Market Snapshot | January 18, 2022

Livestock producers: Cover meal needs through January… The break below $400 in March soymeal futures is an opportunity to extend short-term meal coverage. We advise livestock producers to cover all meal needs in the cash market through the end of this month. We are targeting a drop to the $385 area (50% retracement of the November-to-January rally) to further extend coverage. You remain hand-to-mouth on corn-for-feed needs. Our target for extending corn coverage would be a drop to the $5.75 area.

Corn futures are mildly favoring the downside at midmorning, though off earlier declines.

• Corn futures rebounded after initially following soybeans lower overnight as weekend rains brought some relief to dry crop areas in South America.
• “Beneficial rain fell on large parts of southern Brazil during the… weekend with notable exceptions from north-central Rio Grande do Sul to western Parana and Paraguay where most areas were hot and dry and crop conditions deteriorated,” World Weather Inc. said today.
• USDA reported 1.204 MMT of corn inspected for export during the week ended Jan. 13, up from 1.023 MMT the previous week and at the high end of trade expectations ranging from 800,000 MT to 1.2 MMT.
• China imported a record 28.4 MMT of corn in 2021, up 152% from 2020. The country’s wheat imports, at 9.8 MMT last year, were also a record and up 16.6% from 2020. Chinese buyers stepped up imports or corn and wheat, to fill domestic supply gaps.
• March corn fell as low as $5.88 1/4 overnight after dropping 10 1/2 cents last week. Support is seen around the 50-day moving average at $5.88 3/4, near the overnight low, and at last week’s low of $5.85 1/4.

Soy complex futures are mixed, with soybeans 8 to 10 cents lower and soymeal tumbling over $13.00; soyoil futures are up 30 to 40 points.

• Soybeans dropped to two-week lows overnight after South America rains, with sharp declines in soymeal adding pressure. March soymeal sank near a three-week low.
• Weekend rains may have helped parched South American crops to some extent, but more will be needed after extended heat and dryness.
• Paraguay and far southern Brazil “will see little to no rain of significance and hot temperatures through Saturday,” World Weather said. “Crop stress will return as moisture from recent rain is lost to evaporation while areas that missed out on rain see further declines in yields.”
• Crop Consultant Dr. Michael Cordonnier cut his Brazilian soybean crop estimate again this week, citing irregular rains in Parana and Rio Grande do Sul. Cordonnier cut his Brazilian soybean crop estimate another 1 MMT to 134 MMT. He left his Argentine soybean and corn crop forecasts at 43 MMT and 51 MMT, respectively.
• USDA reported 1.72 MMT of soybeans inspected for export during the week ended Jan. 13, up from 985,445 MT the previous week and well above trade expectations ranging from 600,000 MT to 1.375 MMT.
• USDA reported daily sales of 239,486 MT of soybeans for delivery to Mexico and 126,000 MT of grain sorghum for delivery to “unknown destinations,” both during the 2021-22 marketing year.
• USDA also corrected a daily sale announcement last Friday that should have reported 100,422 MT of soybeans for delivery to Mexico during 2021-22. USDA’s previous report incorrectly listed corn.
• March soybean futures fell as low as $13.49 3/4, the contract’s lowest intraday price since $13.42 on Jan. 3.
• Technicals have weakened after March futures fell under the 10- and 20-day moving averages at $13.85 and $13.63 1/2, respectively, setting the market up for a possible test of the Dec. 30 low at $13.34 1/2.

Wheat futures are sharply higher, led by gains of over 20 cents in winter wheat contracts.

• Winter wheat futures rose for the first day in four amid technically-driven short-covering, gains in European wheat futures and signs of a pick-up in global export demand.
• USDA reported 369,188 MMT of wheat inspected for export during the week ended Jan. 13, up from 234,356 MT the previous week. Trade expectations ranged from 200,000 MT to 400,000 MT.
• China sold all 501,283 MT of state-owned wheat reserves put up for auction last week. The average selling price was 2,713 yuan (just over $427) per metric ton, up slightly from the previous week.
• Turkey purchased at least 175,000 MT of milling wheat from unspecified origins; purchases are ongoing. Japan is seeking 72,351 MT of U.S. and Canadian milling wheat in its weekly tender.
• March SRW futures rose as high as $7.67 3/4 after ending last week at $7.41 1/2, down 17 cents for the week and the lowest close since Oct. 14. Support is seen at last week’s low of $7.35 1/2, which is just above the 200-day moving average at $7.35 1/4.

Live cattle futures are mixed and feeders are lower at midmorning.

• Live cattle are choppy in light trade to open the week.
• Mild pressure is coming from falling cash prices, though surging wholesale beef prices are underpinning futures.
• Choice cutout values ended last week at $284.31 and rose another $3.55 on Monday, reaching the highest levels since early November.
• Live steers last week averaged $136.61, down from a $138.41 average the previous week and the fifth weekly decline in the past six.
• Packer margins have climbed to the highest levels since late November, signaling they have the ability to raise cash bids. But cash direction this week likely will hinge on slaughter rates, which declined the past two weeks due to Covid-related worker absences.
• Cattle slaughter last week totaled 621,000 head, up 1,000 head from the previous week but still down from 652,000 head the same week in 2021.
• April live cattle rose as high as $142.35 today after gaining 7.5 cents last week. Resistance is seen at last week’s high at $142.50 and the 20-day moving average around $142.55. Support is seen at last week’s low of $140.025.

Lean hog futures are mixed, with nearby contracts up modestly.

• Nearby lean hogs rose to the highest levels in over a week on followthrough from last week’s gains and strengthening cash fundamentals.
• The latest CME lean hog index jumped $1.30 to $75.90, the highest since Nov. 16. Pork cutout values ended last week at $89.07 and rose another $2.87 on Monday.
• One key to market direction this week whether cutout values can lure sufficient retailer buying to sustain prices above $90.00. The market rose above $90.00 several times over the past month but quickly fell back as retail interest faded.
• China's 2021 pork output reached 53.0 MMT last year, just below the 53.4 MMT produced in 2017, prior to the African swine fever (ASF) outbreak that decimated the country’s hog herd. China slaughtered 671.3 million hogs in 2021, up 27% from a year earlier.
• April lean hogs rose as high as $88.925, the highest intraday price since $89.65 on Jan. 7. The market’s technical posture strengthened as prices rose above several key moving averages in recent days, which may have bulls targeting a six-month high of $89.675 reached Jan. 6.