Livestock producers: Extend corn-for-feed coverage… December corn futures dropped overnight to a level we consider a value buy under current market conditions. We advise livestock producers to cover all corn-for-feed needs in the cash market through the end of March. Be prepared to extend coverage on additional price pressure.
GRAIN CALLS
Corn: 5 to 8 cents lower.
Soybeans: 1 to 3 cents lower.
Wheat: Winter wheat 10 to 15 cents lower; spring wheat 6 to 9 cents lower.
GENERAL COMMENTS: Corn and wheat futures faced followthrough selling overnight and finished near their session lows. Soybeans faded to losses in most contracts after corrective gains earlier in the overnight session. The U.S. dollar index extended gains to more than 500 points after the personal consumption expenditures (PCE) price index for January came in stronger than expected. That added pressure to corn and wheat at the end of the overnight session and will weigh on those markets during early daytime trade.
Central and southern crop areas of Argentina will have a chance for rain during the second half of this week. While no drought-busting rain is expected, according to World Weather Inc., there will be an opportunity for relief from dryness in some areas. Northern Argentina will see better rainfall chances the next two weeks.
In Brazil, wet conditions across Parana, Sao Paulo, portions of Mato Grosso do Sul and southernmost Minas Gerais will continue to slow soybean harvest and safrinha corn planting. Mato Grosso should be dry enough to see rapid advancement in fieldwork.
Export sales for the week ended Feb. 16
Corn: Net sales of 823,200 MT declined 20% from the previous week and were 30% below the four-week average. Sales were in the middle of pre-report expectations ranging from 500,000 MT to 1.3 MMT. There were net reductions of 69,900 MT to China for the week.
Soybeans: Net sales of 544,900 MT increased 20% from the previous week but were down 18% from the four-week average. Sales were in the middle of expectations ranging from 300,000 to 850,000 MT. China was the lead buyer at 176,200 MT for the week and also the top destination for shipments at 1.058 MMT.
Wheat: Net sales of 338,800 MT for 2022-23 rose 62% from the previous week and 39% from the four-week average. Sales were in the middle of expectations ranging from 150,000 to 500,000 MT. China was a net buyer of 68,300 MT for the week.
CORN: March corn futures showed mild followthrough selling overnight after Thursday’s technical breakdown that violated the intermediate and long-term moving averages. Next support is the psychological $6.50 level and the January low at $6.48 1/4. Near-term resistance is at $6.61 1/4.
SOYBEANS: March soybean futures posted mild corrective gains overnight after filling Tuesday’s gap and closing below the 10-day moving average yesterday. Near-term support is the 20-day moving average near $15.30 1/2, followed by the Feb. 15 low at $15.16 1/2. Near-term resistance remains this week’s high at $15.54 and this month’s high at $15.55 1/2.
WHEAT: March SRW wheat futures dropped below Wednesday’s low overnight, extending the steep pullback from the Feb. 14 high. The contract is nearing oversold status, based on short-term momentum indicators. Near-term support is at $7.23 1/2 and $7.20 1/2. Near-term resistance is at the 5-day moving average at $7.43 3/4 and old support at $7.44 1/4.
LIVESTOCK CALLS
CATTLE: Choppy/higher.
HOGS: Mixed.
CATTLE: Live cattle futures are expected to open with a mostly firmer tone as traders finalize positions ahead of this afternoon’s Cattle on Feed Report and await more cash cattle activity. So far, light to moderate cash cattle trade has been reported at $1 higher prices in the northern market and roughly $2 higher levels in the Southern Plains, though some feedlots held out for hopes of even stronger prices. USDA’s Cattle on Feed Report this afternoon is expected to show a 3.5% decline in feedlot numbers compared with year-ago, which would be the fifth straight month with a year-over-year reduction. January placements are expected to have declined 2.9%. Last month’s marketings are anticipated to have increased 3.9% from last year. USDA will also release its Cold Storage Report this afternoon. The five-year average is a 7.7-million-lb. increase in beef stocks during January. Net weekly beef sales totaled 15,400 MT for 2023, down 45% from the previous week and 35% below the four-week average. China was the lead buyer at 4,300 MT.
HOGS: Lean hog futures are expected to open with a mixed tone. While the cash market continues to strengthen, traders have narrowed premiums futures hold to the cash index. The CME lean hog index continues to rise with another 65-cent gain today (as of Feb. 22). Yesterday’s decline in April lean hog futures combined with gains in the cash index the past month have narrowed the lead contract’s premium to around $8.00. That’s still more than the five-year average gain of around $6.60 in the cash index from now until mid-April, so we can’t rule out more pressure on futures. This afternoon’s Cold Storage Report will likely show a sizable increase in pork stocks during January. The five-year average is a 54.6-million-lb. increase during the month. Net weekly pork export sales totaled 51,900 MT, up 16% from the previous week and 39% above the four-week average. The leading buyers were Mexico (25,000 MT) and China (12,100 MT).