Ahead of the Open | October 11, 2022

Grain, soybean futures lower in corrective pullback as traders await USDA Crop Production update.

Pro Farmer's Ahead of the Open
Pro Farmer’s Ahead of the Open
(Pro Farmer)

GRAIN CALLS

Corn: 1 to 3 cents lower.

Soybeans: 3 to 5 cents lower.

Wheat: 9 to 14 cents lower.

GENERAL COMMENTS: Grain and soybean futures fell overnight in a corrective pullback from Monday’s rally as traders monitor the Ukraine war and position for USDA’s monthly Crop Production and Supply and Demand reports Wednesday. Malaysian palm oil futures fell 3.8%, ending a seven-day rally. Front-month crude oil is down more than $1. U.S. stock index futures signal a mixed weaker open and the U.S. dollar index is down about 125 points.

The United Nation called for faster inspections of Ukrainian grain shipments. On Monday, 97 ships loaded with around 2.1 MMT of Ukrainian grain were waiting for inspection at Istanbul, prompting the UN official overseeing the process to call on Russia and other parties to end “full-blown” inspections of outgoing vessels.

Russia is considering abolishing its grain export quota, Interfax news agency reported, citing Russian Deputy Prime Minister Viktoria Abramchenko. Russia usually sets grain export quotas from mid-February and until the end of June based on supplies. Russia expects this year’s grain crop to be a record 150 MMT, including 100 MMT of wheat.

Widespread rains in Australia’s eastern grain producing states is likely to hurt quality of the wheat crop. “Nearly half the wheat crop, or around 6 MMT to 7 MMT, is at risk of quality downgrades in NSW [New South Wales],” said Ole Houe, director of advisory services at IKON Commodities in Sydney.

France’s farm ministry trimmed its forecast for the country’s 2022 corn production, excluding seed corn, to 11.15 MMT from 11.33 MMT projected last month. The drought-affected harvest was now seen 27% lower than last year’s bumper crop and 18% below the average of the past five years, the ministry said.

China will auction another 500,000 MT of imported soybeans from its state reserves on Oct. 14. Beijing has been regularly selling state-owned soybean reserves into the domestic market to boost supplies since March.

Global palm oil purchases are rising this quarter as buyers take advantage of the widening discount to soyoil, which should entice price-sensitive consumers and boost biofuel usage, Reuters reported, citing senior industry officials. The highest discount in a decade would divert demand towards palm oil from soyoil and sunflower oil and help top producers Indonesia and Malaysia bring down stockpiles that were weighing on the benchmark futures. Palm oil for shipment to India in November is being offered at $941 per MT including cost, insurance and freight (CIF), compared with $1,364 for crude soyoil, according to traders.

Taiwan tendered to buy up to 65,000 MT of corn from the U.S., Brazil, Argentina or South Africa. Japan is seeking 94,140 MT of milling wheat in its weekly tender.

CORN: December corn traded within the previous session’s range overnight after rising yesterday to $7.06 1/2, the contract’s highest intraday price since June 21. USDA’s weekly crop progress report will be release after today’s close, a day late due to the Columbus Day holiday. Last week, USDA said 20% of the U.S. corn crop was harvested as of Oct. 2, up from 12% a week earlier but slightly behind the 22% average for that date the past five years.

SOYBEANS: November soybeans fell as low as $13.65 1/4 overnight, slightly under Monday’s low. USDA last week said the U.S. soybean crop was 22% harvested as of Oct. 2, up from 8% a week earlier but behind the 25% five-year average.

WHEAT: December SRW wheat traded within the previous session overnight after surging Monday as high as $9.48 3/4, the contract’s highest intraday price since July 11. USDA’s Supply and Demand Report Wednesday is expected to show estimated U.S. ending wheat stocks for 2022-23 lowered about 56 million bu. from the current forecast to 554 million bu., which would be the lowest since 2007-08.

LIVESTOCK CALLS

CATTLE: Steady-firm

HOGS: Steady-firmer

CATTLE: Live cattle futures may gain support from expectations for further strength in cash prices. Last week’s average cash price was $146.23, up $1.45 from the previous week and only 65 cents below this year’s high set in August. With packers continuing to run big slaughters and market-ready supplies tightening, the cash market is expected to firm again this week and has potential post a new high for the year. October live cattle futures are trading below the cash market, while December live cattle hold just a small premium. Feeder cattle may gain support from a modest pullback in corn futures below $7.

HOGS: Lean hog futures may gain support from signs of cash improvement. The CME lean hog index is 33 cents higher at $92.98 (as of Oct. 7), breaking a recent string of declines. October futures finished 77 cents above today’s cash quote, which suggests traders sense the cash market will strengthen a little over the next week ahead of the October contract’s settlement on Oct. 18. December lean hog futures narrowed their discount to the cash index to $13.38, though that’s nearly $5.50 more than the five-year average seasonal decline from now until the contract’s mid-December settlement.

October lean hogs rose 80 cents Monday to $93.75, while December hogs rose $2.45 to $79.60, the contract’s highest closing price since Sept. 23.