GRAIN CALLS
Corn: 1 to 3 cents lower.
Soybeans: 4 to 8 cents lower.
Wheat: 6 to 12 cents lower.
GENERAL COMMENTS: Grain and soy futures faced corrective selling overnight, with HRW wheat the downside leader. We expect followthrough selling from overnight trade to be seen in the grain and soy markets this morning. Key will be whether funds actively liquidate long positions or view the pullback as a fresh buying opportunity. Today’s the last day of January, so end-of-month trade could come into play. Outside markets were price-negative overnight but crude oil futures have trimmed losses and the U.S. dollar index is now modestly weaker.
Forecast models continue to show rain in southern and western crop areas of Argentina Wednesday and Thursday before a return of dryness. Northern locations in Argentina will remain dry for the next 10.
Central Brazil will remain too wet in some areas for maturing soybeans and harvest progress. Far southern areas of the country will remain too dry for crop development.
Recent rains across Argentina were the best of the growing season and enough to stabilize crops for now, according to South American crop consultant Dr. Michael Cordonnier, though more rains will be needed. Cordonnier kept his Argentine crop estimates at 39 MMT for soybeans and 44 MMT for corn. He also maintained his Brazilian crop estimates at 151 MMT for soybeans and 125 MMT for corn. Cordonnier cut his Uruguay soybean crop estimate by 300,000 MT to 2.2 MMT given persistent hot, dry conditions. He estimates total South American (Brazil, Argentina, Paraguay, Uruguay and Bolivia) soybean production at 204.7 MMT, which would be up 21.1 MMT (11.5%) from last year. His South American corn production forecast of 176 MMT would be up 3.6 MMT (2.1%) from last year.
Individual state crop conditions ratings showed further deterioration of the HRW wheat crop during January. The “good” to “excellent” ratings for HRW wheat stood at 21% in Kansas (up two points from the end of December), 17% in Oklahoma (down 21 points), 14% in Texas (no December rating), 38% in Colorado (down 12 points), 22% in Nebraska (up four points), 22% in South Dakota (up six points) and 16% in Montana (down six points). When the updated crop condition ratings were plugged into the weighted Pro Farmer Crop Condition Index (CCI; 0 to 500 point scale, with 500 being perfect), the HRW crop dropped 9.2 points from the end of December (using the November rating for Texas) to a rating of 269.1. The HRW crop went into dormancy with the lowest fall CCI rating on record of 280.3.
The International Monetary Fund (IMF) forecasts global economic growth will slow from 3.4% in 2022 to 2.9% this year and then rebound to 3.1% in 2024. It projects U.S. growth will slow to 1.4% in 2023. IMF expects euro zone GDP to bottom out at 0.7% this year. IMF forecasts China’s growth will rebound to 5.2% this year as activity and mobility recover after the lifting of Covid restrictions.
CORN: March corn futures traded within Monday’s range overnight, though the contract fell below the 5-day moving average around $6.80 3/4. Initial support is the 10-day moving average around $6.78, followed by the 100-day average at $6.74 3/4.
SOYBEANS: March soybean futures traded within Monday’s range in corrective trade overnight, holding above the short-term, intermediate and long-term moving averages. Initial support is the 5-day moving average around $15.20, followed by 10-day average at $15.12 1/2. Resistance starts at Monday’s high of $15.38 and extends to the contract high at $15.48 1/2.
WHEAT: March SRW wheat futures dropped below Monday’s low at $7.43 1/2 overnight. Initial support is the 10-day moving average at $7.41 1/4. Near-term resistance is the 40-day average at $7.50 3/4.
LIVESTOCK CALLS
CATTLE: Higher.
HOGS: Mixed.
CATTLE: Live cattle futures are expected to open higher this morning after strong gains on Monday that resulted in new highs in many contracts. February live cattle futures finished Monday $3.50 above last week’s average cash cattle price, while the April contract held an $8.10 premium. Traders finally started to build in some premium amid stressful feedlot conditions and expectations the cash market will begin an extended price rally. But another lengthy standoff in the cash market is expected this week and packers have fresh contract supplies available beginning Wednesday, so the cash market may not end up as strong as hoped. There is risk of profit-taking if early buyer interest is limited. April live cattle will face initial resistance at Monday’s high of $163.475 and then at $164.00. The previous contract high at $162.75 is initial support.
Traders expect USDA’s Cattle Inventory Report this afternoon will show further contraction of the U.S. cattle herd. Based on an Urner Barry survey, analysts expect the Jan. 1 U.S. cattle herd to be down 2.9% from year-ago, with beef cows/heifers down 4.2% and beef replacement heifers 3.5% under year-ago. The dairy cow inventory is anticipated to be down 0.1%, while milk replacement heifers are expected to rise 0.1%. The annual calf crop is expected to decline 2.6%.
HOGS: Lean hog futures are expected to open with a mixed tone. There are further signs a seasonal low in the cash market may be in the works. But futures’ premiums to the cash index may limit buyer interest. The CME lean hog index is up 7 cents to $72.71 (as of Jan. 27), extending its string of gains to four straight days. While the index is up only 61 cents during that four-day stretch, it’s the longest string of gains since a five-day rally in late October. Initial resistance for April lean hog futures is at last week’s high of $88.325 and then $89.00. First support is at $85.00 and then at the January low of $83.70.