Ahead of the Open | September 16, 2022

NEW ADVICE -- Cotton hedgers: Add 2022-crop hedges… Cotton futures posted a downside breakout from the recent consolidation range, which opens sharp downside risk. We advise cotton hedgers to hedge 30% of 2022-crop in short December futures to get to 100% covered on new-crop production. 

GRAIN CALLS

Corn: 2 to 4 cents lower.

Soybeans: 5 to 7 cents lower.

Wheat: 1 to 5 cents lower.

GENERAL COMMENTS:  Winter wheat futures fell to lows for the week overnight and are headed for the first weekly decline in the past four weeks amid concerns over demand and the global economy. Corn and soybean futures also fell. Front-month crude oil futures are up slightly but still on track for a third straight weekly drop. U.S. stock index futures indicate a weaker open and the U.S. dollar index is around 400 points higher.

Limited rain is expected in U.S. hard red winter wheat areas the next 10 days, although complete dryness is not likely, World Weather Inc. said. Some rain fell from the Texas Panhandle to central Nebraska on Thursday and early today with local totals over 1.00 inch in a few areas, which may help wheat planting and establishment, but more rain will be needed.

Russian President Vladimir Putin said Europe had only “partially” removed sanctions that Moscow says block its ability to sell and send fertilizers around the world. He said Russia was ready to provide more than 300,000 MT of Russian fertilizers stuck in European ports to the developing world for free. He also said Russia was increasing grain exports, without providing any specifics.

French corn crop conditions were stable last week, data from farm office FranceAgriMer showed, halting a nine-week fall linked to scorching summer weather. An estimated 43% of the crop was in good or excellent condition as of Sept. 12, unchanged from the previous week but down sharply from 89% a year earlier, the office said. The farm ministry earlier this week reduced its forecast for this year's crop by 1 MMT to the lowest level since 1990.

European grain trade association Coceral cut its 2022 EU wheat production forecast by 2.5 MMT to 143 MMT, which would be down 400,000 MT from last year. The group slashed its forecast for EU corn production by 14.1 MMT to 66 MMT previously due to hot, dry weather in key growing countries.

Russia’s wheat export tax for Sept. 21-27 will be 2,668.3 rubles ($44.45) per metric ton based on an indicative price of $311.90. That’s down from a rate of 2,962.9 rubles per metric ton the previous week and the sixth straight weekly decline.

China’s economy showed surprising resilience in August amid faster-than-expected growth in factory output and retail sales. Industrial output grew 4.2% in August from a year earlier, the fastest pace since March. Retail sales rose 5.4%, the largest year-over-year increase in six months. However, the property sector contracted further in August as home prices, investment and sales extended losses.

CORN: December corn overnight fell as low as $6.71 3/4, the contract’s lowest intraday price since Sept. 9 and slightly above support at the 100-day moving average at $6.69. Corn is poised for its first weekly decline in the past four as the market extends Thursday’s slide, which was fueled in part by an agreement between U.S. railroads and unions representing workers that avoided a strike.

SOYBEANS: November soybeans overnight fell as low as $14.40 1/4 but are still up from $14.12 1/4 at the end of last week.

WHEAT: December SRW wheat overnight fell as low as $8.36 1/4, the contract’s lowest intraday price since $8.26 on Sept. 9. The contract is down from $8.69 1/2 at the end of last week.

LIVESTOCK CALLS

CATTLE: Steady-firmer

HOGS: Steady-firmer

CATTLE: Live cattle futures may extend Thursday’s rally on strengthening cash prices. Cash cattle trade picked up on Thursday as packers raised bids from earlier in the week, with most prices steady to $1 higher than last week. For the week through Thursday morning, USDA-reported live steers averaged $142.73, up from last week’s $142.48 average. Packer bidding grew more aggressive after the railroad union deal was announced Thursday, seemingly confirming earlier talk they were short-bought on slaughter needs. Wholesale beef remained under pressure, as Choice cutout values fell $1.13 to $252.34, the lowest since April 2021. Movement was again strong at 145 loads.

October live cattle surged $1.275 Thursday to $145.625, down from $145.675 at the end of last week.

HOGS: Lean hog futures are poised for a strong weekly gain on indications the cash market has bottomed following a steep slump. The CME lean hog index is up 19 cents to $97.77 (as of Sept. 14), up from a seven-month low earlier this week ending the string of daily price declines dating back to Aug. 11. The cash index is just $1.53 above October futures, a sharp narrowing from $14.735 at the end of August. With October futures’ discount now mostly erased, any gains in the cash index should entice more buyer interest near-term. Pork cutout values fell $1.03 Thursday to $105.85 on movement of 274 loads, slower than average for a second straight day. October lean hogs rose $1.35 Thursday to $96.05, the contract’s highest close since Aug. 17 and up from $93.175 at the end of last week.

China’s ag ministry says the price of pork in the country averaged 30.69 yuan ($4.43) per kilogram for the week ended Sept. 9, up 1.2% from the previous week and 69.4% higher than last year. China will release a record 200,000 MT of pork from state reserves this month to boost supplies and stabilize prices.