Ahead of the Open | September 19, 2023
GRAIN CALLS
Corn: 1 to 3 cents lower.
Soybeans: 4 to 6 cents lower.
Wheat: SRW 3 to 5 cents lower; HRW 5 to 7 cents lower; HRS 5 to 7 cents lower.
GENERAL COMMENTS: Grains continued to fall under pressure overnight following Monday’s breakdown. Technical selling pressure is likely to continue to weigh on markets after the open. Outside markets are bullish, as front-month crude oil futures are over $1.00 higher and near 2023 highs, while the U.S. dollar index is over 200 points lower.
Crop consultant Dr. Michael Cordonnier left his corn and soybean yield estimates at 173 bu. and 49.5 bu. per acre, respectively, and adopted USDA’s harvested acreage figures. He now estimates production at 15.06 billion bu. for corn and 4.09 billion bu. for soybeans. Cordonnier has a neutral to lower bias toward both crops.
As of Sunday, USDA rated 51% of the corn crop as “good” to “excellent,” down one percentage point from last week and in line with expectations. The amount of crop rated “poor” to “very poor” increased two points to 20%. USDA rated 52% of the soybean crop as “good” to “excellent,” unchanged from the previous week, though there was a one-point decline in the top category. Traders expected a one-point drop in the “good” to “excellent” rating. The portion of crop rated “poor” to “very poor” held at 18%. When USDA’s weekly condition ratings are plugged into the weighted Pro Farmer Crop Condition Index (CCI; 0 to 500-point scale, with 500 representing perfect), the corn crop dropped 3.2 points to 332.9, which was 4.0 points (1.2%) below year-ago at this point. The soybean crop declined 2.1 points to 331.3, down 7.6 points (2.3%) from last year in mid-September. Illinois accounted for the bulk of the decline for both crops over the past week.
A cargo vessel carrying grain has left the Ukrainian Black Sea port of Chornomorsk for the first time since a grain deal expired in mid-July. “Resilient Africa” was loaded with 3,000 MT of wheat. “Aroyat” is still moored in Chornomorsk and is being loaded with wheat for Egypt.
The Federal Reserve is starting their two-day FOMC meeting today. Rising crude oil prices has put the Fed in a difficult position. While Core CPI strips out volatile energy prices, higher oil prices inevitably lead to higher fuel costs, which drive up the cost of all goods and services as producers must offset their own energy cost. This upward pressure comes at a critical point, as the Fed has seemingly lowered inflation from the 2022 peak as the Fed has hiked interest rates over 5% in the current tightening cycle.
CORN: December corn futures saw additional selling pressure from Monday’s lows overnight. The break below the double bottom at $4.73 1/2 is indicative of a range expansion to the downside, with bears targeting $4.65 then $4.50 support. Bulls hope is to break back above $4.73 1/2 resistance to post a false break down on the daily bar chart, which would be a bullish reversal targeting additional resistance at $4.79 1/2.
SOYBEANS: November soybean futures saw followthrough selling overnight though have since seen small corrective buying. Bulls are seeking to hold the overnight low of $13.08, though a trip to the psychological $13.00 support level is likely. Bears are seeking to hold $13.26 1/4 resistance on corrective buying, which is backed by $13.30.
WHEAT: December SRW futures gapped lower overnight but have since seen some corrective buying. Friday’s close above 10-day moving average resistance then Monday’s break below does not bode well for bulls, as it indicates a failed breakout reversal. This points to a likely test of last week’s contract low of $5.70, though $5.84 1/4 support stands on the way. Bulls are targeting resistance at $5.96.
CATTLE: Mixed.
HOGS: Choppy/higher.
CATTLE: Live cattle futures are expected to continue recent consolidation as bulls garner momentum for a run at last week’s all-time high. Last week’s cash average came in $1.76 higher than the previous week at $184.04. Cash trade this week is once again likely to be delayed towards the end of the week, which will likely delay any corresponding futures move as well. Wholesale prices remain sluggish, with Choice falling 39 cents to $305.32 and Select rising 29 cents to $283.41 on Monday.
HOGS: Lean hog futures are expected to open mostly higher as price action is likely to remain volatile. The CME lean hog index has been consolidating in the $86.00 area since the Sept. 5 low, with today’s quote falling 12 cents to $86.81 (as of Sept. 15). Bulls are looking for a bounce in cash prices, which historically is the norm from early September until mid-October, though it is not guaranteed, as the past two years each saw sustained weakness through the period. Meanwhile, wholesale prices have surged back above $100.00, with Monday’s quote rising $2.67 to $100.96.
