Ahead of the Open | August 31, 2022

Corn drops to lows for the week as corrective pullback continues; soybeans and wheat also lower.

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GRAIN CALLS

Corn: 10 to 12 cents lower.

Soybeans: 14 to 15 cents lower.

Wheat: 6 to 14 cents lower.

GENERAL COMMENTS: Corn futures fell to lows for the week overnight as grain markets extended a corrective pullback driven by escalating global recession concerns. Soybeans and wheat also fell. Front-month crude oil futures have worked off their overnight lows but are still nearly $1.50 lower and trading at the lowest level in over a week. U.S. stock index futures signal a stronger open, while the U.S. dollar index is modestly higher.

USDA reported a sale of 167,000 MT of soybeans for delivery to China during the 2022-23 marketing year. Today’s announcement follows four daily soybean sales totaling 940,000 MT to China and unknown destinations over the past week.

The Midwest and Central Plains are expected to receive limited rainfall the next 10 days, World Weather Inc. said, while parts of central and southern Texas will be “quite wet” next week with some of excessive rain possibly reaching the lower Delta as well. Those areas may be at risk for “significant flooding,” the forecaster said.

Grain silos in Ukraine’s second biggest port, Mykolaiv, were hit by Russian shelling of the city on Tuesday, causing a fire that was still burning today, Reuters reported, citing Ukraine’s emergencies service. There are several major grain terminals in Mykolaiv, and some have already come under attack during the Russian invasion. Ukraine is conducting a counter-offensive in the area.

USDA Secretary Tom Vilsack said he’s not sure if the Foreign Agricultural Service (FAS) will be able to release its normal Weekly Export Sales report on Thursday, although he gave no date of its return. Glitches last Thursday forced FAS to take down and retract some of the data released. “We’re going to make sure we’ve got it fixed and I appreciate the fact when they made the mistake, we owned up to it,” Vilsack said Tuesday. “Mistakes happen.”

China’s official purchasing managers index (PMI) rose to 49.4 in August from 49.0 in July, though that was still below the 50.0-point mark that signals contraction. The latest figure was the second straight month of contraction in factory activity, amid a resurgence of Covid-19 cases, new lockdowns in some cities and power rationing due to the worst heatwaves in decades.

Euro zone inflation rose to another record high of 9.1% this month from 8.9% in July. Energy prices, despite a slight deceleration, remain by far the main driver of the general rise in prices with a jump of 38.3% compared to August 2021, after a surge of 39.6% in July. Prices of food, alcohol and tobacco jumped 10.6% from year-ago. Inflation excluding energy and unprocessed food rose a stronger-than-expected 5.5%.

Indonesia tweaked its palm oil export tax rules to charge a maximum levy of $240 per metric when the reference price hits over $1,430 per metric ton, a regulation document showed. The new levy will take effect Nov. 1. The government has waived palm oil export levies until the end of October to encourage shipments.

Low inventories sent the national average diesel price in the U.S. back above $5, the first weekly price increase in more than two months. Distillate fuel inventories in the Northeast are particularly low, with supplies of diesel fuel and heating oil in New England currently 63% below the five-year average. There is a growing fear that an extreme weather event could significantly disrupt distillate supply in the Northeast.

Algeria purchased an unspecified amount of milling wheat that is expected to be sourced from Russia. Taiwan tendered to buy 65,000 MT of corn that can be sourced from the U.S., Brazil, Argentina or South Africa.

CORN: December corn overnight fell as low as $6.63 1/2, a low for the week, but remains up more than 45 cents for the month after posting a two-month intraday high at $6.83 3/4 Monday.

SOYBEANS: November soybeans fell as low as $14.16 overnight, slightly above trendline support drawn from the July 22 low.

WHEAT: December SRW wheat fell as low as $8.10 1/2 overnight but remains slightly higher for the week. Wheat may face continued pressure from weakness in crude oil and strength in the U.S. dollar.

LIVESTOCK CALLS

CATTLE: Steady-firmer

HOGS: Steady-mixed

CATTLE: Live cattle may gain initial support on followthrough from Tuesday’s strong close and signs of firm beef demand. Choice beef cutout values fell $3.25 to $259.79, the lowest since mid-May, but movement was active at 162 loads, signaling strong retail demand, especially on price downturns. Packers are keeping supplies moving through the pipeline as they pushed through the biggest weekly slaughter of the year last week. October live cattle rose 92.5 cents Tuesday to $143.825. October feeder cattle gained $2.20 to $183.275.

HOGS: Lean hog futures face mixed prospects as this week’s strong technical rebound competes with an ongoing slump in the cash market. The CME lean hog index is down $1.90 to $109.36, the lowest since mid-July. Pork cutout values fell 41 cents Tuesday to $102.16, the lowest daily average since May 17, but movement was strong at 355 loads. Weakness in wholesale prices has driven packer margins into the red at a time when market-ready supplies are building seasonally, which likely will keep the cash market under pressure. October lean hogs rose $1.35 Tuesday to $93.60, the highest closing price in over a week.