Ahead of the Open | February 7, 2022

GRAIN CALLS

Corn: 6 to 12 cents higher.

Soybeans: 19 to 24 cents higher.

Wheat: 7 to 12 cents higher.

GENERAL COMMENTS: Soybean futures climbed to contract highs overnight on expectations adverse weather will further reduce South American production. Corn and wheat futures were also higher. Malaysian palm oil futures ended lower after rising earlier today to a record high.

USDA announced daily soybean sales totaling 507,000 MT to unknown destinations, with 249,000 MT for 2021-22 and 258,000 MT for 2022-23. China is believed to be the buyer.

South American weather remains supportive for soybean and corn futures. Rains were lighter than expected across central and northern Argentina and southern Paraguay over the weekend, southern Argentina and interior southern Brazil received beneficial rains, World Weather Inc. said. “Net drying is expected over much of central Argentina, Paraguay and southern Brazil during the coming week while frequent rain falls from northeastern Mato Grosso to Minas Gerais where delays in harvest progress and worry over crop quality will continue,” the forecaster said.

Russia is close to completing preparations for what appears to be a large-scale invasion of Ukraine that could leave up to 50,000 civilians killed or wounded, the Washington Post reported. “We are in the window,” National security adviser Jake Sullivan said Sunday on Fox News, referring to the timing of a potential Russian invasion. “Any day now, Russia could take military action against Ukraine, or it could be a couple of weeks from now, or Russia could choose to take the diplomatic path instead.”

Large speculators increased their bullish bets in the soybean market in late January to the highest level since May, according to the Commodity Futures Trading Commission’s Commitments of Traders report. The managed money net long in soybean futures and options jumped 39,593 contracts to 172,822 contracts for the week ended Feb. 1, the highest since the week ended May 11. In corn, the managed money net long rose 6,946 contracts to 372,551 contracts, the highest since Dec. 28. Managed money’s net short in SRW wheat increased 13,025 contracts to 26,452 contracts.

Ukrainian winter grain crops were mostly in favorable condition as of Feb. 3, APK-Inform agriculture consultancy reported. It said crop ratings were 91% to 99% good to satisfactory, depending on region and most “have good regenerative capacity.”

In two separate tenders, South Korea purchased a total of 201,000 MT of optional origin corn. South Korea also bought around 110,000 MT of optional origin feed wheat. Syria tendered to buy 200,000 MT of milling wheat from unspecified origins.

CORN: March corn futures overnight rose as high as $6.32 1/2 after dropping 15 1/2 cents last week to end Friday at $6.20 1/2. Key resistance is seen at the contract high of $6.42 1/2 posted Jan. 31. On Wednesday, USDA is expected to cut its Brazil corn crop estimate to 113.63 MMT from 115 MMT and its Argentina corn peg to 52.16 MMT from 54 MMT, based on a Reuters survey of analysts.

SOYBEANS: March soybeans gapped higher at the outset of overnight trade and climbed as high as $15.84 1/2, the highest for a nearby contract since prices topped $16.00 last June. USDA is expected to lower estimated Brazilian soybean production to 133.65 MMT from 139 MMT last month. Argentina’s crop estimate is expected to be cut to 44.51 MMT from 46.5 MMT.

WHEAT: March SRW wheat overnight reached $7.76 1/2 after gaining 11 1/2 cents Friday to $7.63 1/4. Russia/Ukraine tensions and expanding drought in the U.S. Plains HRW belt will continue to be closely followed this week. USDA is expected to lower its 2021-22 global ending wheat stocks estimate by about 60,000 MT, to 279.89 MMT, underscoring tight supplies for milling-quality wheat.

LIVESTOCK CALLS

CATTLE: Steady-firm

HOGS: Steady-firm

CATTLE: Live cattle futures may see followthrough buying from a strong chart performance last week during which the most-active April contract posted new highs for three consecutive days. Continued upside in futures will likely require packers to further boost cash bids. Cash cattle strengthened last week as meatpackers boosted slaughter rates, but weakness in boxed beef indicates packers are cutting prices to generate retail interest. USDA-reported live steers averaged $139.88 through Friday morning, up from the previous week’s average of $136.95. Choice cutout values fell $1.65 Friday to $279.81, down sharply from $290.42 at the end of last week.

April live cattle futures rose 12.5 cents to $146.875, up $3.775 last week. March feeder futures fell 62.5 cents to $166.10, up $6.475 for the week.

HOGS: Lean hog futures may find support early this week from stronger cash fundamentals. The CME lean hog index is up 97 cents to $84.30, the highest since mid-October. The index premium to nearby February futures may limit buying in the lead contract, but active selling is unlikely unless the cash index declines. Speculative money flow will be a key driver for deferred futures, which are overbought after last week’s price surge. Pork cutout values rose 20 cents Friday to an average of $97.41, up from $96.39 at the end of last week.

Packers slaughtered an estimated 2.436 million head last week, down 8.9% from year-ago levels. So far this year, slaughter trails comparable 2021 levels by 11%, suggesting hog supplies may contract below year-ago levels more than the widely anticipated 6.0% decline. April lean hogs climbed $1.70 Friday to $100.075, up $5.15 for the week.