Ahead of the Open | October 13, 2022

Grain, soybean futures lower as inflation, economic concerns pressure global markets.

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

GRAIN CALLS

Corn: 6 to 8 cents lower.

Soybeans: 11 to 14 cents lower.

Wheat: HRW and SRW 12 to 15 cents lower, spring wheat 1 to 3 cents lower.

GENERAL COMMENTS: Winter wheat futures fell to two-week lows overnight and corn and soybeans also dropped as concerns over high inflation and economic uncertainty pressured global markets. Malaysian palm oil futures fell 2%, while front-month crude oil dropped more than $1, the market’s fourth straight daily decline. U.S. stock index futures signal a lower open and the U.S. dollar index has reversed its earlier course to trade higher.

USDA reported daily soybean sales totaling 264,000 MT for delivery to China and 242,000 MT for delivery to “unknown destinations,” both for the 2022-23 marketing year. Today’s sales follow USDA’s announcement Wednesday of a soybean sale totaling 526,000 MT to China in 2022-23.

Due to Monday’s government holiday, USDA’s weekly export sales data for the week ended Oct. 6, is pushed back until Friday morning.

U.S consumer prices increased more than expected in September and underlying inflation pressures continued to build up, reinforcing expectations the Federal Reserve will boost its benchmark funds rate another 75-basis points interest rate hike next month. The consumer price index rose 0.4% last month after gaining 0.1% in August, the Labor Department said today. CPI was expected to gain 0.2%. In the 12 months through September, the CPI increased 8.2% after rising 8.3% in August.

NATO allies meeting in Brussels unveiled plans to beef up Europe’s air defenses after committing more military aid to Kyiv. That prompted Russia to unleash missiles on more than 40 Ukrainian cities and towns and warn of an “escalation to a World War III” if Ukraine is admitted to military alliance. NATO is not likely to quickly allow Ukraine to join, as its membership would put the U.S. and its allies in direct conflict with Russia.

Turkish President Tayyip Erdogan said on Thursday Ankara could work with Moscow on determining low-income countries to which Russian grains and fertilizers can be exported. “We are determined to strengthen and continue the grain exports under the Istanbul agreement and the transfer of Russian grain and fertilizer to less developed countries via Turkey,” Erdogan said. “It is important that we focus on the poor countries rather than developed countries.”

Argentina’s government is set to meet with wheat millers and exporters today amid concerns over the size of this year’s crop due to a severe and ongoing drought, a government official and an industry source told Reuters. A spokesperson for Argentina’s economy ministry, which sits above the agricultural secretariat, when asked about potential tighter caps on wheat exports said: “No. It’s not like that.” The Rosario Grain Exchange forecasts this year’s Argentine wheat crop at 16.5 MMT, which be down 6.5 MMT (28.3%) from the 2021-22 crop and the smallest in seven years.

India’s government will allow exports of 397,262 MT of broken rice backed by letters of credit issued prior to the Sept. 8 decision to bar exports. Reuters reported the decision to halt broken rice exports had stranded nearly 1 MMT of rice moved to ports for export or in transit before the announcement was made.

Japan purchased 94,140 MT of milling wheat in its weekly tender, including 25,390 MT U.S., 35,867 MT Canadian and 32,883 MT Australian. The Philippines tendered to buy 165,000 MT of feed wheat from unspecified origins. Iraq canceled its tender to buy at least 50,000 MT of wheat.

CORN: December corn traded within Wednesday’s range overnight, falling as low as $6.85 1/4, right at the 10-day moving average. Further support is seen around $6.80, matching a trendline drawn from the July low. Corn ended mixed Wednesday after USDA, in its Crop Production Report, lowered its U.S. corn production forecast by 49 million bu. to 13.895 billion bu., smaller than analyst expectations for a cut closer to 59 million bushels.

SOYBEANS: November soybeans traded within the previous session’s range overnight after rallying 19 3/4 cents Wednesday to $13.96, the contract’s highest close since Sept. 29. Support from USDA’s unexpectedly lower crop forecast on Wednesday was short-lived.

WHEAT: December SRW wheat overnight broke under trendline support around $8.79 and fell as low as $8.66, the contract’s lowest intraday price since Sept. 28. Wheat futures fell Wednesday after USDA cut 2022-23 U.S. ending stocks less than expected.

LIVESTOCK CALLS

CATTLE: Steady-firm

HOGS: Steady-mixed

CATTLE: Live cattle futures may gain support from continuing expectations for stronger cash prices but gains could be limited by weakness in wholesale beef. Packer margins fell into the red recently, slowing cash negotiations this week, but the slaughter pace is showing no signs of letup, suggesting firmer cash prices are likely. Estimated cattle slaughter through Wednesday stood at 384,000 head, up 1,000 head from last week and 28,000 head (7.9%) greater than the same period last year. Choice beef cutout values fell 9 cents to $246.66, near an 18-month low posted in late September, but movement was strong at 128 loads. December futures fell 12.5 cents Wednesday to $148.45.

HOGS: Lean hog futures face mixed prospects with strengthening charts suggesting further technically driven gains but cash benchmarks still slumping. The CME lean hog index is down 46 cents to $92.49 (as of Oct. 11). However, wholesale pork extended recent strength, as the pork cutout value rose 79 cents to a three-week high of $103.94. While the wholesale pork market is giving no indications of top, general seasonal weakness is typical into year-end as hog supplies build. The recent uptick in the pork cutout has pushed packer margins back into the black, which should help alleviate some of the normal seasonal cash weakness. December hogs rose $1.175 Wednesday to $80.70, the highest since Sept. 23.