Ahead of the Open | July 25, 2022
GRAIN CALLS
Corn: 14 to 18 cents higher.
Soybeans: 16 to 22 cents higher.
Wheat: 20-plus cents higher.
GENERAL COMMENTS: Grain futures rose overnight as a missile strike on Ukraine’s Odesa port over the weekend stirred concerns over an agreement to resume the country’s grain exports. Expectations for a return of Midwest heat after brief relief also boosted prices. Malaysian palm oil futures fell a third straight session on disappointing by export data. Front-month crude oil futures more than $1.50. U.S. stock index futures signal a stronger open and the U.S. dollar index is down more than 400 points.
Beneficial rains fell on some areas of the Corn Belt over the weekend, but weekend precipitation was light from eastern Nebraska to Minnesota and that region may stay drier biased during the next 10 days. Recent precipitation “will improve crop and field conditions in many areas especially in the southwestern Corn Belt and the Delta, the forecaster said. However, the following week is drier and warmer in the central U.S., with ridge building expected once again, “which will return warmer and drier weather after this week's rain.”
A day after Ukraine and Russia signed a deal to resume grain exports from Ukraine’s Black Sea ports, Russian missiles hit Odesa, the biggest of those ports. A Ukrainian foreign ministry spokesman accused Russian President Vladimir Putin of “spitting in the face” of the United Nations Secretary General António Guterres and Turkish President Recep Tayyip Erdogan, who brokered the agreement. The Kremlin said a Russian cruise missile strike against the port of Odesa in southern Ukraine would not affect the export of grain.
Despite the Russian attacks on Odesa, Ukrainian officials say they are moving forward with implementing the deal to restart grain exports. Ukraine’s infrastructure minister hopes the first shipment will be this week from Chornomorsk and the country will be able to work on the export of grains from all ports in the agreement within two weeks. The minister says the deal included no limits on the volume of grain exports and also includes the shipment of fertilizers from Ukrainian ports.
The Federal Reserve, whose policy-setting committee meets this week, is widely expected to hike its benchmark funds rate another 75 basis points as the central bank tries to corral soaring inflation. Some economists say the Fed could raise the rate 100 basis points.
Malaysian crude palm oil prices will remain weak for most of the third quarter of this year, the country’s commodities minister said today, after rival producer Indonesia scrapped its export levy. “This is inevitable in light of stiffer competition from Indonesia… in its quest to flush out as much excess palm oil possible from its existing stockpile,” Zuraida Kamaruddin said in a statement. Malaysia’s benchmark crude palm oil price rallied to record levels earlier this year as Russia's invasion of Ukraine and a temporary export ban by Indonesia tightened global edible oil supply.
Large speculators continued to slash bullish bets in grain markets. The managed money net long in the corn market fell 25,871 contracts to 125,303 futures and options contracts as of the week ended July 19, the lowest net long since September 2020, according to data from the Commodity Futures Trading Commission. The managed money net long fell to the lowest level since late December.
SOYBEANS: November soybeans rose as high as $13.36 1/2 overnight after ending last week at $13.15 3/4, down 26 1/2 cents for the week.
WHEAT: September SRW futures reached $7.93 1/2 overnight after ending last week at $7.59, down 17 3/4 cents for the week.
LIVESTOCK CALLS
CATTLE: Steady-weaker
HOGS: Steady-firmer
CATTLE: Deferred live cattle futures may face pressure after USDA’s Cattle on Feed Report late Friday showed estimated feedlot placements during June at 1.629 million head, down 2.4% from the same month a year earlier but higher than trade expectations for a decline of 5%, based on a Reuters survey of analysts. Other aspects of the report were largely price-neutral and should have little futures impact today. The July 1 feedlot inventory up 0.4% from year-ago, as June placements dropped slightly less than anticipated. USDA’s Cattle Inventory Report Friday showed the U.S. cattle herd contracted 2.0% as of July 1, while the beef cow herd declined 2.4% and the calf crop is estimated to be 1.4% lower than last year. While those figures were all slightly higher than the respective pre-report estimates, they weren’t enough so to greatly influence prices. The beef heifer replacements category declined a slightly more than expected 3.5%, signaling herd contraction will continue.
USDA’s Cold Storage Report showed a June record 516.2 million lbs. of beef in storage. While that could imply sluggish demand, it may also be related to facilities building inventories due to ongoing strong exports. Pork stocks declined less than average during June to 541.0 million lbs., down 5.1 million lbs. from May.
HOGS: Lean hog futures may extend last week’s rally to three-month highs on continued strength in cash fundamentals. The CME lean hog index is up another $1.12 to $118.16, a 13-month high. August lean hogs rose $2.40 Friday to $118.70, up a sharp $8.875 for the week and the contract’s highest closing price since April 19. The lead contract is at a 54-cent premium to today’s quote and now virtually in line with the cash index, which could slow buyer interest to some extent. But seller interest should be limited until the cash index signals the seasonal rally has exhausted.
