Ahead of the Open | September 26, 2022

GRAIN CALLS

Corn: 4 to 5 cents lower.

Soybeans: 2 to 4 cents lower.

Wheat: 12 to 18 cents lower.

GENERAL COMMENTS: Soybean futures fell to two-week lows overnight and corn and wheat also slumped as growing concerns over the global economy weighed on markets. Malaysian palm oil futures fell 5.1% to a 15-month low on an outlook for ample supply and weaker demand. Front-month crude oil futures are slightly higher after earlier sinking to the lowest price since early January. U.S. stock index futures signal a weaker open and the U.S. dollar index is mildly firmer, though well off its earlier highs that marked a fresh 20-year high.

The world is heading toward the tightest grain inventories in years despite the resumption of exports from Ukraine as shipments are too few and harvests from other major crop producers are smaller than initially expected, Reuters reported, citing grain supply and crop forecast data. By the end of the 2022-23 crop year, the world’s buffer stocks of corn will be enough for just 80 days’ worth of consumption, down 28% from five years ago and the lowest level since 2010-11, according to figures compiled for Reuters by the International Grains Council.

Global economic growth is expected to slow sharply to 2.2% next year, revised down from a forecast in June of 2.8%, and compared with a 3.0% expansion projected for 2022, says the Organization for Economic Cooperation and Development (OECD). The Paris-based policy forum said disruptions to energy supplies due to the war in Ukraine and the generalized tightening of monetary policy are weakening the economic outlook, as inflation remains high for longer than expected.

Soymeal prices in China are at record highs as rising demand from farmers follows months of lackluster soybean imports. Chinese soymeal prices surged to an average of 5,352 yuan ($747.94) per metric ton on Friday. China’s soybean crushers have scaled back purchases of soybeans in recent months due to high global prices and poor demand from the livestock industry. Soymeal stocks have fallen for 10 consecutive weeks to 493,000 MT in the week ended Sept. 17, well below the five-year average of 845,000 MT, according to Shanghai JC Intelligence Co Ltd.

The People’s Bank of China (PBOC) said it would raise the foreign exchange risk reserves for financial institutions when purchasing FX through currency forwards to 20% from the current zero, starting on Sept. 28, to “stabilize FX market expectations and strengthen macro prudential management.” The move to resume FX risk reserves would effectively raise the cost of shorting the yuan.

Large speculators increased their bullish bets in the corn market for the eighth consecutive week through mid-September, data from the Commodity Futures Trading Commission showed. The managed money net long rose 7,266 futures and options contracts during the week ended Sept. 20 to 247,909 contracts, the highest since the week ending June 21.

South Korea purchased 135,000 MT of corn from unspecified origins. Taiwan tendered to buy 51,800 MT of U.S. milling wheat. The UN World Food Program tendered to buy 100,000 MT of milling wheat to be donated to poorer countries.

CORN: December corn fell overnight to $6.70, just 1/2 cent above Friday’s low. The contract ended last week at $6.76 3/4, down 1 cent for the week and the lowest close since Sept. 8. USDA will update harvest progress after today’s close. Last week, USDA said 7% of the U.S. crop was harvested as of Sept. 18, up from 5% a week earlier but slightly behind the 8% average for the previous five years.

SOYBEANS: November soybeans dropped under the 50-day moving average overnight and fell as low as $14.11, the contract’s lowest intraday price since Sept. 12. USDA last week reported 3% of the U.S. crop was harvested as of Sept. 18, under the 5% five-year average.

WHEAT: December SRW wheat fell under the 10-day moving average at $8.73 overnight and dropped as low as $8.61 1/4. The contract fell 30 1/4 cents Friday to $8.80 1/2 but still rose 20 3/4 cents for the week. Last week, USDA reported 21% of the U.S. winter wheat crop was planted as of Sept. 18, above the five-year average of 17%.

LIVESTOCK CALLS

CATTLE: Steady-weaker

HOGS: Steady-weaker

CATTLE: Live cattle futures may face followthrough pressure from last week’s losses after USDA reported slightly higher-than-expected numbers in its monthly Cattle on Feed Report Friday. Feeder cattle may gain support from weakness in corn. USDA said the Sept. 1 feedlot inventory rose 0.4% over the same date a year earlier, while placements during August rose 0.4%, contrary to expectations for a drop of about 2.7%. Marketings during August climbed 6.4%. The data likely will have limited impact on futures, though there could be some bull spreading (nearby contracts firmer and deferred futures lower). Recent firmness in cash prices could limit futures declines. USDA-reported live steers averaged $144.55 last week through Friday morning, up from the previous week’s $143.19 average and the second consecutive weekly increase.

December live cattle fell 80 cents to $148.55, down $2.425 for the week and the contract’s lowest close since Aug. 31.

HOGS: Lean hog futures may be pressured by renewed weakness in cash fundamentals and followthrough from a soft performance last week. The national direct cash hog price fell $7.69 on Friday, while the CME lean hog index is down 42 cents to $97.59 (as of Sept. 22). October hogs finished Friday nearly $5.00 under the cash index, suggesting traders expect more near-term pressure on the cash hog market. Pork cutout values fell $2.95 Friday to $100.93, the lowest since mid-May. December lean hogs fell $2.875 Friday to $82.80, the lowest close since Sept. 12.