GRAIN CALLS
Corn: 5 to 10 cents higher.
Soybeans: 10 to 15 cents higher.
Wheat: 8 to 12 cents higher.
GENERAL COMMENTS: Corn, soybean and wheat futures traded solidly higher overnight amid support from weather, greater risk appetite and outside markets. Front-month crude oil futures are around 75 cents higher and the U.S. dollar index is more than 100 points lower this morning.
There’s a stronger risk appetite to finish the week as negotiators are working on a deal that would increase or suspend the U.S. debt limit into 2025 and cap domestic spending over two years, though by how much was still murky. The goal is to have an agreement announced late tonight or Saturday. That would give Congress just enough wiggle room to get the legislation written and give House members three days to peruse it. If an accord is reached, a win-win outcome must be evident to get enough lawmakers from both political parties and chambers of Congress to get it cleared and signed into law before the “x-date” timeline is hit on debt default.
World Weather says the Corn Belt will remain dry during the next week to 10 days, while temps will be normal to above normal. This will add to dryness/drought in the western Corn Belt. The U.S. Climate Prediction Center believes a “flash drought” is possible from Illinois into parts of Ohio and Kentucky over the next couple weeks.
World Weather says rain will continue to fall frequently in the west-central and southwestern Plains during the next 10 days with some of that expected to expand northwest into Montana.
The personal consumption expenditures (PCE) price index, the Fed’s preferred inflation gauge, rose 4.4% annually in April. That was up from a 4.2% rise in March. Core PCE, excluding food and energy prices increased 4.7% from year-ago, up from a 4.6% rise last month. The inflation data came in hotter than expected, prompting traders to boost their bets the Fed will raise interest rates again in June. Fed fund futures now reflect around 60% odds of another 25-basis-point increase to rates next month, whereas they were around 60% in favor of a pause prior to the inflation data.
CORN: July corn futures continued their strong rebound from last week’s lows. The contract is trading well above the 5-, 10- and 20-day moving averages. Next resistance is at this month’s high at $6.00, followed by the 40-day moving average at $6.01 3/4. Near-term support is at the 5-day moving average at $5.84 and the 20-day average at $5.82 1/4.
SOYBEANS: July soybean futures remain in the short-term consolidation range following the sharp mid-month selloff. That has formed a bearish pennant/flag on the daily price chart. To negate that bearish formation, bulls need a close above $13.48. A close below the double-bottom at $13.04 3/4 would project the contract to the $12.35 area.
WHEAT: July HRW wheat futures built on Thursday’s gains during overnight trade but stopped just shy of the 20-day moving average at $8.33 3/4, which is near-term resistance, followed closely by the 40-day average around $8.34 1/2. Near-term support extends from $8.20 to the psychological $8.00 level.
LIVESTOCK CALLS
CATTLE: Higher.
HOGS: Lower.
CATTLE: Live cattle futures are expected to open higher after a bullish breakout to a new contract high in June futures on Thursday. This week’s price surge has been driven by strength in cash cattle trade, especially the northern market, where supplies are tightest. While futures are still well below the cash market, it wouldn’t surprise us to see some profit-taking and corrective selling ahead of the upcoming three-day holiday weekend. But given the discount structure and bullish supply-side fundamentals, the downside should be limited if there is a pullback. Wholesale beef prices firmed $1.64 for Choice boxes and 75 cents for Select on Thursday, while movement totaled 104 loads. Retailers remain relatively selective buyers with Choice beef around $300.00.
HOGS: Lean hog futures are expected to open lower on followthrough selling after another poor finish on Thursday. While the market is heavily oversold and futures are at discounts to the cash index, bottom pickers have been repeatedly chewed up, causing buyers to be skittish and emboldening sellers. With that said, we wouldn’t be surprised to see some corrective buying surface ahead of the extended holiday weekend, though any buyer interest would likely be relatively light. June hogs finished Thursday’s session $3.15 below today’s cash index quote of $80.80 (as of May 24). July and August futures also dropped to discounts to the cash index. The pork cutout value firmed 32 cents on Thursday but movement slowed to 249.2 loads.