Ahead of the Open | September 21, 2023
GRAIN CALLS
Corn: 4 to 6 cents lower.
Soybeans: 16 to 20 cents lower.
Wheat: Winter wheat 5 to 7 cents lower; HRS 4 to 6 cents lower.
GENERAL COMMENTS: Grain markets were not immune to broad market selling pressure overnight, with corn, soybeans and wheat each facing losses into the break. Equity markets saw intense selling after the Federal Reserve’s interest rate decision yesterday, which continued overnight. The Fed was seen as more hawkish, implying that rates needed to stay higher for longer as upward inflationary pressure remains persistent, with the Fed raising inflation expectations for 2024 to 3% before returning to the long-term target of 2% by 2026. This volatility is likely to spill over into grain market, along with the surging U.S. dollar index, which is nearly 500 points higher on the day.
House members took steps toward reaching an agreement to fund the government, garnering support from Republicans. However, their path appears to diverge significantly from the Senate’s stance. The latest GOP plan involves a stopgap bill as a precursor to more significant spending cuts and the establishment of a commission to address the federal debt. Additionally, the House Rules Committee sent the Defense appropriations bill back to the floor, a sign of reduced tensions within the Republican caucus.
The cargo ship “Resilient Africa,” loaded with 3,000 MT of Ukrainian wheat, arrived off Turkey’s Bosphorus Strait on Thursday. It is the first vessel loaded with grain from Ukraine to sail in and out of the Black Sea using a temporary corridor. Another ship “Aroyat” has yet to leave the port of Chernomorsk.
Washington urged JPMorgan to “be patient” before the U.S. bank stopped processing agricultural payments for Moscow after it quit the Black Sea grain export deal, a senior State Department official told Reuters. “It was JPMorgan’s decision, and in fact, we had... made clear to the Russians that if they could show signs they were returning to the deal, it would be much easier to keep this payment system alive,” James O'Brien, head of the State Department’s Office of Sanctions Coordination, told Reuters. He said JPMorgan made a “completely commercial decision based on business and reputational factors.”
This morning, USDA announced export sales of 137,160 MT of corn to delivery to Mexico. Of the total, 121,920 MT is for delivery during the 2023-24 marketing year and the remaining 15,240 MT is for delivery during the 2024-25 marketing year.
Export sales for the week ended Sept. 14:
Corn: Net sales of 566,900 MT for 2023-24, the lowest level since July and near the lower end of expectations. Increases came primarily from Japan and Mexico. Traders expected net sales between 550,000 MT and 1.1 MMT.
Soybeans: Net sales of 434,100 MT for 2023-24, the lowest level since the first week of July and down 64% from the four-week average. Increases came primarily from China, Japan and the Netherlands. Traders expected net sales between 550,000 and 1.2 MMT.
Wheat: Net sales of 307,700 MT for 2023-24, down 30% from the previous week and at the lower end of expectations. Traders expected net sales between 250,000 and 600,000 MT.
CORN: December corn futures struggled to take out $4.83 resistance on Tuesday and ultimately turned lower overnight. The near-term trend remains bearish, with bears targeting initial support at $4.73 1/2, which is backed by Tuesday's low of $4.67 3/4.
SOYBEANS: November soybean futures broke lower overnight, taking out recent support from the Sept. 19 low. Prices have quickly fell to $13.00 psychological support. Additional support comes in at $12.82 1/4. Bulls are aiming to take out initial resistance at $13.08 before tackling additional resistance at $13.22 3/4.
WHEAT: December SRW futures continue to base near the support zone at $5.85 that has captured most of the downside over the past two weeks. This will remain key support into today’s session, which is backed by the contract low of $5.70. The overarching trend remains lower, but the range on the daily chart is tightening, indicating a range expansion in the coming days.
CATTLE: Mixed.
HOGS: Choppy/lower.
CATTLE: Live cattle futures are expected to open mixed after showing strong support Wednesday, pushing prices back near last Friday’s all-time high close. While the underlying fundamentals remain bullish, the lack of cash cattle trade in the cash market has provided little clarity on the direction of the cash market this week, with minimal volume taking place at $186.00 in the northern market, which are known for tighter supplies. Wholesale beef prices continue to flounder, with Wednesday’s Choice quote falling 86 cents to $301.26 and Select dropping $3.10 to $278.68. The increase in volume, which rose to 196 loads, is an indication that prices may have fallen enough to increase demand, which could be price supportive as the week comes to a close. USDA reported net beef sales of 13,700 MT for 2023, up 15% from the four-week average.
HOGS: Lean hog futures are expected to open mostly lower as wholesale pork prices fade. Pork cutout has supported futures over the past week as prices were basing over the $100.00 level, which failed yesterday. Pork cutout fell $1.91 to $99.22, with losses across the board apart from a small rise in butts. Meanwhile, the CME lean hog index continues to base above $86.00, with today’s quote rising 9 cents to $86.67 (as of Sept. 19). This puts October futures within $1.00 of the index, which has only happened one other day since May 2023. USDA reported net pork sales of 30,200 MT for 2023, up 31% from the previous week.
