Ahead of the Open | February 8, 2022

GRAIN CALLS

Corn: 3 to 5 cents lower.

Soybeans: 9 to 13 cents lower.

Wheat: HRW and SRW 5 to 7 cents lower, spring wheat 1-3 cents higher.

GENERAL COMMENTS: Grain and soybean futures fell under corrective pressure overnight as traders await USDA’s Supply and Demand Report tomorrow. Malaysian palm oil futures posted the biggest single-day loss in over three weeks as weaker rival vegoils triggered profit-taking. Nymex crude oil futures are down more than $1. U.S. stock index futures are slightly lower this morning and the U.S. dollar index is more than 250 points higher.

USDA announced daily soybean sales of 132,000 MT for delivery to China and 332,000 MT for delivery to “unknown destinations,” both during the 2022-23 marketing year. Since Jan. 28, USDA has reported a combined 2.42 MMT of soybean sales to China or unknown destinations.

Weekend rains across areas of Paraguay came too late to help the drought-damaged soybean crop, prompting Crop Consultant Dr. Michael Cordonnier to lower cut his Paraguay soybean crop estimate by 1 MMT to 5 MMT, less than half of what the country was originally expected to produce. Cordonnier kept his Brazilian and Argentine soybean and corn crop estimates unchanged this week, but he has a lower bias toward both crops in both countries. He forecasts Brazilian production at 130 MMT for soybeans and 112 MMT for corn. In Argentina, he estimates production at 42 MMT for soybeans and 51 MMT for corn.

Soybean harvesting remains a struggle in several areas of center-south and northeastern Brazil as well as portions of Mato Grosso due to wet weather, World Weather Inc. said. Rainfall the past week was enough to keep the ground saturated, with flooding noted in portions of Minas Gerais and minor damage was suspected in areas that saw the most severe flooding. These areas need drier weather to support more aggressive harvesting, though another week of wet weather will continue to impact harvest progress.

French officials said Vladimir Putin had moved towards de-escalating the Ukraine crisis by promising not to undertake any new “military initiatives” and agreeing to withdraw thousands of Russian troops from Belarus after the completion of planned exercises, the Financial Times reported. If the agreement — brokered during talks with his French counterpart Emmanuel Macron — is confirmed by Putin, it could ease tensions in the region after Russia amassed more than 100,000 troops on Ukraine’s borders.

Canada’s stocks of total wheat plunged 38% at the end of December 2021 compared to the same date in 2020 to 15.6 MMT, according to a farm survey by Statistics Canada. Only stocks of corn for grain were up year-over-year. StatsCan noted the decreases were due to poor growing conditions in Western Canada, leading to the decline in stocks. In addition, flooding in British Columbia in November affected the movement of grain in Western Canada.

Turkey provisionally purchased 325,000 MT of corn from unspecified origins. Taiwan tendered to buy up to 65,000 MT of corn from the U.S., Brazil, Argentina or South Africa.

CORN: March corn futures matched yesterday’s high of $6.36 3/4 overnight before fading. Positioning  is expected today ahead of Wednesday’s USDA Supply and Demand Report, which is expected to include reduced production forecasts for South American crops. USDA is expected to cut its Brazil corn crop estimate to 113.63 MMT from 115 MMT last month and its Argentina corn estimate to 52.16 MMT from 54 MMT, based on a Reuters survey of analysts. Initial support in March futures is seen at the 10-day moving average of $6.27 1/2 and yesterday’s low at $6.24 3/4.

SOYBEANS: March soybean futures overnight fell as low as $15.65 1/2 after surging 28 1/4 cents yesterday to $15.81 3/4, the highest close for a nearby contract since June 4. Bulls’ target is the contract high of $15.89 1/2 set yesterday, with further upside targets including the psychological $16.00 mark, followed by the June 2021 high of $16.23 1/2, based on the continuation chart.

WHEAT: March SRW wheat fell as low as $7.54 overnight after gaining 5 1/2 cents yesterday to $7.68 3/4. Initial support is seen at the 200-day moving average of $7.43 3/4 and last week’s low of $7.40. An apparent easing of Russia/Ukraine tensions may keep pressure on the market, but expanding drought in the U.S. Plains HRW belt remains a concern. 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-weak

HOGS: Steady-firm

CATTLE: Live cattle futures may extend yesterday’s declines on weakness in wholesale beef. Choice cutout values fell 85 cents yesterday to a four-week low of $278.96 and movement was light at 80 loads, indicating packers are cutting prices to draw retail interest. Packer margins have fallen near a four-week low but remain firmly profitable. Cash cattle prices rose almost $3.00 last week, but if retail demand doesn’t improve packers probably will be reluctant to further increase bids. Live steers averaged $139.76 last week, up from the previous week’s average of $136.95. April live cattle fell 47.5 cents yesterday to $146.40 after reaching a contract high at $147.375. March feeder cattle fell $1.075 to $165.025.

HOGS: Lean hog futures may see followthrough buying from yesterday’s jump to contract highs on continued strength in cash fundamentals. The CME lean hog index is up $1.57 to $85.87, the highest since mid-October, while pork cutout values rose 78 cents to $98.19, matching a two-month high reached Jan. 27. Movement totaled 337 loads. The index is just $1.83 under the February futures close yesterday. The cash market’s gains on the lead contract may stir additional buyer interest, but deferred hog futures are overbought technically and could face some near-term corrective selling. April lean hogs rose $1.20 at $101.275 after hitting a fresh contract high at $102.85. February futures rose 67.5 cents to $87.70.