Ahead of the Open: Soybeans Lead Grains Higher Ahead of Jan. 12 USDA Reports

Posted on Tue, 01/05/2021 - 08:21

GRAIN CALLS

Corn: Up 3 to 5 cents
Soybeans: Up 22 to 27 cents
Wheat: Up 6 to 9 cents

GENERAL COMMENTSCorn and soybeans rose overnight near 6-1/2-year highs hit on Monday, as concerns about South American crops and disruptions to exports supported prices. Wheat rose as the weaker dollar, which is positive for U.S. exports amid Russia's export tax approaches in February. Brazil's soybean harvest started slowly in some areas in top producer Mato Grosso state. Local farmers say harvesting is behind last year's pace due to scarce rainfall earlier in the season. Argentina will suspend sales of corn for export until Feb. 28 as the government seeks to ensure ample domestic food supplies. Export limitations on Argentine wheat are feared after actions with corn last week. The question is also when will Russia return to export markets, but in the meantime U.S. wheat export prospects are looking positive.

South American 24-hour precipitation actually looked a bit better this morning and a few more rains are in the forecast there, but those needed supplies are a long way from being secured and selling interest is limited ahead of the key USDA reports on Jan. 12 that will provide updated U.S. corn and soybean production estimates, first winter wheat planted acreage estimates and update U.S. and world supply and demand forecasts.

Gold continued its strong start to the year as lower U.S. real yields and a weaker dollar combined with surging coronavirus cases to boost demand for the haven asset. The yellow metal traded near an eight-week high as U.S. 10-year inflation expectations topped 2% for the first time since 2018 on hopes that monetary stimulus and government aid policies will drive demand in the post-vaccine world. The higher inflation expectations boost speculation in commodity investments.

Rainfall in Argentina overnight has been a little better organized and locally greater than expected.  The greatest precipitation occurred in southwestern Buenos Aires, near the Buenos Aires/Santa Fe/Cordoba common border and northwest Cordoba. Well-timed rainfall and seasonable temperatures have been instrumental in stimulating improved crop development in Brazil. However, rainfall has continued to be lighter than usual in many areas. Soil moisture assessments painted a definite improving trend in recent weeks. Over the coming two weeks there should be sufficient precipitation to support most crop development throughout Brazil in a favorable manner. The exception will be in Rio Grande do Sul and eastern portions of Bahia.

Yesterday’s weekly CFTC Report showed big managed money fund buying for corn in the week ended Dec. 29, almost as much as the trade expected. Soybeans were short of estimates, rising almost 7,900 contracts to more than 196,000 net long futures and options positions. Funds’ held most bullish corn stance since August 2012, and the latest move was predominantly driven by new long positions, which rose the most for a week since March 2018. Through Dec. 29, money managers lifted their net longs in soybean meal and soybean oil to the highest levels since June 2018 and December 2019, respectively.  

Before the reopening this morning, USDA did not announce any new export sales. That may limit some new buying interest early in today’s daytime session.     

While the relentless spread of the coronavirus drove the equity market lower on Monday, there were also signs investors are preparing for a greater possibility that Democrats will gain control of the U.S. Senate, pointing to a lower opening today on Wall Street.  

The outcome of today’s Georgia Senate runoff elections will shape Joe Biden’s presidency even before it officially begins on Jan. 20, setting the scope of his agenda, the pace of his nominees’ confirmations and signaling whether Republicans can launch robust investigations into him and his family. If Democrats Jon Ossoff and Raphael Warnock both win, the Senate will be divided 50-50 between the parties and Vice President-elect Kamala Harris can cast a tie-breaking vote to help advance that agenda. If Republicans David Perdue or Kelly Loeffler win one of the seats, Republicans will have 51 votes -- enough to block any Biden initiative, from approving his cabinet onward.

In an interesting U-turn, the New York Stock Exchange said it will no longer delist China’s three biggest state-owned telecommunications companies, backtracking on a plan that had threatened to escalate tensions between the world’s largest economies. The change comes just four days after the NYSE said it would remove the shares to comply with a U.S. executive order. The exchange cited “consultation with relevant regulatory authorities” for the reversal in a brief statement late Monday, declining to elaborate further.

 Meanwhile, a former chairman of one of China’s biggest bad debt managers was condemned to death over charges of corruption, marking a rare sentence in President Xi Jinping’s efforts to tighten control over the economy and rein in malfeasance. Lai Xiaomin, who was chairman of Huarang Asset Management Co. before he came under investigation in 2018, was sentenced to death for taking bribes as well as bigamy, according to a local court. He was found guilty of receiving 1.79 billion yuan ($277 million) in bribes between 2008 and 2018.

CORN: March corn trading both side of unchanged overnight but well contained inside of the reversal down range from Monday. Corn used for ethanol in November was 431.7 million bushels, down from 434.2 million in October and 456.7 million bu. last November. For the first three months of the crop year, corn use totals 1267.4 million bu. and that is down from 1301.5 million a year earlier. USDA forecasts crop year use of 5050 million bushels and the pace is enough to reach that forecast. 

SOYBEANS: March soybeans open fractionally higher last night and continued to strengthen throughout the session. November total U.S. soybean crush came in at 191.0 million bushels yesterday afternoon, down from last month’s 196.6 million bu. record and the average trade estimate at 192.1 million bu. But that was still above 174.6 million bu. last year and a record figure the month of November. The crush yield was relatively high at 47.28 pounds up from 47.09 pounds last year. The September-November quarter crush totaled 558.7 million bushels. Malaysian palm oil futures reversed early losses on Tuesday, climbing 0.9% to 10-year highs, as a survey showed December stockpiles tumbling to their lowest in over a decade.  China’s Dalian most-active soyoil contract fell 0.5%, while its palm oil contract declined 0.4%.

WHEAT: Futures are moving higher with corn and soybeans. Monthly state winter wheat ratings found top producer Kansas at 46% rated “good and excellent,” up from 33% in late November and 40% last year; ratings also improved from final USDA numbers in Nebraska but fell in the Dakotas, Colorado and Illinois.

Cattle: Mixed
Hogs: Mixed

Cattle: Cattle futures fell sharply yesterday.  Rising grain prices weighed especially heavily on the feeder cattle market. The weekly meat production update from USDA reminds that average cattle weights are still a hefty 16 lbs. above year-ago levels and futures started the week at premiums to their respective cash markets. After Monday’s pullback, nearby futures for both live and feeder cattle are more in line with the cash market. Last week, cash cattle traded at an average price of $111.51. Feeder steers sold at $1 to $4 lower prices at Day 1 of an Oklahoma City feeder cattle auction yesterday, with demand reportedly light to moderate after record-setting New Year’s snowfall left fields muddy.

Hogs:  April lean hog futures appear to have formed an inverted head and shoulders on the daily bar chart, which would project futures back to the October highs. Momentum clearly favors market bulls. In contrast to futures, the product market got off to a lackluster start, with the pork cutout value slipping 81 cents and movement slowing to 330.05 loads, erasing midday gains.