Ahead of the Open | December 13, 2023

Ahead of the Open
Ahead of the Open
(Pro Farmer)

GRAIN CALLS

Corn: 3 to 5 cents lower.

Soybeans: 6 to 9 cents lower.

Wheat: Winter wheat 9 to 12 cents lower; HRS 7 to 9 cents lower.

GENERAL COMMENTS: Corn, soybeans and wheat each favored the downside overnight, though corn and soybeans saw corrective buying into the break. Risk assets saw buying this morning following the BLS release of Producer Price Index (PPI) data for November, which measures the average change over time in selling prices received by domestic producers and is another inflation gauge, which came in below expectations. The report sent bonds higher and the U.S. dollar index lower, while front-month crude oil futures saw corrective buying following a fresh for-the-move low overnight.

USDA reported daily sales of 125,000 MT of soybeans to unknown destinations for the 2024-25 marketing year, marking six consecutive days of daily soybean sales.

The Federal Reserve is widely expected to keep interest rates unchanged for a third consecutive time following the conclusion of its two-day monetary policy meeting at 1:00 p.m. CT. Markets will focus on the post-meeting economic projections from Fed officials and Chair Jerome Powell’s press conference for ideas of the future path for monetary policy.

Argentina will weaken its peso 54% to 800 per dollar and enact extensive spending cuts with the goal of eliminating the primary fiscal deficit in the next year, new Economy Minister Luis Caputo announced, as part of President Javier Milei’s shock plan aimed at fixing the country’s worst crisis in decades. Caputo said the plan would be painful in the short-term but was needed to cut the fiscal deficit and bring down triple-digit inflation. Caputo, echoing previous pledges by Milei, said the government would look to gradually erase export tariffs, something farmers have long sought. The International Monetary Fund called the measures “bold” that would “help stabilize the economy and set the basis for more sustainable and private-sector led growth” following “serious policy setbacks” in recent months.

Recent reports suggest the Treasury Department is preparing to provide instructions on how to qualify for sustainable aviation fuel (SAF) credits under the Inflation Reduction Act. However, Bloomberg notes that even if the rules are released this week, crucial components may remain undisclosed until spring. One significant issue revolves around the model used to determine greenhouse gas emission reductions from the SAF feedstock. If the Department of Energy’s model is adopted, it could potentially include corn-based ethanol for SAF credits. In contrast, using a model developed by the United Nations might exclude certain feedstocks like ethanol from eligibility. Of note: In late November, USDA Secretary Tom Vilsack told Reuters he was confident ethanol will become an SAF feedstock. “They (U.S. Treasury) will provide some direction and guidance, and I think the actual rules and regulations and so forth may take a little bit longer,” he said.

 

CORN: March corn futures continue to face persistence selling following last week’s failure at 40-day moving average resistance. Bulls are seeking to hold support at $4.80, with additional backing at $4.76 1/2, then $4.74. Resistance remains at $4.84, the downtrend line capping gains over the last week at $4.85, then $4.88 3/4.

SOYBEANS: January soybean futures saw continued selling pressure overnight, though selling stalled near initial support at $13.13 1/2. Further selling targets support at $13.04, then the psychological $13.00 mark, while resistance lies at $13.21, $13.28, with significant backing from Tuesday’s high of $13.44.

WHEAT: March SRW futures pulled back overnight as volatile trade persists. Prices failed at 100-day moving average resistance overnight, which stands at $6.26 1/4, ultimately falling below prior support, now resistance at $6.16. Support lies at $6.08 1/4, then the psychological $6.00 mark.

 

LIVESTOCK CALLS

CATTLE: Choppy/higher.

HOGS: Choppy/lower.

CATTLE: Live cattle futures and feeders are expected to open with a mostly firmer tone, though technical selling could limit gains. Following last week’s low, cattle futures have posted three consecutive days of gains, which is a typical correction. Additional buying would point to a near-term low likely being in place. Meanwhile, cash cattle trade has yet to take place this week, which provides little direction to futures. Wholesale beef prices were mixed on Tuesday, as Choice cutout rose $2.35 to $292.78 and Select fell 88 cents to $258.66, bringing the Choice/Select spread to $34.12. Movement has fallen significantly from the last few weeks, indicating grocer buying for features for the upcoming holidays has potentially dried up.

HOGS: Lean hog futures are expected to open with a mostly weaker tone, as prices have alternated between higher and lower closes for nine straight sessions. While that does not mean much in itself, it points to the uncertainty in the cash hog market in terms of a seasonal bottom. The CME lean hog index fell 23 cents to $67.70 today, which stands 55 cents below February futures. February futures have been trading below the index, with prices changing between a premium and discount regularly. Wholesale pork prices fell on Tuesday, with cutout dropping $2.66 to $83.96. Each cut showed losses for the day, though movement remained firm at 355.93 loads, showing robust retailer demand, which has kept cutout values largely sideways for the better part of two months.

 

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