Ahead of the Open | November 21, 2022

GRAIN CALLS

Corn: 1 to 3 cents lower.

Soybeans: 1 to 3 cents lower.

Wheat: SRW wheat 9 to 12 cents lower, HRW and spring wheat 2 to 5 cents lower.

GENERAL COMMENTS: SRW wheat futures fell near a three-month low overnight and corn and soybeans also declined as the U.S. dollar strengthened and rising Covid cases in China stirred demand concerns. Malaysian palm oil futures rose slightly on strong export numbers and a weaker ringgit, while front-month crude oil was down around 60 cents. U.S. stock index futures signal a weaker open, while the U.S. dollar index is up almost 800 points.

China’s new Covid cases are nearing a peak in April amid flare-ups around the country, including in Beijing. The latest wave is testing China’s resolve to stick to recent adjustments it made to its zero-Covid policy, which call for cities to be more targeted in their clampdown measures and steer away from widespread lockdowns and testing that have strangled the economy and frustrated residents. Meanwhile, Hong Kong’s chief executive, John Lee, tested positive for Covid-19 just days after interacting with his boss, President Xi Jinping of China, at the Asia Pacific Economic Cooperation forum in Bangkok.

Timely rainfall is expected for most of Brazil’s grain and oilseed areas during the coming two weeks, with alternating periods of rain and sunshine and seasonable temperatures, World Weather Inc. said. “There may be a little concern about long-term soil moisture in Rio Grande do Sul and a few areas in both Mato Grosso and Goias,” the forecaster added. “The concern will stay low unless rainfall is missed or temperatures turn hotter.”

In Argentina, rain over the weekend “was welcome, but it fell in a classic La Nina manner, leaving eastern areas dry or mostly dry,” World Weather said.

China kept its benchmark lending rates unchanged for the third straight month on Monday, as a weaker yuan and persistent capital outflows continued to limit Beijing’s ability to ease monetary conditions to support the economy.

Turkish President Tayyip Erdogan said he had agreed with Russian President Vladimir Putin to produce flour in Turkey from Russian wheat and ship it for free to the least developed countries in order to ease a global food crisis, broadcaster Haberturk reported. This comes on the back of an extension of the deal last week allowing Ukrainian grain exports to continue from the Black Sea.

IKAR consulting firm raised its 2022-23 Russian wheat export forecast by 2 MMT to 44 MMT. Its overall grain export forecast was raised 1 MMT to 53.5 MMT, meaning shipments of grains aside from wheat are expected to be 1 MMT less than previously projected.

China sold all 40,152 MT of state-owned wheat reserves put up for action last week. The average sales price was 2,934 yuan ($409.52) per metric ton.

Large speculators in mid-November increased their bearish bets in the SRW wheat market to the highest level in nearly 2 1/2 years. The managed money net short in SRW wheat futures and options increased 3,878 contracts during the week ended Nov. 15 to 46,780 contracts, the largest net short since June 2020, Commodity Futures Trading Commission data showed. In corn, the managed money net long fell 60,831 contracts to 176,831 contracts, the smallest since the week ended Aug. 16.

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

CORN: March corn fell as low as $6.65 overnight, below the 10-day moving average at $6.67, after settling Friday at $6.70, up 7 cents for the week.

SOYBEANS: January soybeans fell as low as $14.17 1/4 overnight after ending last week at $14.28 1/4, down 28 3/4 cents for the week and the third weekly decline in the past four.

WHEAT: March SRW wheat overnight fell as low as $8.08, the contract’s lowest intraday price since Aug. 25, after ending last week at $8.22, down 13 1/4 cents for the week. USDA will update winter wheat crop condition ratings after today’s close. A week ago, USDA reported 32% of the U.S. crop in “good” or “excellent” condition as of Nov. 13, up from 30% a week earlier and slightly better than analysts’ expectations. Wheat rated “poor” to “very poor” totaled 32%, down from 34% a week earlier.

LIVESTOCK CALLS

CATTLE: Firmer

HOGS: Steady-weaker

CATTLE: Cattle futures are poised to extend last week’s gains after USDA’s Cattle on Feed report Friday showed feedlot placements in October down 6.1% from the same month a year ago, larger than the 3.5% decline analysts expected. The estimated Nov. 1 feedlot inventory also fell more than expected, dropping 2.0%, while marketings rose 0.6%, slightly less than expected but not bearish. Gains may be limited by signs the cash market’s recent rally may be losing momentum. Live steers last week averaged $152.68 through Friday morning, down 3 cents from last week's average. Choice beef cutout values fell $2.23 Friday to $254.87, down about $4.07 from the end of the previous week.

February live cattle ended last week at $155.85, up from $153.25 a week earlier and the contract’s highest close since Oct. 28.

HOGS: Lean hog futures may take pressure from a continuing seasonal decline in the cash market. The CME lean hog index is down another 37 cents to $87.77 (as of Nov. 17), the lowest level since Feb. 9. December lean hog futures closed Friday $3.545 below today’s cash index quote, reflecting attitudes that the cash market will continue to weaken over the next month. Pork cutout values rose 81 cents Friday to $93.44 but still fell about $4.56 for the week.