Ahead of the Open | February 7, 2023
GRAIN CALLS
Corn: 1 to 3 cents lower.
Soybeans: 2 to 4 cents higher.
Wheat: Mixed.
GENERAL COMMENTS: Soybean futures recouped a portion of Monday’s losses overnight, while the corn market gave back yesterday’s gains and wheat futures showed a varied tone. We expect rather directionless trade today amid pre-report positioning ahead of Wednesday’s USDA reports. Outside markets are pulling in opposite directions this morning with front-month crude oil futures more than $1.00 higher and the U.S. dollar index over 100 points higher.
South American crop consultant Dr. Michael Cordonnier cut his Argentine soybean crop forecast by 1 MMT to 38 MMT and noted “the estimate could easily move lower with an extended period of hot and dry weather.” Cordonnier left his Argentine corn crop forecast at 44 MMT but warned “any extended period of hot and dry weather going forward would result in a lower corn estimate.” Cordonnier kept his Brazilian crop estimates at 151 MMT for soybeans and 125 MMT for corn. For corn he noted, “Given the slow planting pace of the safrinha corn, I think the weather over the next several months will have to be better than average to achieve that number.”
The forecast for South America is little changed from yesterday, according to World Weather Inc. Argentina will be hot and dry the bulk of this week but is still expecting some relief from dryness late in the weekend and next week with rains forecast for most areas. But followup rains will be needed. Southern Brazil is expected to remain dry, though some rains are forecast for next week. Central Brazil will receive frequent rains over the next two weeks, limiting soybean harvest and safrinha corn planting.
Positioning is expected ahead of Wednesday’s Supply & Demand Report. USDA is expected to make minor adjustments to its U.S. balance sheets. Traders expect USDA to report U.S. ending stocks at 1.266 billion bu. for corn (up from 1.242 billion bu. in January), 211 million bu. for soybeans (up from 210 million bu.) and 576 million bu. for wheat (up from 567 million bu.). The bigger focus will be any changes to USDA’s global production forecasts. Traders expect USDA to lower its Argentine corn and soybean crop forecasts, with little change anticipated for the Brazilian projections.
If U.S. GMO corn passes the sanitary filters of the Federal Commission for Protection against Sanitary Risks (Cofepris), it will have no problem entering Mexico, said Mexico’s Secretary of Economy Raquel Buenrostro. Without specifying a date, Buenrostro anticipated a new decree will be published in a few days, which she says will address U.S. concerns and should eliminate the possibility of the U.S. starting a dispute settlement process against Mexico under the U.S.-Mexico-Canada Agreement.
Canadian wheat stocks as of Dec. 31 totaled 22.3 MMT, according to Statistics Canada, in line with pre-report expectations and up 32.6% from year-ago. Canadian canola stocks at 11.4 MMT were a little lighter than the 11.7 MMT traders expected, though they rose 29.3% from last year.
CORN: March corn futures held within Monday’s range in light overnight trade. Near-term support starts at the 20-day moving average around $6.75 1/2 and extends to last week’s low of $6.71 1/2. Near-term resistance extends from the 5-day moving average at $6.78 to the January high at $6.88 3/4.
SOYBEANS: March soybean futures held within yesterday’s range overnight. Near-term support is the 10-day moving average around $15.16 1/2 and then last week’s low at $15.10 3/4. Near-term resistance extends from yesterday’s high at $15.35 1/2 to the January high at $15.48 1/2.
WHEAT: March SRW wheat futures failed to find sustained selling on an overnight dip below the 20-day moving average at $7.45 3/4 and yesterday’s low of $7.45 1/2. Near-term resistance extends from the 40-day moving average around $7.52 1/2 to $7.55.
LIVESTOCK CALLS
CATTLE: Choppy/higher.
HOGS: Choppy/higher.
CATTLE: Cattle futures are expected to open with a firmer tone this morning on followthrough buying after posting new contract highs on Monday. But some profit-taking may creep into the market as traders wait on cash cattle trade to develop. The average cash cattle price surged $2.92 to $158.17 last week, the highest price since the end of May 2015. While that’s supportive, the most bullish aspect of last week’s trade is that packers purchased only 64,000 head of cattle and just 50,000 head in the five-state area. As a result, packers are still short-bought on near-term slaughter needs, signaling cash prices will likely rise again this week – and potentially post strong gains again. Wholesale beef prices posted strong gains on Monday, with Choice up $1.83 and Select $2.11 higher on movement of 104 loads.
HOGS: Lean hog futures may face followthrough selling on the open this morning after bearish technical closes in deferred contracts on Monday. But we anticipate a round of corrective buying amid ideas yesterday’s losses were overdone. Any major fallout from the U.S./China balloon incident, which spooked hog traders yesterday, seems to have calmed, opening the door to corrective buying. Meanwhile, there is a building case for a seasonal low in the cash hog market. The CME lean hog index is 24 cents higher to $73.29 (as of Feb. 3), marking the seventh gain in the past nine days. Traders have modest seasonal premiums built into spring- and summer-month hog futures – way too small in our opinion. The pork cutout value firmed $2.53 on Monday as all cuts strengthened, led by bellies. Movement was solid for a Monday at 280.8 loads.
