Ahead of the Open | May 26, 2021

GRAIN CALLS

Corn: July up 4; December down 2

Soybeans: Down 3 to 8 cents.

Wheat: Down 2 to 5 cents.

GENERAL COMMENTS: July and December corn are mixed this morning but off the early-session lows after falling sharply lower and below key support levels on Tuesday. There was no one piece of news to pressure the market Tuesday amid unconfirmed rumors of Chinese rolling old-crop purchases into new-crop or possible new government limits on Chinese corn imports. Still,  most importers still can make big margins importing cheaper U.S. corn and will likely take most of the purchases after record sales from reserves depleted government inventories. Some of the selling came on lower ethanol processor basis bids and increased elevator cash sales as the July/December spread narrowed to $1.00 yesterday down from $1.26 two weeks ago.  Soybeans are heading for a seventh straight lower session and wheat prices are also weaker this morning.

The flow of money is clearly out of the grain markets with rapid planting of U.S. corn and soybeans and timely rains in the winter wheat belt boosting yield potential.  Still, isolated issues remain for the corn belt as we move towards June, mostly notably lingering drought in the Northern Plains and northwestern parts of the Midwest.  Rains were scattered from south to north across the center of the country once again over the past 24 hours, roughly as expected. Rains are expected to be scattered in the west and east again today, but the next seven days look wet for much of the central U.S. before weather turns a bit drier. A few more showers across central Brazil will also aid late grain fill and has stabilized falling Brazilian safrinha corn crop estimates but is unlikely to raise yields much.

Traders see the corn and soybean crops mostly planted and forecasts generally ideal for crop development going forward despite a few warts from dryness and emergence problems from cold weather earlier this month. The fast-planting pace boosts yield potential without summer weather problems. USDA’s acreage report at the end of June can still throw a wrench into the production outlook.

Meanwhile, U.S. stock index futures rose overnight, pointing to a higher opening on Wall Street this morning as more central-bank officials joined the chorus predicting that inflationary pressures are transitory, soothing concerns that monetary tightening may start sooner than expected. The slowing inflation talk also is encouraging money flows out of the grain markets.  

Before the reopening this morning, USDA did not announce any new private exporter sales. Traders will be looking to tomorrow’s weekly USDA export sales data for fresh export demand stories.

Argentine port workers launched another 48-hour strike at midnight as they continue to push to be designated essential workers so they can receive Covid-19 vaccines. Eleven unions announced the work stoppage, saying a strike was "given the exponential increase in cases, the regrettable loss of several colleagues and the failure of all negotiations we have held with national authorities.” A similar strike last week at its main Rosario port upended traffic and stranded seven ships due to falling water levels along the Parana River. The last of those ships was freed on Tuesday. Harvest of the country’s soybean and corn crops are underway. Argentina is the world’s top exporter of soymeal and its No. 3 exporter of corn.

The China Banking and Insurance Regulatory Commission (CBIRC) has asked lenders to stop selling investment products linked to commodity futures to mom-and-pop buyers, three sources with knowledge of the matter told Reuters. The banking regulator has also reportedly asked lenders to completely unwind their existing books for such products. This comes at a time when commodity prices are soaring, and China has been importing huge quantities of corn and other feed grains. The price surge has elevated regulatory concerns about the risks of speculative bets, which has already led to China’s state planner and exchanges taking steps to control prices in recent weeks.

CORN:  July corn tested and held Tuesday’s low overnight before rebounding slightly after yesterday falling as much as 40-cents during the session. It will take a close back above $6.30 to suggest a period of consolidation. December corn touched $5.08 1/2 overnight, the lowest since April 15. Bulls should make a stand near $5.00.

SOYBEANS: July beans did hold above yesterday’s low, but November fell to the lowest since May 3 overnight. Nearly meal futures extended losses overnight to the lowest since Dec. 15. July soyoil is lower after failing to extend Tuesday’s rebound. Brazil will likely export 14.9 MMT of soybeans this month, forecasts the association of grain exporters ANEC. That’s roughly a 1.3-MMT drop from its forecast last week. The association also edged its soymeal export forecast 100,000 MT higher to 1.9 MMT. It now expects the country to export 21,991 MT of corn during May versus its forecast last week for no exports of the grain this month.

WHEAT: Wheat futures are following the overall weakening trend in grains amid better weather and the impending seasonal harvest pressure. World crops are also in better shape with Australia looking for a second big harvest after recent rains. India is expected to produce a record 108.75 MMT of wheat this year, the farm ministry said in its third forecast for the crop year, marginally lower than its previous estimate of 109.24 MMT.

CATTLE: Mixed
HOGS: Mixed

CATTLE: A big decline in corn futures’ caught the livestock sectors’ eye on Tuesday, with feeder cattle leading the charge. But June live cattle remain at roughly a $3 discount to last week’s cash cattle trade, signaling traders are still skeptical about the cash market’s ability to rise given ample market-ready supplies. Cash cattle trade is again off to an early start, with trade occurring from $118 to $120 in Iowa, from $119.50 to $120.00 in Kansas and Texas and from $120 to $123 in Nebraska. This is steady to up slightly compared with last week’s action. Given concerns about market ready supplies, daily kill numbers have taken on more focus. This week’s kill is running 2,000 head ahead of last week’s strong tally, which is encouraging. Meanwhile, boxed beef values extended their charge yesterday, though movement slowed to 93 loads.

HOGS: Cash hog bids fell $1.89 on Tuesday, a retreat from midday gains. But the pork cutout value shot $2.31 higher, with bellies, butts and loins driving gains. The cutout value has been on the rise for more than three weeks thanks to strong grilling demand, tight cold storage supplies and food service restocking. That’s helping to lift daily kills. Tuesday’s slaughter was estimated at 485,000 head, a marked improvement from 466,000 head last Tuesday.