GRAIN CALLS
Corn: 10 to 15 cents lower.
Soybeans: 20 to 26 cents lower.
Wheat: 12 to 18 cents lower.
GENERAL COMMENTS: Corn, soybeans and wheat faced active followthrough selling overnight amid eroding technicals, Chinese economic concerns and pressure from outside markets. With crude oil futures more than $2.00 lower and the U.S. dollar index around 250 points higher, grain markets will remain on the defensive this morning.
USDA’s initial corn crop condition rating of 69% “good” to “excellent” was below expectations and the five-year average. When USDA’s initial weekly condition ratings are plugged into the weighted Pro Farmer Crop Condition Index (CCI; 0 to 500-point scale, with 500 representing perfect), the corn crop starts the growing season with a 375.9 rating. That’s down 6.7 points from last year’s first rating, though it came one week later.
USDA reported corn and soybean planting and emergence remained ahead of the five-year average paces for the end of May. Planting jumped in North Dakota over the past week – the state where there had been the greatest concern. While corn and soybean planting remained behind average in North Dakota, concerns have eased.
World Weather Inc. says the Corn Belt will maintain a drier bias over the next 10 days with temperatures above normal in this first week of the outlook and then cooler conditions will briefly occur along with some shower activity. But the Gulf of Mexico is “shut off as a moisture source,” meaning it’s going to be difficult to get significant rains into the central United States – likely through mid-June. The U.S. weather model suggests better rain chances for the Corn Belt the second half of June.
China’s official manufacturing purchasing managers index unexpectedly fell to a five-month low of 48.8 in May, the second straight month of contraction in the factory sector. That’s prompting more concerns with the world’s second largest economy – and the largest consumer of commodities.
CORN: July corn futures are signaling a high was posted last Friday and the contract fell below the 20-day moving average overnight. Next support will be the 10-day average at $5.77 3/4. Near-term resistance is layered from the $5.85 area to last week’s high at $6.06 3/4.
SOYBEANS: July soybean futures posted a downside breakout from the short-term consolidation range on Tuesday and sharply extended losses overnight. The contract is short-term oversold, but that’s not a good indicator that a low will be forged anytime soon as bears have the strong upper hand. Next support is in the $12.71 to $12.55 range on the continuation chart. Near-term resistance is the psychological $13.00 mark.
WHEAT: Wheat futures are fully bearish, with contracts nearing short-term oversold. Near-term support for July SRW futures is in the $5.68 to $5.65 range. The 5-day moving average around $5.98 1/2 is near-term resistance, followed by the psychological $6.00 mark.
LIVESTOCK CALLS
CATTLE: Higher.
HOGS: Higher.
CATTLE: Live cattle futures are expected to open higher on followthrough buying after strong gains and high-range closes on Tuesday. But we wouldn’t be surprised to see some profit-taking as traders await active cash cattle trade, despite big discounts futures still hold to the cash market, especially if there’s widespread risk aversion in markets today. June live cattle futures finished Tuesday $9.065 below last week’s average cash price of $177.94, which jumped $2.79 from the previous week. While that suggests there’s plenty of room for futures to run to the upside, we expect traders to remain conservative and keep the lead contract at a sizable discount to cash. Wholesale beef prices firmed $1.03 for Choice and $2.85 for Select on Tuesday, while movement was solid at 115 loads.
HOGS: Lean hog futures are expected to open higher on followthrough buying after strong corrective gains on Tuesday. But fresh selling could surface if early buyer interest is limited. The CME lean hog index dropped 40 cents to $80.08 (as of May 29), the second straight daily decline after the recent string of gains. After Tuesday’s strong corrective gains, June hog futures moved to a 74.5-cent premium to today’s cash quote, though the July and August contracts remained at discounts. The pork cutout value firmed $1.48 on Tuesday and movement was active at 367 loads.