Ahead of the Open | December 20, 2022

GRAIN CALLS

Corn: 1 cent lower to 2 cents higher.

Soybeans: 6 to 8 cents higher.  

Wheat: SRW wheat 1 to 2 cents lower, HRW and spring wheat 4 to 7 cents higher.

GENERAL COMMENTS: Nearby corn futures and soybeans gained on light corrective buying overnight as traders monitored South American weather. Wheat futures traded mostly higher. Malaysian palm oil futures fell 1.5% to a one-week closing low amid slower export data, while front-month crude oil rose nearly $1. U.S. stock index futures signal a weaker open, while the U.S. dollar index is down more than 500 points.

Extremely cold temperatures will grip central parts of North America mid- to late-week and “will bring all kinds of problems,” World Weather Inc. said. Blizzard conditions are likely from the eastern U.S. Plains to the Great Lakes region Wednesday night into Saturday. Extreme lows in the -30s and -20s Fahrenheit are likely in the Northern Plains, and subzero lows will occur southward to the Texas Panhandle, central Oklahoma, central Illinois and northern Indiana.

Drought continues in control across Argentina’s summer crop areas, causing delays in planting, emergence and establishment, World Weather Inc. said. “Accelerated production cuts are still possible without better rainfall soon. Computer forecast model data has been hinting at possible trend changes late this month and/or in January, but until La Nina weakens it will still be very difficult to get drought-busting rain.” The forecaster added it believes “the better rainfall days are just a few weeks away.”

South American crop consultant Dr. Michael Cordonnier cut his Argentine soybean crop estimate for a fourth consecutive week, this time by 2 MMT to 45 MMT, amid “problematic” weather. Cordonnier kept his Argentine corn crop estimate at 47 MMT after a “temporary reprieve” from weekend rains and lower temps. He has a neutral to lower bias for both crops. Cordonnier kept his Brazilian crop estimates at 151 MMT for soybeans and 125.5 MMT for corn but noted “developing dryness in southern Brazil is becoming a concern.”

China is scrambling to strengthen its healthcare system as Covid-19 spreads through the country. Officials in several cities are building “fever clinics” at hospitals to treat patients. Five Covid-related deaths were reported on Tuesday, but the true figure is likely to be far higher. State media said the country should return to “normalcy” within a few months.

The Bank of Japan (BOJ) shocked markets on Tuesday with an unexpected adjustment to its bond-yield controls by allowing long-term interest rates to rise further, a move that seeks to alleviate some of the costs of prolonged monetary stimulus.

The People’s Bank of China (PBOC) kept its loan prime rates (LPRs), the benchmark lending rates, unchanged for the fourth consecutive month. The one-year LPR was kept at 3.65%, while the five-year

The World Bank lowered its China growth outlook for this year and next, citing the loosening of strict Covid-19 policy and persistent property sector weakness. World Bank expects China’s economy to grow 2.7% in 2022, before recovering to 4.3% in 2023 as it reopens following the worst of the pandemic. In September, it forecast China’s growth at 2.8% this year and 4.5% next year.

Taiwan tendered to buy 56,000 MT of U.S. milling wheat. Japan is seeking 144,441 MT of milling wheat in its weekly tender.

CORN: March corn overnight traded within Monday low and high of $6.44 and $6.50 3/4, respectively, and is hovering around the 10-day moving average at $6.48 3/4. Continued choppy, sideways price action is likely ahead of the holiday weekend. The 20-day moving average at $6.53 3/4 stands as initial resistance.

SOYBEANS: March soybeans overnight nudged under the 20-day moving average and dropped to $14.62 3/4, the contract’s lowest intraday price since Dec. 7, before rebounding to gains. Resistance is at the 10-day moving average at $14.78 1/2.

WHEAT: March SRW wheat traded within the previous session’s range overnight after dropping 5 cents Monday to $7.48 1/2, the contract’s lowest close since Dec. 9. HRW futures are drawing support amid concerns frigid temperatures in the U.S. Plains this week could damage the crop.

LIVESTOCK CALLS

CATTLE: Steady-firm

HOGS: Steady-weaker

CATTLE: Live cattle futures should remain supported by beliefs tight supplies of market-ready animals will keep cash prices on a firm track. Packers slaughtered an estimated 629,000 head of cattle last week, down 23,000 head from the previous week, and kills will be lower this week and next as plants take extended downtime around Christmas and New Year’s Day. Packers will attempt to boost cutting margins around the holiday-shortened schedules, though cash prices are likely to hold around steady with last week’s $155.69 average since feedlots are well positioned to not have to move a lot of cattle if prices drop much. Live steers averaged $155.69 last week, down just 10 cents from last week’s average and near the 7 1/2-year high posted earlier this month. Choice beef cutout values rose $1.00 Monday to $263.83, near a six-week high, but movement was again light at 74 loads.

HOGS: Lean hog futures may face pressure from indications the cash market has yet to find a bottom following an extended slide. The national direct cash hog price dropped 79 cents on Monday, with the Iowa/Minnesota market down $1.98. The CME lean hog index is down 71 cents to $80.84 (as of Dec. 16), the lowest level since Jan. 27, signaling the cash market has not yet put in a seasonal low. February lean hog futures ended Monday at a $4.86 premium to today’s cash index quote, which likely limits the upside in front-month futures until traders sense a seasonal low. Pork cutout values fell $2.51 to $84.93, back near an 11-month low posted last week, but movement was strong at 336 loads.

February lean hogs fell 7.5 cents Monday to $85.70, after earlier rising to $86.55, the highest intraday price since Dec. 7.