5 MMT from last month to 29.9 MMT, citing stronger-than-expected Russian shipments even amid Western sanctions. The consultancy raised its EU 2022-23 wheat export forecast by 500,000 MT to 30.8 MMT, despite a 500,000-MT decline in its production forecast to 126.2 MMT.

Japan purchased 196,560 MT of wheat in its weekly tender, including 87,640 MT U.S., 85,580 MT Canadian and 23,340 MT Australian. Taiwan tendered to buy 65,000 MT of corn to be sourced from the U.S., Brazil, Argentina or South Africa.

CORN: USDA reported net U.S. corn sales for the week ended May 5 at 192,700 MT for 2021-22, down 75% from the previous week, down 80% from the average for the previous four weeks and a marketing-year low. Net weekly sales for 2022-23 totaled 46,600 MT. Both numbers fell short of trade expectations ranging from 350,000 to 700,000 MT for 2021-22 and 150,000 to 650,000 MT for 2022-23. USDA announced daily sales of 612,000 MT of corn to China, with 68,000 MT for 2021-22 and 544,000 MT for 2022-23.

Overnight, July corn futures reached $7.92 3/4, a high for the week, before fading around the 10-day moving average. Near-term resistance is seen at the 20-day moving average at $7.95 3/4 and the $8.00 area.

SOYBEANS: Net weekly soybean sales totaled 143,700 MT for 2021-22, down 80% from the previous week, down 74% from the prior four-week average and a marketing-year low. Net sales for 2022-23 totaled 77,300 MT, including 66,000 MT for “unknown destinations.” Sales were near or below the low end of expectations ranging from 100,000 to 600,000 MT for both marketing years.

WHEAT: Net weekly wheat sales totaled 14,100 MT for 2021-22, down 88% from the previous week, down 79% from the prior four-week average and a marketing year low. Net sales for 2022-23 totaled 124,300 MT. Sales were expected to range from 25,000 to 125,000 MT for 2021-22 and zero to 350,000 MT for 2022-23.

LIVESTOCK CALLS

CATTLE: Steady-weaker

HOGS: Steady-weaker

CATTLE: Live cattle futures may take pressure from signs of weakness in cash trade and concerns over beef demand. Live steers averaged $141.43 through Wednesday morning, down about $2 from last week’s average. Cash sources reported limited demand from packers in the northern market, where tighter supplies in recent weeks pushed prices higher. Wholesale beef prices remain around eight-week lows, with Choice cutout values down 16 cents Wednesday to $255.08. Movement was again strong at 185 loads, indicating that packers are cutting prices to spur retail buying.

USDA reported new weekly U.S. beef sales at 28,400 MT for 2022, a marketing-year high and up 95% from the previous week. June live cattle gained $1.175 Wednesday to $133.575. August feeder cattle fell $1.85 to $170.00.

HOGS: Lean hogs may face further pressure from slumping cash and demand concerns. June lean hogs fell to a rare discount to the cash index for this time of year, ending Wednesday at $100.85, 41 cents below today’s cash index quote of $101.26 (as of May 10). The premiums in July and August hogs narrowed to 29 cents and 69 cents, respectively. The cash index pattern this year is similar to 2019 when prices posted an early seasonal peak during spring and then declined into early July. In 2019, the cash index then firmed to near the previous high for the year in late July before slumping seasonally.

Pork cutout values fell 70 cents Wednesday to $99.49, the lowest daily average since Feb. 8, while movement remained relatively light at 262 loads. Net weekly pork sales of 26,300 MT for 2022 were up 10% from the previous week and up 14% from the prior four-week average.  June lean hogs fell 72.5 cents Wednesday to $100.85, the contract’s lowest closing price since Jan. 18.