GRAIN CALLS
Corn: Steady to 2 cents higher.
Soybeans: 8 to 10 cents higher.
Wheat: Winter wheat 4 to 6 cents higher; HRS 5 to 7 cents higher.
GENERAL COMMENTS: Grain markets favored the upside overnight but saw some profit-taking near the break. Today’s session will be key to determine if recent buying is still seen as a “sell the rip” opportunity or if follow-through buying occurs.
Rain is expected to occur in most of the Midwest over the next week in two bouts of precip. The rain is not expected to have much of an impact though, and moisture is expected to become infrequent in the second week of the outlook, World Weather Inc says.
USDA rated 53% of the corn crop as “good” to “excellent,” down three percentage points from the previous week. Traders expected a two-point decline. The amount of crop rated “poor” to “very poor” increased one point to 18%. USDA rated 53% of the soybean crop as “good” to “excellent,” down five points from last week. Traders expected a three-point decline. The portion of crop rated “poor” to “very poor” increased three points to 17%.
When plugged into the weighted Pro Farmer Crop Condition Index (CCI; 0 to 500-point scale, with 500 representing perfect), the corn crop dropped 7.7 points to 337.1, which was 2.9 points (0.9%) below last year at this time. The soybean crop fell 8.5 points to 335.5, down 8.1 points (2.3%) from last year. Illinois led declines for both crops, though most of the top production states saw some deterioration.
World crop production prospects have dampened as El Niño has intensified. Crops in Asia, specifically Australia, India, Indonesia and Thailand, have received below average rainfall already. This has caused embargos on exports of specific commodities and has sent rice and sugar futures higher, rationing demand.
The Argentine government launched a new so-called “soy dollar” scheme through Sept. 30, which allows exporters to obtain an exchange rate higher than the official rate to encourage them to move inventories. The fourth “soy dollar” program allows exporters to enter 75% of the foreign currency at the official wholesale exchange rate of 350 pesos per dollar, while the remaining 25% will be “freely available.” This implies an exchange rate of around 450 pesos per dollar because the 25% of free availability would be traded at the financial exchange rate called “contado con liquidación,” currently around 770 pesos per dollar.
CORN: December corn futures continued higher overnight, marking the third day in a row of gains. The rally stems from a trend line drawn from the August lows, which is critical support at $4.78 1/2. Bulls are eyeing last week’s high of $4.99 1/2 to negate the recent downtrend.
SOYBEANS: November soybean futures saw corrective buying overnight, surging above 10-day moving average resistance at $13.71 1/2, which will remain an important pivot after the reopening. Resistance lies at $13.81, which is backed by $13.93.
WHEAT: December SRW futures continue to show strength after bouncing from a fresh contract low yesterday morning. Bulls are eyeing a daily close above 10-day moving average resistance at $6.10 1/2, which would mark the first since late July. Additional selling pressure would likely find support at $5.92 1/4.
LIVESTOCK CALLS
CATTLE: Mixed/lower.
HOGS: Steady/higher.
CATTLE: Live cattle futures are expected to continue to struggle against technical resistance. Bulls are looking for a catalyst to break the downtrend stemming from the July high, which will likely come from the cash market. Cash trade is unlikely to develop until the end of the week, so sideways to lower trade until then is likely, especially if wholesale prices remain stuck around $315 for Choice and $290 for Select. Wholesale beef prices were mixed Tuesday, with Choice up 99 cents and Select 75 cents lower. Packer margins are down a little from this time last week but remain in the black.
HOGS: Lean hog futures are expected to open with a mostly firmer tone after yesterday’s close above 200-day moving average resistance, though yesterday afternoon’s weakness is a little concerning for bulls. Pork cutout finished the day strong, rising $5.17 to $98.87 led by bellies, which should give bulls the confidence that recent strength will continue and potentially support cash prices as well. The CME lean hog index is down another $1.21 to $86.56 (as of Sept. 1).