Ahead of the Open | August 4, 2023
GRAIN CALLS
Corn: 5 to 10 cents higher.
Soybeans: 10 to 15 cents higher.
Wheat: SRW 15 to 20 cents higher; HRW and HRS 10 to 15 cents higher.
GENERAL COMMENTS: Corn, soybeans and wheat traded sharply higher overnight amid rising geopolitical tensions after Ukraine attacked a major Russian Black Sea port. We expect the overnight price strength to carry over to early daytime trade. But key today will be whether the geopolitical support is enough to sustain buyer interest given generally favorable forecasts for crop development. Outside markets are price-supportive for grain/soy futures with the U.S. dollar index down more than 350 points and crude oil futures modestly firmer.
A Ukrainian drone attack on Russia’s Black Sea navy base at Novorossiysk briefly halted operations at the port, which handles 2% of the world’s oil supply and also exports grain. A source with knowledge of the port’s operations told Reuters oil and grain loadings were still taking place at the port, which resumed normal operations hours after the attack.
Russia said on Friday it needed actions, not promises, from the U.S. to meet the conditions it has set for a return to the Black Sea grain deal. The comments came after U.S. Secretary of State Antony Blinken on Thursday said the U.S. would make sure everyone including Russia would be able to export food products safely in the event of a resumption of the Black Sea grain deal.
Rain is forecast for most U.S. crop areas during the next 10 days. The GFS (American) weather model is wetter in the eastern Dakotas, Minnesota, Wisconsin and Iowa for next week and into the following weekend. The European model keeps a wet bias in the same region as it has been during much of this week.
The GFS model also suggests greater rainfall across the Canadian Prairies in the two most recent runs, but World Weather Inc. believes the expected rainfall is overdone.
Northeastern Heilongjiang, known as China’s “great northern granary,” is the latest area to suffer the aftermath of Typhoon Doksuri. Heavy downpours and flooding have already impacted farmland in the province and more rains are in the near-term forecast. World Weather says Typhoon Khanun will move through the Ryukyu Islands of Japan this weekend and then turn to the north, possibly ending up in Heilongjiang, China late next week.
The U.S. economy added 187,000 non-farm payrolls in July. That was slightly less than expected.
CORN: December corn futures poked above the 5-day moving average overnight but failed to find sustained buying above that level. The overnight high at $5.06 1/2 will be initial resistance. Strong resistance is at Monday’s downside gap from $5.24 1/2 to $5.25 1/2. Support extends from $4.93 to $4.81.
SOYBEANS: November soybean futures have consolidated around Monday’s low, forming a bear flag on the daily chart. Bulls must defend Tuesday’s low at $13.15 to avoid confirmation of the bearish formation that would project the contract to the $12.15 area. Near-term resistance is at $13.54.
WHEAT: December SRW futures pushed above the 5-day moving average overnight but remain technically bearish. Resistance is heavily layered from $6.50 to $6.80. Near-term support is at $6.26 1/4, followed by $6.22.
CATTLE: Mixed.
HOGS: Choppy/lower.
CATTLE: Live cattle futures are expected to open with a mixed tone as traders wait on active cash cattle trade to develop. Packers showed a little more interest in buying cattle on Thursday, but negotiations remained at a standstill as feedlots had no willingness to move cattle at steady/lower prices. With contract supplies to pull from, it’s unlikely packers will get too aggressive with cash bids, which suggests it could be another week of light cash trade. Choice boxed beef prices fell $1.17 on Thursday, while Select firmed 84 cents.
HOGS: Lean hog futures are expected to open with a mostly weaker tone amid followthrough selling. Hog futures have rolled over this week, suggesting traders sense a seasonal top is in place despite no strong signs of that from the cash market. The seasonal climb in the cash hog market may have stalled, but prices haven’t rolled over. The CME lean hog index is up 6 cents today (as of Aug. 2), meaning it has posted a net 2-cent gain this week. After sharp losses on Thursday, discounts in futures stood at $4.86 for August hogs, $23.81 for October hogs and $31.31 for December hogs. That could lead to some corrective buying ahead of the weekend. The pork cutout value firmed $4.00 on Thursday due primarily to a $22.31 surge in primal belly prices.
