Ahead of the Open | November 16, 2021
Corn: 2 to 3 cents lower.
Soybeans: 1 to 3 cents lower.
Wheat: 7 to 16 cents lower.
GENERAL COMMENTS: Spring wheat led grain futures declines overnight, with the December contract dropping to the lowest level in a week. Corn and soybean futures were under mild profit-taking pressure. Malaysian palm oil and Nymex crude oil futures rose slightly. The U.S. dollar index is around 200 points higher this morning, reaching a 16-month high.
Large speculators reduced their net long position in corn futures during the week ended Nov. 9, and also expanded their short positions in SRW wheat while shifting to a net short in soybeans, according to the Commodity Futures Trading Commission's weekly Commitments of Traders report.
Weather in Brazil remains mostly favorable for crop development. Consultant Michael Cordonnier left his Brazilian crop estimates at 144 MMT for soybeans and 118 MMT for corn, though he has a neutral to slightly higher bias for both crops. Weather hasn’t been as favorable in Argentina, but Cordonnier kept his crop estimates of 50 MMT for soybeans and 53 MMT for corn unchanged.
Brazil cut import tariffs by 10% on many goods and services until Dec. 31, 2022. The list of goods included ethanol, for which the tariff was reduced to 18%. This could present an opportunity for U.S. ethanol exports to Brazil amid rising domestic production.
SovEcon raised its Ukrainian corn crop estimate by 1.5 MMT to a record 39.9 MMT, as the country continues to report strong yields. USDA projects Ukraine’s corn crop at 38 MMT. SovEcon issued its first forecast for Ukraine’s 2022-23 wheat crop, with a projection of 27.1 MMT, down 15.0% from its estimate for this year.
CORN: USDA reported the corn crop was 91% harvested as of Nov. 14, up from 84% a week earlier and above the 86% average for that date for the previous five years. Harvest progress matched trade expectations. December corn futures traded within yesterday’s range overnight. Chart levels to watch include last week’s high at $5.82.
SOYBEANS: USDA said the soybean crop was 92% harvested as of Nov. 14, up from 87% a week earlier and just under the five-year average of 93%. Soymeal futures will remain in focus after the December contract rose to a four-month high yesterday amid talk of potential U.S. shortages of lysine, which could drive up soymeal use in livestock feed rations. January soybeans overnight fell as low as $12.51 after ending yesterday at $12.57 1/4, the highest closing price since $12.65 1/2 on Sept. 30.
WHEAT: USDA’s latest crop condition ratings showed slight improvement in winter wheat. As of Nov. 14, the crop was rated 46% “good” or “excellent” condition, up from 45% a week earlier and slightly above trade expectations. When USDA’s weekly crop condition ratings are plugged into the weighted Pro Farmer Crop Condition Index (0 to 500-point scale, with 500 being perfect), the HRW crop improved 5.9 points to 332.9, still 9.0 below the five-year average for mid-November. The SRW crop rose 2.0 points to 367.1, 4.9 points above the five-year average.
December SRW wheat futures overnight fell as low as $8.19 1/4, after rising 9 1/4 cents yesterday to $8.26 1/4, the sixth consecutive daily gain and the highest settlement for a nearby contract since December 2012.
CATTLE: Futures may face pressure from ideas the cash market’s recent upward momentum will slow after two weeks of aggressive packer buying. Live steers rose $2.24 last week to an average of $131.47, the sixth consecutive weekly gain and the highest weekly average since early June 2017. Packers bought 119,000 head after buying 97,000 head the previous week. Wholesale beef prices continue to erode, indicating record retail prices are suppressing demand. Choice cutout values fell $1.10 yesterday to an average of $283.20, the lowest since $283.04 on Oct. 25. Chart levels to watch in December live cattle include yesterday’s high at $132.625, a 2 1/2-month high, and the 100-day moving average around $131.25.
HOGS: Weak cash fundamentals likely will continue to limit buying interest in futures, though tight animal supplies portend higher prices in early 2022 as focus shifts from the December to February contract. The CME lean hog index is down another 51 cents to $76.17, the lowest since mid-February. Pork carcass cutout values fell 78 cents yesterday to an average of $93.93. Movement was decent at about 312 loads. National direct cash carcasses fell 54 cents to an average of $57.46. Chart levels to watch in December futures include yesterday’s high at $76.525 and last week’s low at $73.70.