Ahead of the Open | February 23, 2023
GRAIN CALLS
Corn: 1 cent lower to 1 cent higher.
Soybeans: Steady to 3 cents lower.
Wheat: 3 cents lower to 3 cents higher.
GENERAL COMMENTS: Grain and soybean futures posted light, two-sided trade overnight. We expect rather directionless price action this morning as traders digest USDA’s initial projections for 2023-24 that were released at the Ag Outlook Forum early this morning. Outside markets are mildly supportive, with front-month crude oil up around 80 cents, while the U.S. dollar index is modestly weaker.
Based on the January WASDE Report, USDA projects the following for 2023-24:
Corn: Planted acreage of 91.0 million, with harvested acres of 83.1 million. A national average corn yield of 181.5 bu. per acre would produce a crop of 15.085 billion bushels. Total use is projected at 14.490 billion bu., with feed and residual use of 5.600 billion bu., food, seed & industrial use of 6.690 billion bu. (5.250 billion bu. for ethanol) and exports of 2.200 billion bushels. Carryover: 1.887 billion bushels (13.0% stocks:use). Price: $5.60.
Soybeans: Planted acreage of 87.5 million, with harvested acres at 86.7 million. A national average bean yield of 52.0 bu. per acre would result in a crop of 4.510 billion bushels. Total use is projected at 4.461 billion bu., including a record 2.310 billion bu. of crush and exports of 2.025 billion bushels. Carryover: 290 million bushels (6.5% stocks:use). Price: $12.90.
Wheat: Planted acreage of 49.5 million, with harvested acres at 38.4 million. A national average yield of 49.2 bu. per acre would produce a crop of 1.887 billion bushels. Total domestic use is projected at 1.142 billion bu., with exports forecast at 825 million bushels. Carryover: 608 million bushels (30.9% stocks:use). Price: $8.50.
Cattle: U.S. beef production is projected at 26.5 billion lbs., down 6% from 2022. Exports are projected at 3.09 billion lbs., down 12.6% from last year. Cash price: $159.00, which would be a record and approximately $15.00 above last year.
Hogs: U.S. pork production is projected at 27.4 billion lbs., up 2% from last year. Exports are expected to inch up 0.2% from last year to 3.65 billion pounds. Cash price: $66.50, down $4.71 from last year.
Northern Argentina will receive beneficial rains, while southern Argentina will remain mostly dry during the next week to 10 days. World Weather says the best chance for rains in southern Argentina will occur in the second week of the forecast. Frequent rains will continue in areas of southern and central Brazil, which will delay soybean harvest and safrinha corn planting in Mato Grosso do Sul, Sao Paulo and Parana, though conditions will be improved in Mato Grosso.
Due to Monday’s government holiday, USDA’s export sales data for the week ended Feb. 16 will be released on Friday morning.
CORN: March corn futures held in a tight range just above Wednesday’s low of $6.73 3/4 overnight. That corresponds with the 40- and 100-day moving averages to form solid initial support. Additional support is at the 200-day average at $6.71 1/4 and the 50-day average around $6.70 1/2, with backing from this month’s low at $6.69 1/4. Near-term resistance extends from the 5-day average at $6.76 1/2 to the January high at $6.88 3/4.
SOYBEANS: March soybean futures entered Tuesday’s gap overnight but bounced off the 10-day moving average and didn’t fill it. The bottom of the gap at $15.33 1/4 is near-term support, followed by the 20-day average near $15.30. Near-term resistance is at Wednesday’s high at $15.54 and this month’s high at $15.55 1/2.
WHEAT: March SRW wheat futures held above Wednesday’s low at $7.33 overnight. That level will serve as initial support, with additional support at $7.23 1/2. A bounce from that level would form an inverted head-and-shoulders. Failure to hold support at $7.23 1/2 would point to a near-term test of the January low at $7.12 1/2. Near-term resistance extends from $7.44 1/4 to the $7.55 area.
LIVESTOCK CALLS
CATTLE: Mixed.
HOGS: Choppy/firmer.
CATTLE: Live cattle futures are expected to open with a mixed tone today as traders await active cash cattle trade and position themselves ahead of USDA’s Cattle on Feed Report Friday afternoon. So far, only light cash cattle trade has been reported in the northern market around $161 in Nebraska and $164 in Iowa. Cash negotiations have been limited in the Southern Plains. Traders expect higher cash trade this week, but active sales may not be seen until after Friday afternoon’s USDA report. Meanwhile, the wholesale beef market remains on fire. Choice wholesale beef prices firmed another 71 cents on Wednesday to $287.81. Though that was 81 cents off the morning high, it still marked the highest February price ever for Choice beef, with the next upside target being the January 2022 high at $293.50. Choice beef has now surged nearly $22 this month, building packer margins as they have increased cash bids.
HOGS: Lean hog futures are expected to open with a mostly firmer tone on support from the strengthening cash market. The CME lean hog index is up 77 cents, the biggest daily gain during the current rally from the January low. After yesterday’s sharp losses, April lean hog futures still held a $9.02 premium to today’s cash quote (as of Feb. 21). The bigger-than-normal premium in the lead-month contract could limit support from the firming cash index. The pork cutout value firmed 4 cents on Wednesday and movement slowed to 234.4 loads. Wholesale pork prices are cheap compared to beef, which should encourage retailers to actively feature pork after Lent and ahead of the grilling season.
