Ahead of the Open | May 16, 2022

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GRAIN CALLS

Corn: 12 to 16 cents higher.

Soybeans: 12 to 15 cents higher.

Wheat: 40 to 60 cents higher.

GENERAL COMMENTS: HRW wheat futures soared to the highest prices in over 14 years and other wheat markets also surged after India’s export ban further inflamed concerns over tight global supplies. Corn and soybeans were also higher. Front-month U.S. crude oil futures are modestly lower this morning. U.S. stock index futures point to a weaker open, while the U.S. dollar index is down nearly 200 points.

India on Saturday banned most wheat exports to manage domestic food security and prices. The government said it would still allow exports backed by already issued letters of credit and to countries that request supplies “to meet their food security needs.” Senior government officials said the ban could be revised. Before the ban, India had aimed to ship a record 10 MMT of wheat in 2021-22. In April, India exported a record 1.4 MMT of wheat and deals were already signed to export around 1.5 MMT in May. In total, Indian traders had already contracted to export 4.5 MMT of wheat this year. India’s wheat export ban has trapped some 1.8 MMT of grain at ports, leaving traders facing heavy losses from the prospect of selling onto a weaker domestic market, dealers told Reuters.

The annual Wheat Quality Council HRW tour runs Tuesday through Thursday, with field reports from Kansas and surrounding areas. The tour will be of particular interest this year after USDA estimated the HRW crop at just 590 million bu. last week, which would be the smallest since 1963-64, including a Kansas crop of 364 million bushels.

Less frequent rains are expected across the Northern Plains and Upper Midwest the first half of this week, though drying will be limited and more rains are expected Thursday through Saturday, according to World Weather Inc. The forecaster calls for intermittent rains across the bulk of the Corn Belt. Areas of the Southern Plains may get some rains early this week, but the area will remain dry overall. In grain areas of southern Brazil, frost and freezes are expected late this week and into the weekend.

Traders expect the National Oilseed Processors Association (NOPA) to report soybean crush totaled 172.4 million bu. in April, according to a Reuters survey. While that would be down from 181.8 million bu. crushed in March, it would be a 7.5% increase from last year and the highest April crush on record. Soyoil stocks as of April 30 are estimated at a five-month low of 1.839 billion pounds.

Large speculators in early May slashed bullish bets in the soybean market to the lowest level since late January, while cutting their net long in the corn market to the lowest since mid-February. The managed money net long in soybean futures and options fell 22,592 contracts during the week ended May 10 to 130,661 contracts, data from the Commodity Futures Trading Commission showed. Corn and soybean futures have since rallied, meaning funds may have reversed course from a recent liquidation move.

China’s industrial production unexpectedly fell 2.9% versus year-ago in April. That was the first decline in industrial production since March 2020, as widening COVID-19 lockdown measures snarled supply chains and paralyzed distribution. China’s retail sales declined by 11.1% from last year in April, the second straight month of falling retail trade and the steepest decline since March 2020.

The European Commission cut its economic growth forecast for the 19 countries sharing the euro to 2.7% this year from 4.0% predicted only in February, as Russia’s invasion of Ukraine and a surge in energy and commodity prices curbs growth this year and next.

 

CORN: July corn futures overnight reached $8.03 3/4, matching the intraday high from May 4. The lead contract fell 3 1/2 cents last week. December corn overnight hit $7.66, a contract high for the second straight session. Wheat strength and concerns over delayed U.S. planting may continue to support futures next week. USDA last week reported 22% of the U.S. corn crop was planted as of May 8, up from 14% the previous week but under the 50% average for that date the previous five years.

SOYBEANS: July soybeans overnight reached $16.68, a two-week high, after gaining 24 1/2 cents last week. November soybeans gapped higher and reached $15.19 1/4, the highest since April 29. Planting delays and hopes for continued export business to China may support futures this week. USDA reported the U.S. soybean crop at 8% planted as of May 8, below the five-year average of 13%. About 3% of the crop had emerged, 1 percentage point behind the five-year average.

WHEAT: July HRW wheat overnight hit $13.52, the highest on the continuation chart since spring 2008. July SRW reached a two-month high at $12.47 1/2. Traders await USDA’s weekly crop condition updates after today’s close. Last week, USDA reported modest improvement in winter wheat crop conditions, with the “good” to “excellent” rating rising to 29% as of May 8 from 27% and the “poor” to “very poor” rating falling to 39% from 43%.

 

LIVESTOCK CALLS

CATTLE: Mixed-weaker

HOGS: Steady-mixed

CATTLE: Live cattle may face followthrough pressure from concerns over beef demand and expectations for further cash market weakness. Live steers last week averaged $142.41 through Friday morning, down about $1 from the previous week's average. Choice cutout values rose $1.75 Friday to $258.95, up from 254.44 a week ago. But movement slowed to 92 loads. The cash market is expected to head lower as marketings increase, but traders already have sizable discounts to the cash market built into summer-month live cattle futures, which lead to corrective futures rebound even if the cash market has topped.

June live cattle rose 42.5 cents Friday to $132.075, still down 67.5 cents from the end of the previous week. August feeder cattle gained $1.50 to $168.025 but lost $6.675 for the week.

HOGS: Hog futures may see followthrough from a corrective bounce late last week amid ideas the market is trying to put in a near-term bottom, though sentiment remains heavily bearish. For the market to build on Friday’s gains, the cash market likely needs to lead the way. The CME lean hog index is hovering just above $100.00 – roughly the same level as summer-month hog futures. Pork cutout values fell 89 cents Friday to $98.60, down from $104.70 at the end of last week. Movement was stronger for a second straight day at 337 loads.

June lean hog futures rose $3.275 Friday to $100.75, up from a four-month low the previous day but still down $3.35 for the week and the third consecutive weekly drop.

 

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