Ahead of the Open | July 14, 2022

GRAIN CALLS

Corn: 2 to 5 cents higher

Soybeans: 5 to 10 cents lower

Wheat: 8 to 12 cents higher

GENERAL COMMENTS: Wheat futures caught a bid late in the overnight session after weekly export sales greatly topped expectations. Corn followed wheat higher at the end of overnight trade, while soybeans remained weaker. The U.S. dollar index is up nearly 800 points this morning, hitting a fresh 20-year high. Front-month U.S. crude oil futures are around $1.25 lower. We anticipate a firmer open for wheat and corn, based on how the overnight session ended, but that buying may be fleeting given outside markets and macroeconomic happenings.

Ukraine is “definitely a step closer” to clinching a deal to export grain through its Black Sea ports after Wednesday’s talks with Russia, the United Nations and Turkey, Ukrainian Infrastructure Minister Oleksandr Kubrakov said. The talks delivered some elements of a possible deal, Russia’s foreign ministry said. “There has indeed been a substantive discussion on this issue,” a Russian foreign ministry spokesperson said. “It was possible to formulate some elements of a possible agreement which Russia, Ukraine and Turkey are now discussing in their capitals through their military departments.” A preliminary date for the next four-way meeting is July 20 or July 21, Russian RIA news agency reported, citing a source familiar with the situation. No significant obstacles remain to signing the agreement, its source added. But there are hurdles ahead even if an agreement is signed. Experts have cautioned that an agreement will not have an immediate impact. It will take time to ensure there are no mines in the Black Sea shipping channel, and then to get cargo ships to Odesa, Ukraine’s largest Black Sea port.

World Weather Inc. reports, “U.S. weather remains mostly unchanged in a general sense, but the European model run wants to produce generalized rain in Missouri this weekend, while the GFS suggests that event will be a little less significant and more concentrated on northeastern Missouri and southern Illinois. Some of this moisture in Missouri also reaches the Delta Sunday and Monday. All of this will only be temporary relief. The same general theme of dryness and heat will remain from the northern Delta to South Dakota and despite a few showers and thunderstorms in the region infrequently over the next ten days the region will experience a net loss in soil moisture and rising levels of stress. Most other U.S. Midwest crop areas will see a favorable mix of rain and sunshine, although be cautious here... the rain may not be well distributed, leaving pockets of net drying and developing crop stress.”

The European Commission cut its forecasts for economic growth in the euro zone for this year and next and revised up its estimates for inflation. The commission now predicts growth of 2.6% this year for the 19-country currency bloc, slightly less than the 2.7% it had forecast in May. But next year, when the impact of the Ukraine war and of higher energy prices may be felt even more acutely, growth is now forecast to be 1.4%, instead of the 2.3% previously estimated. For the broader 27-country European Union, the growth forecast was unchanged at 2.7% this year, but revised down to 1.5% in 2023 from 2.3%. In a major change, the commission also raised its estimates for euro zone inflation, which this year is now expected to peak at 7.6% before falling to 4.0% in 2023. In May, it had forecast prices in the euro zone would rise 6.1% this year and 2.7% in 2023.

Weekly corn export sales totaled 59,000 MT for 2021-22 and 348,200 MT for 2022-23. Sales were within expectations but won’t entice buying.

There were net soybean sales reductions of 362,900 MT for 2021-22 and net sales of 113,900 MT for 2022-23. USDA reported net old-crop soybean sales reductions of 130,800 MT for China.

Weekly wheat export sales for 2022-23 greatly exceeded expectations at 1.017 MMT, including 265,300 MT sold to China. There were also sales of 30,000 MT for 2023-24 to Brazil.

CORN: December corn futures are well within the established wide trading boundaries from last week’s low at $5.66 1/2 to Monday’s high at $6.58 1/2. The contract is pivoting around $6.00.

SOYBEANS: November soybean futures are within the wide trading boundaries from last week’s low at $13.02 1/2 and Monday’s high at $14.38 1/2. The $13.50 level has been the pivot point this week.

WHEAT:  December SRW wheat futures are holding above support at last week’s low of $8.02 1/4. Near-term resistance is Monday’s high at $9.54.

LIVESTOCK CALLS

CATTLE: Steady/firmer

HOGS: Steady/firmer

CATTLE: Live cattle futures are expected to open with a firmer tone on followthrough from yesterday’s gains, though price action could turn choppy if early buyer interest is limited. This week’s cash trade started around $137 in the Southern Plains and $145 in the northern market – both around steady prices with last week. Nearby live cattle futures continue to trade well below the cash market, which should be supportive – at least limit seller interest. Wholesale beef prices weakened a little on Wednesday, with Choice down 46 cents and Select 91 cents lower. Packers moved a solid 119 loads on the day, though that was down notably form 178 loads on Tuesday. Net weekly beef exports sales of 9,200 MT were a marketing-year low, down 17% from the previous week and 42% below the four-week average.

HOGS: Lean hog futures are expected to open with a firmer tone amid strengthening cash fundamentals, though choppy trade is likely if early buyer interest is limited. The CME lean hog index rose another 24 cents to $112.80 (as of July 12). That’s up $2.13 from the same date last year, though still $9.88 below the 2021 seasonal summer peak. The pork cutout value firmed 81 cents to $118.28 – a new high for the year, though 53 cents below this time last year and $16.66 below the June 2021 peak. Strengthening cash fundamentals are keeping a premium in front-month July lean hog futures, which expire on Friday, and causing traders to narrow the discount in the August contract.  Net pork export sales of 18,300 MT were down 42% from the previous week and 37% below the four-week average.