Ahead of the Open | February 21, 2024
GRAIN CALLS
Corn: 2 to 4 cents lower.
Soybeans: 6 to 8 cents lower.
Wheat: 3 to 5 cents lower.
GENERAL COMMENTS: Soybeans continue to lead the grain and soy markets, driving prices lower overnight. Outside markets were relatively quiet overnight though both equity markets and front-month crude oil futures continue to pullback from recent highs. The U.S. dollar index pivoted around unchanged overnight, with little guidance from the bond market, which did the same.
Agroconsult cut its Brazilian soybean crop estimate by 1.6 MMT to 152.2 MMT as adverse weather cut yields in key production areas. The Brazil-based firm, which began a tour of Brazil’s main soy producing regions 33 days ago, said it has so far covered almost 30,000 kilometers, representing 60% of the areas it intends to survey. In Mato Grosso, areas planted between the beginning of September and mid-October were the most affected by high temperatures and low rainfall, Agroconsult said. Areas planted in Mato Grosso throughout October and November have shown better potential, despite also being affected by adverse weather. It maintained the average yield estimate for Mato Grosso at 52.5 bags per hectare, 17.7% below last year. Agroconsult lowered its average yield forecast for Mato Grosso do Sul to 57.5 bags per hectare from its previous projection of 59 bags. In Parana and Rio Grande do Sul, average yields potential was cut to 58 and 53 bags per hectare, respectively, compared to 60 and 55.5 before the crop tour, Agroconsult said.
Ukraine called on the European Commission to take robust action after Polish farmers blockaded the border and opened railcars to let grain spill out. Protests from farmers complaining of unfair competition have strained ties between the two countries that were already on edge after truckers blocked border crossings around the turn of the year. Tuesday’s protests from farmers marked an escalation from previous demonstrations, with a near-total blockade of all Ukrainian border crossings and disruption at ports and on roads nationwide. Ukrainian Economy Minister Yulia Svyrydenko said Kyiv has informed the European Commission of the actions of Polish protesters at the Ukrainian border and expected a robust response. Agriculture Minister Mykola Solskyi said the grain was headed to Germany and would not have entered the Polish market. Polish President Andrzej Duda told Ukrainian Radio and the Suspilne broadcaster the Polish government is negotiating with farmers and trade unions and he hopes the issue will be resolved through talks.
If there’s not a new budget for fiscal year (FY) 2024 by April 30, it will trigger a 1% across-the-board spending cut. Democrats won’t back a stopgap bill beyond this date. Of note: Axios reports that behind closed doors, House Republicans have shifted from optimism to anticipating a government shutdown, signaling a tough decision ahead for House Speaker Mike Johnson (R-La.). With the March 1 deadline looming for a budget or spending stopgap for 20% of spending (including for USDA), Axios notes Republicans are divided between risking a shutdown in a standoff with Democrats or striking a deal that may jeopardize Johnson’s leadership.
CORN: March corn futures saw renewed selling pressure overnight. Bulls are seeking to overcome resistance at $4.18 3/4, $4.20, then $4.25 to establish bullish momentum. Support stands at $4.16 1/2, the contract low of $4.14 3/4, then $4.10.
SOYBEANS: March soybean futures failed to maintain a break above 10-day moving average resistance at $11.80 3/4 Tuesday, marking that as key resistance. Additional resistance stands at $11.74 on the way. Meanwhile, bulls are seeking to hold support at $11.70 1/2, quickly backed by $11.69 3/4, then $11.62 1/4.
WHEAT: March SRW futures saw modest profit taking overnight. Bulls recaptured prior resistance turned support at $5.80 Tuesday, bears challenged that level overnight. Resistance stands at $5.83 1/4 then $5.88 1/2, while support comes in at $5.75, $5.73 1/4, then $5.60 1/2.
HOGS: Choppy/higher.
CATTLE: Live cattle futures and feeders are expected to open with a mostly firmer tone, though lack of direction from the cash cattle market could cause near-term volatility. Packers purchased a large volume of cattle last week – the most since October and the second straight week of big purchases. That likely limits their need for near-term supplies, especially with reduced slaughter runs. USDA will release their monthly Cattle on Feed Report Friday afternoon as well, which usually pushes cash cattle trade late into the week. Continued strength in wholesale beef prices are likely to give feedlots confidence to hold off on taking lower bids, suggesting an extended standoff. Choice cutout rose 28 cents to $297.37 Tuesday while Select firmed 42 cents to $287.82.
HOGS: Lean hog futures are expected to open with a mostly firmer tone, though traders continue to sell strength. The last three sessions, April futures gapped higher and closed below opening levels, though prices still finished higher than the prior day. This is a peculiar look on the daily bar chart, something that does not happen often. It shows the underlying strength of the market, though bears continue to take advantage of selling higher prices. The CME lean hog index leapt $1.05 today to $76.80 (as of Feb. 19), the biggest daily jump since last summer, when the index was surging to a seasonal top. Wholesale pork prices gave up some of Monday’s jump, falling $1.34 to $92.44, led lower by an $8.21 drop in bellies.
