Ahead of the Open | November4, 2022

GRAIN CALLS

Corn: 3 to 4 cents higher.

Soybeans: 14 to 17 cents higher.

Wheat: 10 to 12 cents higher.

GENERAL COMMENTS: Soybean futures climbed overnight and are heading for the third weekly gain in the past four on strength in global vegoil markets and demand optimism. Corn and wheat also rose. Malaysian palm oil futures firmed 0.7% and posted a 9.4% jump on the week, while front-month crude oil rallied around $4. U.S. stock index futures signal a firmer open, while the U.S. dollar index is down more than 1,200 points.

U.S. employers hired more workers than expected in October. Nonfarm payrolls increased 261,000 last month, the Labor Department reported today, compared to expectations for a gain of about 200,000. The unemployment rate increased to 3.7% from September’s 3.5%.

Substantial changes to China’s “dynamic-zero” Covid policy are set to take place soon, a former Chinese disease control official told a conference hosted by investment bank Citi today, Reuters reported. Zeng Guang, a former chief epidemiologist at the Chinese Centre for Disease Control and Prevention who has remained outspoken on China’s Covid fight, said the conditions for China opening up were “accumulating,” citing new vaccines and progress the country had made in antiviral drug research.

The UN Food and Agriculture Organization (FAO) global food price index ticked down 0.1 point in October – the seventh straight monthly decline – though it was 2.7 points (5.5%) above year-ago. Declines in vegoils, meat, dairy and sugar were nearly offset by a rise in cereal grain prices. Compared to year-ago, prices were up 5.7% for meat, 15.3% for dairy and 11.1% for cereal grains, while vegoils dropped 18.8% and sugar declined 8.5%.

FAO lowered its 2022-23 global cereal grain production forecast by 4.9 MMT from last month to 2.764 billion MT. Most of the reduction was to wheat production, which FAO cut 3.4 MMT to 783.8 MMT, though that would still be up 4.5 MMT (0.6%) and record high. FAO forecasts global grain production will fall 50.8 MMT (1.8%) from year-ago.

Two unions have rejected a proposed deal with U.S. railroads, while six have approved it. Others are still deciding, with votes of the two largest rail workers’ unions coming mid-November. The earliest a rail strike could happen is late November. All 12 unions must approve the contracts with the railroads to prevent a strike.

Brazilian road blockades are compromising about 45% of the country’s poultry and hog slaughter capacity, a sector source told Reuters. Some plants were halted while others reduced slaughters, the source said, adding the most affected state is Santa Catarina in the south. The situation is expected to improve by Monday as protests will likely fade.

The global outlook for palm oil remains uncertain, with strict pandemic policies in major importer China weighing on demand, while high energy prices and a slowdown in output provide support, analysts said today. “China has been a real disappointment for sellers of vegetable oils because the market happens to be under the lockdown all the time,” James Fry, chairman of commodities consultancy LMC International, said at the Indonesia Palm Oil Conference in Bali. “I can't see this changing very quickly.”

Iraq purchased 150,000 MT of hard milling wheat expected to be sourced from Canada, Lithuania and Australia.

CORN: December corn overnight fell as low as $6.78 1/2, matching this week’s low, before rising to $6.85 1/4. The contract ended last week at $6.80 3/4. Sideways trade may continue ahead of USDA’s Crop Production and Supply and Demand Reports on Nov. 9. USDA is expected to lower its estimate for U.S. corn production to 13.887 billion bu. from 13.895 billion bu., based on a Reuters survey of analysts.

SOYBEANS: January soybeans overnight reached $14.55 1/4, slightly under this week’s high of $14.57 3/4 and up from $14.00 1/4 at the end of last week. USDA is expected modestly increase its estimate for U.S. soybean production to 4.315 billion bu. from 4.313 billion bu., based on the Reuters survey.

WHEAT: December SRW wheat overnight climbed to $8.54 1/2 and the contract is poised for a firm gain on the week after ending last week at $8.29 1/4 amid uncertainty over whether a deal allowing Ukraine grain exports will be extended beyond the Nov. 19 deadline.

LIVESTOCK CALLS

CATTLE: Steady-weaker

HOGS: Steady-weaker

CATTLE: Live cattle are on track for a weekly decline on signs of slippage in the cash market. Live steers averaged $151.79 through Thursday morning, down 16 cents from last week's average. December live cattle settled at $151.95 on Thursday, the exact level of last week’s average cash cattle price. While the market holds a bullish outlook as market-ready supplies tighten, traders have been reluctant to build in premium. Choice beef cutout values rose $1.71 Thursday to $265.18, the highest daily average since Aug. 8, on movement of 129 loads.

HOGS: Lean hog futures are poised for a second straight sharp weekly decline as cash fundamentals erode. The CME lean hog index is down 95 cents (as of Nov. 2) to $92.34, a new low for the fall and the lowest level since Feb. 14. Based on the wider-than-normal discount December lean hog futures hold to the cash index, traders anticipate more near-term seasonal pressure over the next six weeks. December hogs rose 7.5 cents Thursday to $83.375, down from $86.10 at the end of last week.