Ahead of the Open | August 5, 2022
GRAIN CALLS
Corn: 1 to 3 cents lower
Soybeans: 5 to 10 cents lower
Wheat: 4 to 8 cents lower
GENERAL COMMENTS: After failing to find sustained followthrough from Thursday’s gains early in the overnight session, corn, soybean and wheat futures faded. Given a favorable near-term weather forecast and outside markets factors, we expect the weaker tone to carry through to the open this morning. The U.S. dollar index is more than 1,000 points higher this morning in reaction to the stronger-than-expected jobs data. Front-month crude oil futures are modestly extending their recent decline, though still holding above Thursday’s lows.
USDA reported daily soybean export sales of 132,000 MT each to China and unknown destinations for 2022-23, which could limit selling in that market.
A “significant” rain event is expected to bring temporary relief from crop stress in the western Corn Belt through the middle of this week. World Weather says amounts and coverage levels from this rain event will be critical for the driest areas as a period of hot and dry conditions will follow for a week to 10 days. Conditions are expected to remain favorable for much of the eastern Corn Belt.
Three ships loaded with grain left Ukrainian ports, the Turkish defense ministry said, two from Chornomorsk and one from Odesa. The three ships were carrying a total of about 58,000 MT of corn. Meanwhile, a team of inspectors in Turkey on Friday completed checking an empty cargo ship before it heads to be loaded with grain at Chornomorsk, the Turkish defense ministry said. Ukraine wants the export deal expanded to include metals, though Russia says that would require sanctions against Russian metals firms to be lifted.
Tensions between the U.S. and China continue to escalate in the aftermath of House Speaker Nancy Pelosi’s visit the Taiwan earlier this week. China sanctioned Pelosi and called her visit “vicious” and “provocative.” The U.S. accused Beijing of taking “dangerous acts to a new level,” though officials emphasized it would not provoke a crisis.
The UN Food and Agriculture Organization (FAO) global food price index dropped 13.3% in July – the fourth straight monthly decline and the steepest drop since October 2008. The July decline in food prices was led by significant drops in vegoils and cereal grains, while prices for sugar, dairy and meat fell to a lesser extent. FAO’s global food price index was still 13.1% above last year.
The U.S. economy added 528,000 non-farm payrolls in July, up from 398,000 jobs added in June and far exceeding expectations. Economists expected the Labor Department to report a slowdown in jobs growth versus June. U.S. rate futures immediately priced in greater odds of another 75-basis-point increase in interest rates in September following the stronger-than-expected jobs data. The 2-year/10-year yield curve extended its inversion to the largest since August 2000.
CORN: December corn futures stopped 1/2 cent shy of the psychological $6.00 mark overnight. That level will serve as initial support, with additional support at this week’s low of $5.87 1/2 and the bottom of the July 26 gap at $5.84 1/4. The overnight high at $6.12 3/4 is initial resistance.
SOYBEANS: November soybean futures continue to trade within the recent, broad choppy range. Initial support is the psychological $14.00 mark, which has been a pivot point this week. The overnight high at $14.28 3/4 is initial resistance.
WHEAT: September SRW wheat futures continue to pivot around the $7.75 level while consolidating above the recent lows. This week’s low at $7.52 is key near-term support. The psychological $8.00 mark is overhead resistance.
LIVESTOCK CALLS
CATTLE: Steady/weaker
HOGS: Firmer
CATTLE: Cattle futures are expected to be choppy to lower this morning. Cash cattle sales have been relatively light so far this week, despite steady to firmer prices. That could be a sign feedlots feel cash prices will strengthen in the weeks ahead. Since marketings are current, they have the ability to pass on this week’s steady/firmer prices as maintain negotiating power. Meanwhile, wholesale beef prices have weakened for three straight days, with the Choice cutout down $3.92 from Monday’s high. While prices have eased, movement has picked up, signaling solid retailer demand under the market. The real test of retailer demand will come when packers raise beef prices.
HOGS: Lean hog futures are expected to open higher on followthrough from Thursday’s strong closes. Strength in the cash market should add fundamental support, especially with fall- and winter-month contracts at bigger-than-normal discounts to the cash index. The CME lean hog index is up 67 cents to $121.61 (as of Aug. 3), with today’s quote 2 cents higher than prior to the two-day pullback and only $1.07 below the 2021 peak. Given tighter slaughter supplies than year-ago, we expect the cash index to top last year’s high. The cash rally is lasting deeper into the year than normal since the start of the seasonal upswing was delayed. The pork cutout value followed up Wednesday’s sharp decline with a 69-cent drop yesterday.
