Ahead of the Open | January 25, 2022
GRAIN CALLS
Corn: Steady to 2 cents higher.
Soybeans: Steady to 2 cents higher.
Wheat: 4 to 12 cents higher.
GENERAL COMMENTS: Wheat futures rose near four-week highs overnight on concern a potential Russian invasion of Ukraine could disrupt the global grain trade. Corn futures rose near a seven-month high while soybeans erased declines and firmed near the end of overnight trade. Malaysian palm oil futures close higher and Nymex crude oil is up slightly. U.S. stock index futures extended a recent slump and the U.S. dollar index continued strengthening, rising near a three-week high this morning.
HRW wheat deteriorated further as drought in the U.S. Plains persisted, individual state crop conditions ratings released yesterday showed. The “good” to “excellent” ratings for HRW wheat dropped to 30% for Kansas (down three points from the end of December), 16% for Oklahoma (down four points), 7% for Texas (didn’t update at the end of December), 20% for Colorado (down five points), 36% for Nebraska (down three points) and 31% for South Dakota (down seven points).
When the individual state HRW crop ratings are plugged into the weighted Pro Farmer Crop Condition Index (CCI; 0 to 500 point scale, with 500 being perfect), the HRW crop plunged to a rating of 270.4, down 54.1 points from the end of November when USDA released its final national ratings until spring.
Crop Consultant Dr. Michael Cordonnier kept his Argentina and Brazil crop production estimates unchanged after rains reached key crop areas. He estimates Brazilian production at 134 MMT for soybeans and 112 MMT for corn. In Argentina, he forecasts production at 43 MMT for soybeans and 51 MMT for corn. However, Cordonnier lowered his soybean estimate for Paraguay by 1 MMT to 6 MMT.
China’s use of wheat in feed rations is expected to be far below year-ago levels due to increased corn supplies, reduced corn prices and higher wheat prices. New government restrictions prohibiting wheat sold from state stockpiles to be used by feed producers will also slash demand for wheat as a feedstock. Feed wheat use could fall to between 10 MMT and 24 MMT in 2021-22, down from more than 40 MMT the previous year, according to Reuters.
Archer-Daniels-Midland Co. reported fourth-quarter profit rose nearly 14% behind strength in its carbohydrate solutions and nutrition units. ADM's net earnings rose to $782 million in the quarter ended Dec. 31 from $687 million a year earlier.
Iran tendered to buy up to 60,000 MT each of corn, soymeal and feed barley from unspecified origins. Japan is seeking 47,841 MT of Australian wheat in its weekly tender.
CORN: March corn overnight rose as high as $6.22 1/2, the contract’s highest intraday price since $6.25 on June 11. Futures’ recent technical strength may compel bulls to target the June high at $6.33 and the contract high at $6.40 1/2. Initial support is seen at yesterday’s low of $6.09 1/2 and the 10-day moving average of $6.06 1/4.
SOYBEANS: March soybeans traded within yesterday’s range overnight. Initial support is seen at the 20-day moving average at $13.83 and at yesterday’s low of $13.82 1/2. Resistance levels include last week’s seven-month high at $14.29 1/2.
LIVESTOCK CALLS
CATTLE: Steady-weaker
HOGS: Steady-mixed
CATTLE: Live cattle futures may face further pressure after bearish USDA feedlot numbers and eroding charts sent April futures to the lowest close since early November. Strength in the U.S. dollar and continued weakness in the U.S. stock market may also weight on the cattle market. Choice cutout values rose $1.09 yesterday to $293.50, the highest since Sept. 30. But movement was light at 80 loads, suggesting retailers have secured near-term needs after actively buying beef in the weeks following the holidays. Last week’s cash cattle price averaged $137.50, up 89 cents from the previous week. April live cattle yesterday fell as low as $139.025, the lowest intraday price since $138.725 on Nov. 5.
USDA yesterday reported frozen beef stocks rose 13.4 million lbs. in December, to 503.8 million pounds as of Dec. 31, higher than the average 8.8-million-lb. increase for the month the previous five years. Pork stocks dropped 3.2 million lbs. to 398.9 million lbs., compared to the five-year average decline of 12.8-million-lb. during December. While the rise in beef stock was greater than normal and the drop in pork stocks fell shy of the December average, neither was enough to have a negative price impact.
HOGS: Lean hog futures may continue to draw support from strengthening cash, but the February contract’s steep $8.00-plus premium to the CME lean hog index may discourage buying and produce a corrective pullback. The index is expected to rise another 81 cents today to $78.32, the highest since November. Pork cutout values rose $2.37 yesterday to $95.66, as a gain of nearly $11 in bellies helped lift the average to a 2 1/2-month high. Movement totaled 342 loads. April lean hogs rose 37.5 cents yesterday to $95.325, a lifetime-high close for the third straight session.
