Ahead of the Open: All Quiet Ahead of USDA Reports at 11 a.m. This Morning

Posted on Wed, 03/31/2021 - 06:41

GRAIN CALLS

Corn:  Up a penny to down a penny
Soybeans: Up 5 to 9 cents with soyoil rebounding from sharp losses
Wheat: Mixed

GENERAL COMMENTS: Agricultural markets are bracing for USDA’s planting intentions and quarterly grain stocks reports at 11 a.m. CT this morning. The long history of these reports resulting in volatile price swings has encouraged funds to cut long positions in corn and soybeans and establish net-short positions in wheat. Analysts on average expect the USDA to project expanded plantings of U.S. corn and soybeans in 2021 versus last year, while March 1 stocks of corn, soy and wheat were seen at the lowest in several years.

While soybean futures edged higher on Wednesday, they are heading for their first monthly decline since June on expectations for higher U.S. plantings and improved weather in South America. Corn was set for a monthly drop for the first time in eight months, while wheat has dropped almost 9% this month after closing marginally lower in February. 

Before the reopening USDA did not announce any new grain or soybean export sales. 

The U.S. dollar has also provided bearish momentum over the past week, with the dollar index climbing by 0.4% to a near five-month high yesterday, weighing on the wider commodities complex as shown by the Bloomberg commodities index which fell by 1.4%. Treasury yields rose with commodities before U.S. President Joe Biden unveils an economic plan including a $2.25 trillion infrastructure boost this afternoon. Stocks were mixed as traders weighed inflation and the tax impact of the stimulus.

Biden plan would cover the cost largely by raising the top corporate tax rate from 21% (set by the 2017 tax cut bill) back to 28%. But Biden administration officials will not talk about their legislative strategy on the $2 trillion plan. But if they are going to pass a corporate tax hike, it’s going to have to come through reconciliation.  Republicans in the Senate aren’t going to support it. And Democrats probably won’t wind up at 28 percent on the corporate rate. It’s a starting point with negotiating room down to around 25 percent, though that would reduce paid-for percentage. An increase to about 25% will be hard for corporate America to lobby hard against. CEOs around the nation have bemoaned the lack of infrastructure spending for years. Most in the center-right business world would have been pretty much fine with a 25 percent rate in the 2017 Trump tax cut.

China’s official purchasing managers’ index (PMI) climbed 1.3 points from February to March, with the index now standing at 51.9 points. That’s well above the 50.0-point level that separates contraction in the country’s manufacturing sector from expansion. Factory activity picked up in China following its Spring Festival holiday in February. The sub-index for new orders climbed 2.1 points to 53.6.  

Ukraine’s wheat export prices have dropped to five-month lows amid limited demand from exporters and a global drop in prices, analysts with the consultancy APK-Inform said today. Asking prices for soft milling wheat with 12.5% protein fell to $251 to $256 per MT FOB Black Seas as of March 30, a $23 drop since early last week. APK-Inform also commented that the global move down in prices also caused Ukrainian corn prices to slide $6 over the past week. Ukraine is one of the world’s biggest grain exporters.

CORN:  History warns volatility is likely to jump in corn in response today’s USDA data. Still, low-range monthly closes would fit years that slid into spring/summer. Bullish shocks are possible but may not provide sustained strength and that would be a bearish price signal. Before USDA reports, the EIA releases its weekly ethanol production and stocks update with traders looking for a rebound in output after the larger-than-expected decline a week earlier. U.S. gasoline sales for the week ending March 20 were 10.1% higher than at the same point last year, the first time this year that gasoline demand surpassed 2020 levels, according to new data released by Oil Price Information Service. But recovery remains slow, with gasoline sales that week still 16% below pre-pandemic levels.

SOYBEANS:  May soybeans and soybean meal are in weak technical positions to run with any bullish surprises in today’s USDA reports and bearish shocks could spark a domino selling and long liquidation phase.  Malaysian palm oil futures rose 1.3% after falling to a five-week low on better export data. However, China’s Dalian most-active soyoil contract fell 3.5%, and the palm oil contract was down 2%.  ANEC pares Brazilian soybean export forecast for March but says they could still hit a record.  Brazil could export a record amount of soybeans in March, assuming a best-case scenario, according to the association of exporters ANEC. It now expects this month’s exports to total 15.437 MMT, which is down 663,000 MT from its forecast last week. ANEC expects soymeal exports to total 1.23 MMT this month.

WHEAT: The recent flurry of tenders over the past few days is a signal that there is some demand at current prices after the recent sharp declines. 

CATTLE: Steady to firm
HOGS: Steady to weak

CATTLE: Live cattle futures faced light pressure Tuesday, with traders taking advantage of dollar strength as they evened positions for month’s end. Boxed beef values soared $3.42 (Select) to $5.30 (Choice) yesterday and movement picked up to 149 loads—a welcome shift after light tallies the past three sessions. Asking prices range from $117 to $120, but so far there have just been some light sales around $116 in Texas, up $1 from last week’s action in the state.

HOGS:  May through July lean hog futures once rose to new contract highs on Tuesday, with other contract months close behind. More reports out of China regarding African swine fever’s ongoing impact on its hog herd and the resulting opportunity this presents for the U.S. are bolstering export hopes as the country looks forward to reopening and a boost in restaurant demand. The pork cutout value set back 95 cents on Tuesday and movement soared to 401.59 loads. Cash hog bids slipped 54 cents on Tuesday.