GRAIN CALLS
Corn: Steady to 2 cents lower.
Soybeans: 6 to 12 cents lower.
Wheat: Winter wheat 12 to 18 cents lower; spring wheat 5 to 8 cents lower.
GENERAL COMMENTS: Heavier selling pressure was seen in grain and soy futures overnight, especially the soybean and winter wheat markets, after disappointing closes on Monday. We expect bears to maintain the strong upper hand during daytime trade. Outside markets are mixed this morning, with front-month crude oil futures modestly firmer and the U.S. dollar index nearly 500 points higher.
USDA reported daily soybeans sales of 174,181 MT to Mexico for 2022-23.
The overnight U.S. weather model suggested greater precipitation in Argentina’s central crop areas next week, but this morning’s model run took most of the moisture out. World Weather Inc. says, “Argentina’s central and south will continue to struggle with dryness, despite a few showers infrequently during the next two weeks.” Northern Argentina is still expecting rain of significance later this week that will improve topsoil moisture and benefit a few minor grain and oilseed production areas.
World Weather says most of Brazil will get timely rainfall over the next two weeks supporting crops in most areas, although a few pockets of dryness and a few areas of excessive moisture will be of some concern. Center-south and some center-west Brazil crop areas will experience less intensive rainfall during the middle to latter part of next week favoring better early season soybean maturation and eventual harvest progress.
South American crop consultant Dr. Michael Cordonnier cut his Argentine soybean crop estimate another 2 MMT to 41 MMT, noting “continued dryness and the possibility not all intended soybeans will get planted.” Cordonnier cut his Argentine corn crop estimate 1 MMT to 45 MMT “due mostly to expected low yields of early planted corn.” He maintained a lower bias toward both crops. Cordonnier acknowledged drought in far southern Brazil and excessive rainfall in central areas of the country, but he kept his Brazilian soybean and corn crop estimates at 151 MMT and 125 MMT, respectively.
CORN: March corn futures were again capped by the 5-day moving average around $5.53 overnight. That level will continue to serve as initial resistance. Near-term support is last week’s low at $6.48 1/2. A close below that level would confirm the bear flag formation and project the contract toward the $6.20 area, though the contract would first find strong support at the December low of $6.35.
SOYBEANS: March soybeans finished low-range Monday after failing to find sustained buying on the move above $15.00 and dropped as low at $14.74 overnight. Near-term support is at last week’s low of $14.65, with the uptrend drawn off the July and October lows intersecting around $14.59 1/2 today. The 5-day moving average at $14.82 1/2 is initial resistance, followed by 10-day average at $14.94 3/4.
WHEAT: March SRW wheat posted a downside breakout from the short-term bear flag formation overnight. That projects the contract to the $7.00 area, though the December low at $7.23 1/2 will provide initial support. Bulls need a close above last week’s low at $7.36 to signal the downside breakout overnight was a bear trap.
LIVESTOCK CALLS
CATTLE: Choppy.
HOGS: Choppy/higher.
CATTLE: Live cattle futures turned in a strong performance on Monday, which could lead to some followthrough buying. But traders may tap the brakes as they await cash cattle trade, which isn’t likely to turn active until the second half of the week. Packer demand for cash cattle is expected to be greater this week. With Choice beef prices surging $3.15 on Monday and the Choice/Select spread at a strong $26.54, signs point toward packers paying higher prices for cash cattle than last week’s $157.74 average. February live cattle futures posted a bullish reversal on Monday, which puts the contract high at $159.175 as bulls’ near-term target. Monday’s low at $156.525 is near-term support.
HOGS: Lean hogs are expected to open with a mixed to mostly firmer tone, though buyer interest will be limited by continued pressure on the cash market. The CME lean hog index is down another 70 cents to $76.79 (as of Jan. 6), matching the level from Jan. 19 last year. While hog slaughter is expected to run about 2% under year-ago through the first half of 2023, based on USDA’s Hogs & Pigs Report data, near-term numbers could be stronger than that as plants catch up after recent slowdowns. As a result, the cash market will likely continue to soften near-term as market-ready supplies remain ample. April lean hog futures found support just above last Friday’s low of $59.575 on Monday. That level will continue to serve as initial support, with stronger support at the November/December double-bottom at $89.10. Initial resistance is the 5-day moving average that was at $91.375 yesterday.