Ahead of the Open | October 5, 2023
GRAIN CALLS
Corn: 1 cent lower to 1 cent higher.
Soybeans: 7 to 9 cents lower.
Wheat: SRW steady to 2 cents higher; HRW 3 to 5 cents higher; HRS 3 to 5 cents higher.
GENERAL COMMENTS: Corn and soybeans saw fresh selling overnight, while wheat saw limited corrective buying, though went into the break off session highs. Export sales may support corn and soybeans as sales were at the upper end of expectations, though wheat export numbers remain poor. Outside markets faced slight volatility overnight as interest rates turned higher despite yesterday’s relative strength in the bond market. Front-month crude oil futures are lower ahead of the open, down $12.00 from last week’s peak, and the U.S. dollar index is modestly lower.
Argentina’s soybean processing plants are running out of soybeans after a historic drought cut the crop in half, the head of the country’s grains export chamber told Reuters, which will leave well over two-thirds of factory capacity idle. The head of the grain exporters and crushing chamber CIARA-CEC said there would be just 3 MMT of soybeans left for crushers to process by the end of this month. According to Argentina’s ag ministry, soybean crush volume plunged 27% from year-ago to 19.6 MMT through the first eight months of this year, despite record soybean imports from neighboring countries. He also said he did not expect any officially declared wheat sales in the months ahead for the 2023-24 harvest as export contracts from 2022-23 are still being fulfilled after the government allowed exporters to push them back due to the drought.
Britain accused Russia of plotting to sabotage civilian cargo ships loaded with Ukrainian grain by planting sea mines on the approaches to the country’s Black Sea ports. Based on what it said was declassified intelligence, the UK said Russia did not want to directly attack merchant vessels using Ukraine’s newly created humanitarian corridor with missiles, but instead try to destroy them covertly. Russia would then seek to blame Ukraine for the loss of any shipping in an attempt to evade responsibility, the British Foreign Office said.
Following the unexpected removal of Rep. Kevin McCarthy (R-Calif.) as Speaker of the House, and the temporary appointment of Rep. Patrick McHenry (R-N.C.) as acting Speaker, Republican lawmakers are facing challenges in selecting a successor. Notably, some House Republicans, including Judiciary Committee Chairman Jim Jordan (R-Ohio) and Majority Leader Steve Scalise (R-La.), have already expressed their interest in running for the position. Additionally, there have been discussions about alternative candidates, including former President Donald Trump, although the likelihood of a non-member becoming Speaker is minimal. The ongoing process has raised the possibility that the selection of a new Speaker may extend over several weeks, according to Rep. Garret Graves (R-La). Of note: It didn’t take long for the general ag media to note that neither Jordan nor Scalise has been very friendly toward ag policy in the past, especially compared with dethroned McCarthy. Bottom line: There is no clear alternative to McCarthy who would have the support needed to win. Also adding to the contentious environment is the pressure to reach an agreement on government funding, which is set to expire on Nov. 17. With many committee meetings canceled, members and aides are questioning how they’ll avert a shutdown when there is so much uncertainty about the basic rules of House operation.
Export sales for the week ended Sept. 28:
Corn: Net sales of 1.816 MMT for 2023-24 were over double the previous week and up sharply from the four-week average. Increases were primarily for Mexico, unknown destinations, Colombia and China. Traders expected net sales between 1.4 and 2.0 MMT.
Soybeans: Net sales of 808,500 MT for 2023-24, up 20% from the previous week and in the upper end of expectations. Increases came primarily for China. Traders expected net sales between 400,000 and 900,000 MT.
Wheat: Net sales of 273,100 MT for 2023-24, down 50% from the previous week and 34% from the four-week average. Increases were primarily for the Philippines and Taiwan. Traders expected net sales between 250,000 and 600,000 MT.
CORN: December corn futures traded in a tight range overnight though favored the downside. Prices are stuck in a tight pocket between resistance at $4.88 1/4 and $4.83 1/4 support. A daily close outside of these levels will help determine the interim direction, but traders are likely waiting for next weeks Crop Production report before establishing much of a new trend. Additional support lies at $4.76, while firm resistance stands at $4.96.
SOYBEANS: November soybean futures favored the downside overnight, though selling stopped short of initial support at $12.60. Bears are seeking a break below this level, then $12.56 3/4. Bulls are targeting initial resistance of $12.85, quickly backed by $12.86 1/4 then the psychological $13.00 level.
WHEAT: December SRW futures saw mild corrective buying overnight but went into the break nearer session lows. Bulls are targeting resistance of $5.69 1/2 then $5.80 3/4. Bears are seeking a break of $5.60 support, which is backed by $5.51 3/4 then the contract low at $5.40.
CATTLE: Lower.
HOGS: Lower.
CATTLE: Live cattle futures are expected to open mostly lower as cash fundamentals continue to weaken. Cash trade has been more active in the first half of the week than recent weeks and the average thus far is $182.06, down from last week’s average of $183.64. December futures have fallen over $2.00 in the last week, which may keep losses minimal, but the continued weakness in wholesale beef prices is unlikely to spark confidence in packers to raise cattle bids. Choice cutout fell $3.31 Wednesday to $296.76 and Select dropped 72 cents to $274.87. USDA reported net beef sales of 13,300 MT for 2023 were down 25% from the previous week but up 7% from the four-week average.
HOGS: Lean hog futures are expected to open mostly lower despite Wednesday’s corrective buying efforts. The CME lean hog index fell 27 cents to $84.28 today (as of Oct. 3). While the index has turned bearish, the daily drops are not as large as bears expected, which may limit seller interest. Wholesale pork prices were relatively steady Wednesday, rising 3 cents to $94.64, giving back most of the midsession gains. Strong export sales are also likely to limit seller interest as USDA reported net pork sales of 43,000 MT for 2023, up 57% from the previous week and 61% from the four-week average.
