Ahead of the Open | October 9, 2023
GRAIN CALLS
Corn: 3 to 5 cents higher.
Soybeans: 5 to 7 cents higher.
Wheat: Winter wheat 9 to 11 cents higher; HRS 10 to 12 cents higher.
GENERAL COMMENTS: Corn, soybeans and wheat each favored the upside overnight though went into the break off session highs. The conflict in Israel is likely to keep risk premium in markets today, which sent prices higher overnight and reversed a sinking crude oil market. Front-month crude oil markets are sharply higher and the U.S. dollar index is moderately higher to start the week. Government offices are closed today for Columbus Day and Indigenous Peoples’ Day, but most markets will trade normal hours aside from the bond market which will be closed.
Fighting between Israelis and Hamas forces within Israel continued on Monday, following a surprise attack by Gaza militants that killed many Israelis, including civilians, and resulted in hostage situations. Retaliatory Israeli airstrikes have led to casualties among Palestinians, displacing thousands from their homes. The UN Security Council convened an emergency session on Sunday but did not propose a course of action in response to the Hamas assault. There are reports suggesting Iranian security officials assisted Hamas in planning the attack on Saturday. However, American officials have not confirmed this evidence. Additionally, the conflict appears to be widening as Hezbollah, an Iran-backed militant group in Lebanon, shelled Israeli military positions, further raising concerns about the escalating situation.
IKAR agriculture consultancy raised its forecast for Russia’s grain crop this year to 141.2 MMT, up 1.2 MMT from its prior projection. The firm raised its 2023-24 grain export forecast by 500,000 MT to 64.5 MMT.
A bipartisan delegation of U.S. senators, led by Majority Leader Chuck Schumer (D-N.Y.), landed in China on Saturday, expressing a commitment to fostering competition rather than conflict with the Asian superpower. Schumer emphasized the importance of maintaining a cooperative relationship between the world’s two largest economies and stated the U.S. aims for economic competition with China but does not seek confrontation. The U.S. hopes to pave the way for a potential meeting between President Joe Biden and Chinese President Xi Jinping at the Asia-Pacific Economic Cooperation summit in San Francisco in November, although China has yet to confirm the Chinese leader’s attendance. But Xi’s first meeting with U.S. congressional leaders in eight years was colored with tension after Schumer criticized China’s response to the Hamas attacks in Israel, Bloomberg reports.
CORN: December corn futures continue to show hesitancy to break above the psychological $5.00 level despite rising concerns of geopolitical conflict over the weekend. That marks the bulls initial target, which is backed by $5.06. Bears are aiming to take out initial support of $4.89 1/4, the 40-day moving average, failure of which likely leads to a test of $4.82 1/2.
SOYBEANS: November soybean futures have traded relatively sideways for just over a week. Futures have traded $12.75 seven sessions in a row now, making the area an important pivot going forward. Prices remain in a downtrend on the daily bar chart, with initial resistance standing at $12.82 1/2, backed by $12.87. Bears are seeking to take out support at $12.62, backed by $12.56 3/4.
WHEAT: December SRW futures have sustained a sharp uptrend in the daily bar chart since the Sept. 29 low. This uptrend is now butting up against the downtrend stemming from Sept. 6 highs, marking the next few days as a key inflection point for wheat futures. A daily close above resistance at $5.85 would indicate an interim low is likely in place, targeting the next resistance at $6.00. Initial resistance stands at $5.70, weakness below which would indicate a breakdown, targeting $5.60, then the contract low of $5.40.
CATTLE: Higher.
HOGS: Lower.
CATTLE: Live cattle futures are expected to open mostly higher in continuation of Friday’s strength. Cattle futures ended the week strong as cash cattle proved stronger than expected, though the cash price is still likely to drop slightly from the prior week’s average of $183.64. Wholesale beef prices surged to end the week as well, as Choice cutout jumped $4.25 on Friday to $302.01, reclaiming the $300.00 level that was significant support before slipping below that mark last week. Select rose $1.01 to $275.78 as prices continue to stick near the $275.00 area.
HOGS: Lean hog futures are expected to open mostly lower as cash fundamentals continue to weaken. The CME lean hog index is down 67 cents to $83.03 (as of Oct. 5); the index has not risen on a daily basis since Sept. 21. October futures cut the discount the contract holds significantly over the past week and are now just 70.5 cents below the cash index. October futures expire this Friday and will cash settle against the CME lean hog index quote for that date next Tuesday. Futures leave little buffer for sustained weakness in the index, which will likely undercut prices this week. Pork cutout fell $1.76 to $93.22 on Friday, the lowest value since Aug. 31. Bellies continue to see relative weakness.
