Ahead of the Open | January 27, 2023
GRAIN CALLS
Corn: 1 to 3 cents lower.
Soybeans: 2 to 5 cents lower.
Wheat: 4 to 8 cents lower.
GENERAL COMMENTS: Corn and soybeans faded to slight losses at the end of overnight trade, while wheat also declined. We expect the lower price action late in the overnight session to produce light followthrough selling this morning. Fundamental pressure will come from rains across areas of Argentina overnight, though fund-driven money flow ahead of the weekend is likely to be the real determinant on price action today. Crude oil futures are more than $1.00 higher, while the U.S. dollar index is modestly firmer.
Rain fell in some key grain and oilseed production areas from northern Argentina to southern Cordoba overnight with 0.50 to 1.25 inches and locally more than 1.50 inches, according to World Weather Inc. More precipitation will still be needed to restore subsoil moisture, which is still quite low.
World Weather says alternating periods of rain and sunshine will impact Argentina, Paraguay, Uruguay and Brazil during the next two weeks. The moisture will prove supportive for most crop development, although there will be some concerns over field work delays in parts of Brazil as center-west and center-south crop areas see a return of greater rainfall.
U.S. hard red winter wheat areas will trend much colder this weekend into early next week, but World Weather says crop damage is not likely due to the coldest temperatures staying mostly in areas that have significant snow cover. Weekend snow will protect wheat in Montana and parts of South Dakota from potentially damaging cold.
Areas of the Southern Plains are not likely to get much precipitation of significance through Monday; southeastern parts of the region will get rain and a little snow Tuesday through Thursday next week.
The Personal Consumption Expenditures price index (PCE), rose 5% annually in December, the Commerce Department reported, down from a 5.5% rise in November. Core PCE, which excludes volatile food and energy prices, increased 4.4% annually, down from November’s 4.7% increase. Core PCE is the Fed’s favored inflation gauge as it provides a more complete picture of consumer costs and spending.
CORN: March corn futures are poised to finish the week with slight gains after closing last week at $6.76 1/4. Near-term support is in the $6.77 1/2 to $6.76 range. Thursday’s high at $6.85 1/2 is initial resistance, with stronger resistance at the Jan. 18 high of $6.88 3/4.
SOYBEANS: March soybean futures are on pace for solid weekly gains after finishing last Friday at $15.06 1/2. Near-term support is the 10-day moving average at $15.14, with additional support around $15.05. Resistance extends from $15.28 1/2 to this month’s high at $15.48 1/2.
WHEAT: March SRW wheat futures are poised to post modest weekly gains after closing last Friday at $7.41 1/2. Resistance is at $7.58 and $7.60 1/4. Support extends from the $7.40 area to Monday’s low at $7.12 1/2.
LIVESTOCK CALLS
CATTLE: Choppy/lower.
HOGS: Higher.
CATTLE: Live cattle futures are expected to open with a mostly weaker tone following a low-range close on Thursday after traders grew tired of waiting on cash cattle trade to develop and took profits from long positions. Cash cattle activity has been quiet, with packers trying to buy animals $1 or more lower than last week while feedlots want steady or better prices. These recent extended cash negotiations have played out in packers’ favor but they are thought to be short-bought on near-term slaughter needs after weeks of light purchases. Wholesale beef trade saw Choice values firm 47 cents while Select dropped 32 cents. Packers moved a solid 120 loads on Thursday. April live cattle futures dropped below the 5- and 20-day moving averages on Thursday, stopping right around the 10-day average near $160.51. That will serve as initial support, followed by the 40-day average near $160.315. Wednesday’s high at $161.775 is near-term resistance.
HOGS: Lean hog futures finished strong on Thursday, with deferred contracts posting bullish reversals. We expect that to lead to followthrough buying this morning, with deferred contracts again likely to lead gains. Fundamental support will come from the cash index, which hints a seasonal low could be close. The CME lean hog index is 20 cents higher (as of Jan. 25) after rising 22 cents yesterday. With February lean hog futures more than $4.50 above the cash index as of Thursday’s close, traders will likely want to see more proof before actively building the premium in the front-month contract. April lean hogs closed above the 10-day moving average for the first time since Dec. 30. Next resistance is in the $88.90 to $89.30 range. The 10-day average near $86.20 is near-term support.
