Ahead of the Open | February 22, 2022
GRAIN CALLS
Corn: 4 to 8 cents higher.
Soybeans: 4 to 8 cents higher.
Wheat: 8 to 14 cents higher.
GENERAL COMMENTS: Grain and soy futures jumped overnight on concerns escalating Russia/Ukraine tensions will disrupt the global grain trade, though markets backed off their highs. Malaysian palm oil futures climbed to a record high, while front-month Nymex crude oil futures hit a seven-year high at $96 a barrel before backing off that level. U.S. stock index futures are slightly lower and the U.S. dollar index is slightly lower this morning.
USDA reported daily sales of 132,000 MT of soybeans for delivery to China during the 2022-23 marketing year and 120,000 MT of HRW wheat for delivery to Nigeria, divided evenly between 2021-22 and 2022-23. Since Jan. 28, USDA has reported a combined 3.65 MMT of soybean sales to China or unknown destinations.
Russian President Vladimir Putin announced he’s recognizing two self-proclaimed separatist republics in eastern Ukraine. Putin signed aid and cooperation pacts with separatist leaders at a Kremlin ceremony yesterday and ordered “peacekeeping forces” into the separatist areas of Ukraine. The White House is expected to announce new sanctions on Russia today, but they are not to be as severe as Biden and a host of other administration officials threatened prior to Putin’s latest moves.
Argentina is expected to be wetter over the next week to 10 days, according to World Weather Inc. The forecaster says most of the country will receive some needed rains at some point. Rains are expected to be lighter across central and northern Brazil, which is welcome for mature soybeans. Far southern areas of the country will receive some needed rains.
Crop Consultant Michael Cordonnier cut his Argentine soybean and corn crop estimates by 1 MMT each to 39 MMT and 49 MMT, respectively, after a week of generally dry conditions across most of the country. He left his Brazilian estimates unchanged at 124 MMT for soybeans and 112 MMT for corn. Cordonnier also left his Paraguay soybean crop peg at 5 MMT.
China will improve production capacity of soybean and other oilseeds, while maintaining stable grain acreage, in an effort to bolster food security. China will increase subsidies for land rotation programs and rewards for edible oils production. Beijing also said it will actively deal with unfavorable impacts from late planting of wheat and strictly control corn-based fuel ethanol production, according to the official Xinhua news.
China sold 509,089 MT of the 525,704 MT of state-owned wheat reserves put up for auction last week at an average price of 2,698 yuan ($426) per MT. Interest in the state wheat reserves remains high and the average price increased from 2,590 yuan ($409) per MT the previous week. China’s National Food and Strategic Reserves Administration says the country will sell some soybean and edible oil stocks from state reserves, without providing details of timing or volume.
Taiwan bought 65,000 MT of corn that can be sourced from the U.S., Brazil, Argentina or South Africa.
CORN: March corn futures trimmed gains after rising overnight to $6.71 3/4, a contract high and the highest price for a nearby futures since July. Russia/Ukraine tensions and speculative money flow will be key price influencers this week. Large speculators reduced bullish bets in the corn market for the second consecutive week, according to the Commodity Futures Trading Commission’s Commitments of Traders report. The managed money net long in corn futures and options fell 11,818 contracts to 325,524 contracts for the week ended Feb. 15, the lowest since late November.
SOYBEANS: March soybean futures overnight reached $16.32, the highest since the contract high of $16.33 posted Feb. 10, while nearby soyoil hit the highest level since early June. Large speculators increased their bullish bets in the soybean market for the fourth straight week, according to the CFTC’s Commitments of Traders report. The managed money net long in soybean futures and options increased 11,827 contracts to 175,372 contracts for the week ended Feb. 15, the highest since the week ended May 11.
WHEAT: Wheat futures eased from early gains overnight after the March SRW contract rose as high as $8.24 1/4, the highest since $8.31 1/2 on Jan. 25. Trade focus this week will remain on the Russia/Ukraine standoff. Managed money’s net short in SRW wheat increased 5,106 contracts during the week ended Feb. 15 to 34,658 futures and options contracts, the largest since July 2020, according to CFTC data.
LIVESTOCK CALLS
CATTLE: Steady-weak
HOGS: Steady-firm
CATTLE: Live cattle futures may face further pressure after a soft close last week amid beliefs the market has established a near-term top, despite strong cash fundamentals. The USDA-reported live steer average rose nearly $2 last week to an average of $142.25. While April futures are still about $4.00 over cash, the late-week slump suggests diminished expectations for this week’s cash action. USDA will release its monthly Cold Storage Report after today’s close. The report will detail meat stocks held in frozen storage as of Jan. 31. The five-year average is a 2-million-lb. decline in beef stocks and a 56.7-million-lb. build in pork inventories during January.
April live cattle end last week at $145.875, down 30 cents for the week and the lowest closing price since Feb. 1.
HOGS: Lean hog futures may gain followthrough support after ending last week near contract highs, but price upside may be limited by concerns the market is overbought and due for a correction lower. Cash fundamentals are strong, with the CME lean hog index up another $1.89 to $97.12. Wholesale pork tumbled to end last week but remains up sharply from the January lows. Pork cutout values fell $6.63 Friday to an average of $109.91, down 5 cents from the end of last week. Movement was light at about 206 loads.
April lean hogs rose $1.825 Friday to $109.40, up $7.175 for the week and the highest closing price for a nearby contract since mid-August.
