Ahead of the Open | September 8, 2022
GRAIN CALLS
Corn: 2 to 4 cents lower.
Soybeans: Steady to 2 cents lower.
Wheat: 5 to 14 cents higher.
GENERAL COMMENTS: Grain and soybean futures were mixed in two-sided trade overnight as the market watched Ukraine developments and started to prepare for USDA’s Crop Production and Supply and Demand Reports on Sept. 12. Malaysian palm oil futures fell 4%, the biggest decline in over three weeks, amid continued concerns over China’s Covid lockdowns. Front-month crude oil futures are up more than $1, U.S. stock index futures indicate a weaker open and the U.S. dollar index is down more than 100 points.
The European Central Bank raised its main interest rates by an unprecedented 75 basis points and signaled further hikes as it joined the Federal Reserve and other central banks in accelerating efforts to rein in soaring inflation. Following on a rate hike in July, the ECB raised its deposit rate to 0.75% from zero and lifted its main refinancing rate to 1.25%, their highest levels since 2011, with further moves anticipated in October and December.
Turkish President Tayyip Erdogan said on Thursday he wanted grain from Russia to be exported too, and President Vladimir Putin was right about grains exported from Ukraine under a United Nations-backed deal going to wealthy countries, not poor ones. Erdogan said Putin was uncomfortable with grain shipments going to countries that sanction Russia.
The U.S. ag trade deficit shrank slightly in July. The U.S. exported $14.9 billion of ag goods in July against imports of $15.8 billion for a trade deficit of $938.3 million, down slightly from a trade deficit of nearly $1.1 billion in June. Through the first 10 months of the fiscal year (FY) 2022, ag exports total $167.3 billion against imports of $161.2 billion for a surplus of nearly $6.2 billion. USDA forecasts FY 2022 ag exports at $196.0 billion and imports at $192.0 billion, which would result in a trade surplus of $4.0 billion.
Goldman Sachs raised its forecast for Fed rate hikes. The investment bank now expects the Fed to deliver a 75-basis point hike to interest rates later this month, citing several hawkish comments from Fed officials in recent weeks. The bank’s analysts also lifted their expectations for November’s meeting, forecasting a 50-basis point hike. The U.S. lender had previously expected a 50-basis point hike in September followed by a 25-basis point rise in November. Goldman stuck to its forecast for a 25-basis point hike in December, seeing the fed-funds rate at 3.75% to 4% by the year end.
USDA’s attaché in China expects the country’s pork production to increase 1 MMT to 53 MMT, which would remain below pre-African swine fever levels but be consistent with consumer demand. The attaché forecasts pork imports will decline 8% from this year to 1.85 MMT “as domestic production and prices stabilize. Additionally, imports are expected to be constrained as global pork prices are less competitive compared to domestic prices.” The post expects China’s beef production to rise 300,000 MT to 7.4 MMT. Beef imports are forecast to decline to 2.5 MMT.
Taiwan purchased 55,375 MT of U.S. milling wheat.
CORN: December futures dropped slightly under the 10-day moving average of $6.68 1/4 shortly before the close of overnight trading as the contract extended a pullback from a 2 1/2-month intraday high of $6.88 posted Wednesday.
WHEAT: December SRW wheat extended Wednesday’s rally to near two-month highs but held within the previous session’s range. The most-active contract rose 27 1/4 cents Wednesday to at 8.44 1/4, the contract’s highest closing price since July 11.
LIVESTOCK CALLS
CATTLE: Steady-firmer
HOGS: Steady-weaker
HOGS: Lean hog futures may face pressure from an ongoing slide in cash fundamentals. The national direct average hog price fell 41 cents Wednesday to $97.89, while the CME lean hog index is down another $1.78 to $101.48 (as of Sept. 6), the lowest since May 23. October futures ended $10.405 below the index Wednesday, and while that’s a smaller discount compared to recent weeks, the cash index has firmed an average of nearly $4.75 from now until mid-October over the past five years. Despite indications market-ready numbers will fall short of levels implied by USDA’s June Hogs & Pigs Report, futures continue to reflect a pessimistic stance by traders. Pork cutout values fell $1.18 to $103.15, but movement was strong at 352 loads.
