Ahead of the Open | August 1, 2022

GRAIN CALLS

Corn: 14 to 16 cents lower.

Soybeans: 28 to 32 cents lower.

Wheat: 13 to 20 cents lower.

GENERAL COMMENTS: Corn, soybean and wheat futures tumbled overnight as the departure of the first grain ship from a Ukrainian port under a new agreement raised global supply prospects. Malaysian palm oil futures fell more than 5% on Monday after larger rival Indonesia relaxed its quota for export shipments. Crude oil futures fell around $3 following weak manufacturing data from China and Japan. U.S. stock index futures signal a weaker open, while the U.S. dollar index is down more than 300 points.

A high-pressure ridge will bring hot and dry conditions to the Plains and Midwest this week before retreating over the Rocky Mountains after the weekend. But this week’s outlook isn’t as harsh as what forecast models predicted last Friday. The Plains and western fringes of the Corn Belt will experience a drier biased scenario during the next two weeks, World Weather Inc. said, but the central and eastern Midwest will get timely rain to maintain a favorable outlook for crop development.

The first ship to depart the port of Odesa under a four-way grain deal will pass through the Bosphorus on Tuesday, carrying 26,000 MT Ukrainian corn to Lebanon, Ukrainian Infrastructure Minister Oleksandr Kubrakov said today. Kubrakov said Ukraine would start consultations to try to open up the port of Mykolaiv if the grain deal holds in full. Ukrainian officials have said there were 17 ships docked in Ukraine’s Black Sea ports with almost 600,000 MT of cargo. Of them, 16 held Ukrainian grain with a total volume of about 580,000 MT. Ukraine expects to reach full throughput capacity for transporting agricultural goods within weeks.

Ukrainian grain tycoon Oleksiy Vadatursky, founder and owner of agriculture company Nibulon, and his wife were killed in their home by a missile strike on Sunday. Nibulon, headquartered in Mykolaiv, specializes in the production and export of wheat, barley and corn, and has its own fleet and shipyard.

Recent rains in several regions of Russia have hurt the quality of winter wheat but improved yield prospects for spring wheat, SovEcon ag consultancy said. “There was too much rain for winter wheat at this stage which hits the quality – as farmers typically say, ‘gluten and protein have been washed away.’ However, it is improving the set-up for spring crops, including spring wheat,” SovEcon said in a note.

Strategie Grains lowered its forecast for this year’s European Union sunflower seed crop to 10.35 MMT from 10.87 MMT a month ago, citing impacts of drought. At that level, production would be equal to last year. Strategie Grains had previously projected the sunflower seed crop would surpass last year’s record volume, helped by a sharp increase in planting this year. However, drought conditions hurt yield prospects for sunflowers.

USDA is expected to report June soybean crush totaled 174.6 million bu., according to a Bloomberg survey, which would be down 6.3 million bu. (3.5%) from May but up 7.9% from last year. Corn-for-ethanol use is expected to total 449.9 million bu., which would be up 3.8 million bu. (0.9%) from May and 2.3% above year-ago.

Indonesia will retain its domestic sales requirement for palm oil to keep local cooking oil prices affordable, a senior official told Reuters. But the government will allow exporters to ship nine times the amount sold locally under the rule, up from seven times previously, Septian Hario Seto, a deputy coordinating minister for maritime and investment affairs.

Taiwan tendered to buy up to 65,000 MT of corn to be sourced from the U.S., Brazil, Argentina or South Africa. Algeria tendered to buy a nominal 50,000 MT of optional origin soft milling wheat.

CORN: December corn futures overnight fell as low as $6.00 1/2, a few cents above the 10- and 20-day moving averages, after gaining 55 3/4 cents last week to $6.20, the highest closing price since July 11. USDA will update weekly crop condition ratings after the close. A week ago, USDA reported 61% of the U.S. corn crop in either “good” or “excellent” condition as of July 24, down from 64% the previous week.

SOYBEANS: November soybeans overnight fell as low as $14.31, dropping briefly under the 40-day moving average at $14.35, after soaring nearly $1.53 last week to $14.68 1/2, the highest closing price since June 29. November futures’ 11.7% surge was the contract’s largest weekly percentage gain since August 1999.

Traders will monitor USDA’s crop ratings after the close today. A week ago, USDA reported 59% of the U.S. soybean crop in “good” to “excellent” condition, down from 61% the previous week and the sixth straight weekly decline.

WHEAT: September SRW futures overnight fell as low as $7.84 3/4 after gaining 48 3/4 cents last week. The resumption in Ukrainian grain shipments and weakness in corn and soybeans has wheat under pressure to start this week.

LIVESTOCK CALLS

CATTLE: Steady-weaker

HOGS: Steady-firmer

CATTLE: Live cattle futures may begin the week under pressure on expectations for further cash weakness, but a drop in corn prices could support feeder cattle. With a new month underway, packers have access to a fresh batch of contracted cattle, which may lead to another week of limited packer demand in the negotiated market. That portends a fifth straight week of lower cash prices. But it’s important for feedlots to stay current so they have leverage in cash negotiations when packer demand for cattle improves. Signs of decent beef demand may limit futures declines. Choice beef cutout values ended last week at $269.24, up $2.12 from the previous week. August live cattle ended last week at $136.45, down 92.5 cents for the week, while October futures ended at $142.225.

HOGS: Lean hog futures may extend last week’s gains on continued cash market strength. The CME lean hog index is up another 84 cents to $121.41 (as of July 28), just $1.26 below last year’s mid-June peak. August futures finished last Friday 76 cents below today’s cash index quote, which should limit selling in the lead contract since the index continues to rise. Traders may also continue to narrow the bigger-than-normal seasonal cash decline built into fall- and winter-month hog futures. Pork demand appears to be holding relatively well and retailers likely will step up buying soon for Labor Day weekend features. Pork cutout values ended Friday at $127.34, up $1.60 for the week.

August lean hogs rose $1.525 Friday to $120.65, up $1.95 for the week and the contract’s highest closing price since March 30. October lean hogs ended at $97.225, up 90 cents for the week.