Ahead of the Open | October 13, 2023
GRAIN CALLS
Corn: 2 to 4 cents higher.
Soybeans: 7 to 10 cents higher.
Wheat: SRW 10 to 12 cents higher; HRW 12 to 14 cents higher; HRS 11 to 13 cents higher.
GENERAL COMMENTS: Corn, soybeans and wheat each saw followthrough buying overnight and were driven higher into the break by an export sales report had net sales topping expectations in each crop. Tensions in the Middle East continue to intensify, adding further risk premium into the market. The “flight to safety” in U.S. treasury bonds continues, sinking the 10-year treasury rate to 4.59%, retracing most of Thursday’s selloff in bonds. Front-month crude oil futures are nearly $4.00 higher and near this week’s highs. The U.S. dollar index is facing moderate losses, around 150 points lower.
The Israel Defense Forces issued an ultimatum, instructing approximately 1.1 million Palestinians to relocate from the northern to the southern region of Gaza within a 24-hour period. Israel cited the presence of “Hamas terrorists” allegedly using “human shields” as the reason behind this move. The United Nations swiftly urged Israel to withdraw this “impossible” order, while Hamas dismissed it as “fake propaganda” and advised the affected populace to ignore it. Israel has deployed tanks along Gaza’s borders, with a focus on targeting underground tunnels believed to be used for storing supplies, housing fighters and potentially holding hostages.
China’s exports in September declined 6.2% from last year, while imports also dropped 6.2%. That marked the fifth straight month of year-over-year declines in exports and the seventh consecutive month with an annual drop in imports. China’s trade surplus rose to $77.71 billion from $68.2 billion in August. The trade surplus with the U.S. widened to $33.2 billion in September from $33.06 billion in August.
China imported 7.15 MMT of soybeans in September, down 2.21 MMT (23.6%) from the previous month and 570,000 MT (7.4%) less than last year as hefty stocks at ports slowed arrivals. Through the first nine months of this year, China imported 77.8 MMT of soybeans, up 14.4% from the same period last year.
Rep. Steve Scalise (R-La.) dropped out of the race for House speaker Thursday night, further throwing the chamber into chaos as Republicans openly ponder whether their fractured conference is capable of electing anyone as speaker. The Republican conference plans to restart the nomination process today. There are growing calls from centrists, particularly from the Republican Governance Group, to extend the powers of Speaker Pro Tempore Patrick McHenry (R-N.C.) so the House can begin to address critical pieces of legislation.
Export sales for the week ended Oct. 5:
Corn: Net sales of 910,400 MT for 2023-24 were down 50% from the previous week and 9% lower than the four-week average. Increases came primarily from Mexico, China and Colombia. Traders expected net sales between 600,000 and 900,000 MT.
Soybeans: Net sales of 1,056,800 MT for 2023-24, up 31% from the previous week and 23% from the four-week average. Increases came primarily from China and Mexico. Traders expected net sales between 650,000 and 1.0 MMT.
Wheat: Net sales of 652,000 MT for 2023-24, a marketing year high and more than double the previous week. Increases came primarily from China and unknown destinations. Traders expected net sales between 300,000 and 500,000 MT.
Export activity was especially busy this morning, as USDA reported daily sales of 181,000 MT of SRW wheat to China, 117,300 MT of soybeans to delivery to unknown destinations, and 100,000 MT of soybean cake and meal for delivery to unknown destinations, each for the 2023-24 marketing year.
CORN: December corn futures saw bullish followthrough overnight and went into the break on session highs. Initial resistance stands at the Oct. 6 high of $4.99. Additional resistance stands at $5.06 1/4. Bulls are seeking to hold initial support of $4.94, backed by $4.89 1/2, then $4.85.
SOYBEANS: November soybean futures surged above initial resistance at the 20-day moving average, currently at $12.92, overnight, which will mark first support. Bulls are seeking to hold downtrend line support, currently at $12.85, stemming from the August high to defend against a failed breakout. Bulls are targeting initial resistance at the psychological $13.00 mark, which is quickly backed by 40-day moving average resistance at $13.09.
WHEAT: December SRW futures broke the downtrend stemming from early September overnight. Bulls want to hold this support (currently at $5.73 1/2) into the close to negate another failed breakout. Further selling targets $5.57 support, then $5.47 1/4. Bears are seeking to defend resistance at $5.89 then the 40-day moving average, currently at $5.94.
CATTLE: Higher.
HOGS: Choppy/higher.
CATTLE: Live cattle futures are expected to open mostly higher as Thursday’s technical breakout will likely continue. Cash cattle trade turned active Thursday as packers raised bids, with this week’s average working up to $182.87, 36 cents above last week at this time. Wholesale beef prices continue to stabilize, as Choice cutout rose 91 cents to $301.19, though Select fell 28 cents to $275.02. The sideways trade seen in cutout values could limit bullish followthrough in futures today. USDA reported net beef sales of 9,000 MT for 2023, down 32% from the previous week and 29% from the four-week average.
HOGS: Lean hog futures are expected to open mostly higher in continuation of Thursday’s afternoon strength. The CME lean hog index rose 2 cents to $82.42 today (as of Oct. 11), marking consecutive daily gains for the first time since Sept. 19-20. This will likely support nearby contracts, which remain a discount to the index. Futures traders are pricing in returning weakness to the index, as October futures go off the board at noon CT today and remain at a 32-cent discount to the index. October futures will cash settle against the lean hog index quote for today, which will be released next Tuesday. Wholesale pork prices continue to slip, as cutout fell 25 cents to $92.14, though movement remains strong. USDA reported net pork sales of 21,200 MT for 2023, down 51% from the previous week and 32% from the four-week average.
