Ahead of the Open | May 27, 2022

GRAIN CALLS

Corn: 4 to 5 cents higher.

Soybeans: Steady to 5 cents lower.

Wheat: HRW and SRW mixed; spring wheat 13 to 15 cents higher.

GENERAL COMMENTS: Soybean futures were under mild pressure at the close of overnight trading after surging to a five-week high Thursday. Spring wheat futures surged amid concerns over planting delays, while corn was also higher ahead of the long holiday weekend. Malaysian palm oil futures fell 2.8% but ended a three-week losing streak on expectations for stronger demand. Front-month U.S. crude oil futures are down less than $1 but still up slightly this week. U.S. stock index futures point to a firmer open, while the U.S. dollar index is little changed this morning after falling to a five-week low.

Grain and livestock markets will trade normal hours today ahead of the extended holiday weekend. All markets and government offices are closed for Memorial Day on Monday, May 30. There will be no Pro Farmer market commentary next Monday. Grain markets reopen at 7:00 p.m. CT on Monday for the overnight session, while livestock markets will resume trade at 8:30 a.m. CT on May 31.

Russian wheat exports could jump to 50 MMT in 2022-23, up sharply from around 37 MMT this year, according to the country’s ag minister. Russia is expected to harvest 130 MMT of grain, including 87 MMT of wheat. Exports of grain and other commodities from Russia continue amid a lack of vessels as many owners of large ships stopped working with the market amid Western sanctions. The country’s ag ministry is in talks with the state United Shipbuilding Corp. about construction of vessels for grain exports to address the shortage.

Rice may be India’s next food protectionism target after it restricted wheat and sugar exports, Bloomberg reported. India is the world’s largest rice exporter of rice, accounting for 40% of global trade, so any restrictions on rice exports could have a devastating impact on inflation and world food security but would support U.S. rice prices. Bloomberg notes rice stocks were discussed at an inter-ministerial committee meeting on prices of essential commodities, according to a person familiar with the matter. But the committee decided there’s no need to restrict rice shipments for now because India has huge inventories, according to the source.

Demand destruction and the declining cost of ammonia production have led to a sharp reversal in prices, Bloomberg reported. The Green Markets North American fertilizer price index is down 21% from its peak in late March but remains elevated compared to pre-war levels. According to Bloomberg, the June spot price in Tampa, Florida, for ammonia nitrogen fertilizer settled at $1,000 per ton, a 30% drop from May’s $1,425 price. Southeast Asia and other places are seeing more buyers who are unwilling to pay the record high prices that were seen in April and May, and the cost of ammonia production has declined as European natural gas prices fell in the second quarter.

Hot, dry conditions continue to erode crop conditions in France. The country’s ag ministry rates 69% of the soft wheat crop as good/excellent, down four percentage points from the previous week and 20 points over the past three weeks.

Russia’s wheat export tax for June 1-7 will be $121.20 per MT, based on an indicative price of $373.20 per MT. The tax is up $10.70 from the previous week and the first increase in a month.

South Korea purchased 124,700 MT of milling wheat, including 41,620 MT from the U.S., 50,000 MT from Australia and 33,080 MT from Canada.

CORN: July corn futures traded within Thursday’s range overnight after dropping 7 1/4 cents Thursday to $7.65, the contract’s lowest closing price since $7.58 3/4 on April 11. The lead contract is poised for a fourth consecutive weekly decline after ending last week at $7.78 3/4.

SOYBEANS: July soybeans overnight reached $17.34 1/2, 2 1/2 cents under a five-week high posted yesterday. The lead contract is on track for a sharp weekly advance after ending last week at $17.05 1/4.

WHEAT: July SRW wheat traded within Thursday’s range overnight after dropping 5 cents Thursday to $11.43 1/4, down from $11.68 3/4 at the end of last week. Both July HRW and SRW are poised for a second consecutive weekly lower close. Traders will continue to watch the Russia/Ukraine war following reports earlier this week that Russia is ready to provide a humanitarian corridor for vessels carrying food to leave Ukraine in return for the lifting of some sanctions.

LIVESTOCK CALLS

CATTLE: Steady-mixed

HOGS: Steady-firmer

CATTLE: Live cattle futures are on track for the first gain in three weeks but any upside likely will be limited by continuing weakness in cash prices. USDA-reported live steers averaged $138.46 for the week through Thursday morning, down from last week’s average of $140.25. Packers slowed cattle purchases this week after aggressively buying the past two months. Many cattle were bought “with time” in recent weeks, and with June contract supplies available next week, packer demand is likely to remain soft in the coming weeks, which will make it difficult to motivate buyers in live cattle futures. Choice beef cutout values rose $1.04 Thursday to $263.97 on strong movement of 134 loads. August live cattle rose 7.5 cents Thursday to $132.60, up from $131.55 at the end of last week.

HOGS: Lean hog futures are heading for a sharp weekly advance for the second straight week amid strengthening cash fundamentals. The market may see followthrough technical momentum from Thursday’s close at four-week highs, though pre-weekend profit-taking could limit price upside. The CME lean hog index is up another 53 cents to $104.40 (as of May 25), the seventh straight daily gain and the highest since late August. Summer-month futures hold premiums of about $7 to the index, suggesting traders feel the cash market will continue to strengthen seasonally into summer.

Strength in wholesale pork may also support futures. Pork cutout values gained $1.06 Thursday to $108.13, near a four-week high posted earlier this week. Movement remained relatively light at 233.5 loads. July lean hogs rose $3.875 Thursday to $111.825, up from $109.00 at the end of last week and the contract’s highest closing price since $114.60 on April 28.