Ahead of the Open | November 2, 2022

GRAIN CALLS

Corn: 12 to 14 cents lower.

Soybeans: 9 to 12 cents lower.

Wheat: HRW and SRW 42 to 53 cents lower, spring wheat 33 to 36 cents lower.

GENERAL COMMENTS: Wheat futures plunged overnight and corn and soybeans also tumbled after Russia said it will resume its participation in an agreement allowing grain exports from Ukraine’s Black Sea ports. Malaysian palm oil futures surged 4% to end near a 12-week high on supply concerns, while front-month crude oil futures were little changed. U.S. stock index futures signal a mixed open, while the U.S. dollar index is down around 250 points this morning.

Russia will resume its participation in the Black Sea grain export deal after the country’s defense ministry said it had received written guarantees from Ukraine not to use the Black Sea grain corridor for military operations against Russia. “The Russian Federation considers that the guarantees received at the moment appear sufficient, and resumes the implementation of the agreement,” the ministry said in a statement. Russia’s announcement last weekend it was suspending its participation fueled supply concerns that spurred a brief rally in grain futures.

Lloyd's of London insurer Ascot is again quoting coverage for shipments through the Black Sea grain corridor, the facility’s lead underwriter said today. Ascot on Monday stopped issuing coverage after Moscow suspended its participation in the United Nations-brokered export deal.

Brazilian President Jair Bolsonaro did not concede defeat in his narrow election loss to leftist Luiz Inacio Lula da Silva. He told protesters to avoid destroying property or “impeding the right to come and go,” though he didn’t tell them to stop the protests. The country’s infrastructure ministry asked for protesters’ “support” to avoid supply shortages. Brazilian livestock processors said they may have to stop slaughtering at some production sites are early as today if protesters continue to block roads.

The Federal Reserve is widely expected to raise interest rates another 75 basis points at the conclusion of its two-day monetary policy meeting this afternoon. Investors will focus on Chair Jerome Powell’s post-meeting press conference for clues as to whether the Fed will begin to slow the pace of rate gains amid weakening economic data. He will likely explain that future decisions depend on data, leaving the Fed wriggle room to deliver yet another jumbo rate rise if inflation remains uncomfortably high.

Chinese policymakers pledged Wednesday that growth was still a priority and they would press on with reforms, in an apparent bid to soothe fears that ideology could take precedence as Xi Jinping began a new leadership term. Strict Covid-19 lockdowns are weighing heavily on China’s business activity, consumer confidence and financial markets.

A fungus that causes vomitoxin has been found in some U.S. corn harvested this fall, causing headaches for growers and livestock producers and forcing ethanol plants and grain elevators to scrutinize grain deliveries, Reuters reported. Feed made from grain contaminated with concentrated levels of the toxin can sicken livestock and lead to low weight gain, particularly among hogs, and grain buyers can reject cargoes or dock farmers for shipments that contain it. Early signs of vomitoxin are emerging in Ohio, according to a USDA report, and grain buyers in eastern Indiana are also starting to more rigorously test corn deliveries for the toxin.

USDA Secretary Tom Vilsack today will announce $223 million in taxpayer grants and loans to expand meat and poultry processing capacity and to address supply chain problems.

Jordan tendered to buy 120,000 MT of optional origin milling wheat. 

CORN: December corn overnight fell as low as $6.80, a low for the week and filling a gap on the daily chart created at the beginning of the week. The overnight low matches the 50-day moving average, and further weakness may have bears targeting a late-October low at $6.74 and the low for all of last month of $6.71 1/2.

SOYBEANS: January soybeans dropped to losses after rising earlier in overnight trade. In addition to spillover weakness from the wheat market, soybeans may face pressure from easing concerns over the availability of Brazil’s supplies.

WHEAT: December SRW wheat overnight dropped as low as $8.43, moving into a gap on the daily chart between $8.53 3/4 and $8.40 1/4 that was created at the beginning of the week. Filling the gap may compel bears to target a five-week low of $8.22 1/2 hit Oct. 28.

LIVESTOCK CALLS

CATTLE: Steady-firm

HOGS: Steady-mixed

CATTLE: Live cattle faded near a two-week low late Tuesday but further declines should be limited by cash market strength. Feeder cattle will be supported by sharp declines in corn prices. December live cattle ended Tuesday at $151.95, the same as last week’s average cash cattle price, conveying an overly cautious tone for a market facing tight supplies well into 2023. Wholesale beef remains firm even after weakening Tuesday. Choice beef cutout values fell $1.02 to $262.63, down from a two-month high on Monday. Movement totaled 132 loads.

HOGS: Lean hog futures may extend this week’s sideways trade as weakness in wholesale pork mutes buying interest. Pork cutout values fell $2.73 Tuesday to a nine-month low of $97.21, as all cuts with the exception of bellies eased. Price dips under $100.00 have consistently sparked increased retailer demand and packers moved a solid 336.7 loads yesterday. The question is whether there’s enough retailer demand to push the cutout back above $100.00 or if packers must further reduce prices to keep up with seasonally increasing pork supplies. The CME lean hog index is down 4 cents to $93.75, a two-week low.