Morning report: USDA’s big report drops later this week. (Comments are updated by 7:30 a.m. Central Time.)
Overnight trends:
Corn: Down 10 to 12 cents
Soybeans: Down 18 to 20 cents
Wheat: Down 30 to 45 cents
*Prices as of 6:50 a.m. CDT.
Ahead of Monday’s session, grain prices turned sour in overnight trading as traders began to square positions ahead of Thursday’s Prospective Plantings report from USDA – one of the agency’s most highly anticipated reports of the year. Amid historically high fertilizer prices, interesting speculations abound, including the prospect that more acres will be planted to soybeans versus corn this year – a scenario that rarely happens. Traders also continue to closely monitor the situation in Ukraine.
Overnight losses were severe enough to suggest that prices will stay in the red on Monday unless some as-for-now-unknown factor can jostle prices higher. Corn prices were down 1.5%, soybean prices slid 1% lower, and wheat contracts were slashed 2.5% to 4%.
Overseas stock markets were mixed. Asian markets trended mostly lower, with China’s Shanghai Composite inching fractionally higher while Japan’s Nikkei Index closed nearly 0.75% lower. European markets tracked 0.5% to 1.75% higher in midday trading. On Wall St., Dow futures were up 15 points to 34.774 ahead of the opening bell, with investor focus still on geopolitical turmoil overseas and a likely flurry of interest rate hikes later this year.
Energy futures saw significant cuts overnight. Crude oil spilled 4.25% lower to $108 per barrel. Diesel was down nearly 4%, while gasoline dropped 3.5%. The U.S. Dollar firmed moderately.
The latest 72-hour precipitation map from NOAA shows lots of wet weather in store for the central U.S. between today and Thursday, with a band of rain stretching from Oklahoma to Michigan likely to drop 1.5″ or more during that time. Official 6-to-10-day forecasts show more seasonally wet weather for the Central Plains between April 2 and April 6, although drier-than-normal conditions could develop in the upper Midwest during that time. Widespread cooler-than-normal conditions are also likely for the Corn Belt next week.
Last Friday, commodity funds were net buyers of all major grain contracts, including corn (+4,500), soybeans (+4,500), soymeal (+4,000), soyoil (+1,000) and CBOT wheat (+6,500).
Corn
Corn prices dropped 1.5% in overnight trading as traders continue to assess the situation in Ukraine (one of the world’s top corn exporters) and begin to square positions ahead of the March 31 Prospective Plantings report. Prices dropped nearly 1.5% overnight and will require a big jolt of bullish news later today to break the current pattern.
Last Friday, corn basis bids were mostly steady to firm after rising 3 to 6 cents higher at four Midwestern locations. An Ohio river terminal bucked the overall trend, sliding 6 cents lower.
Ahead of Thursday’s Prospective Plantings report, analyst expect USDA to show corn plantings at 92.001 million acres this season. That would be more than a million acres down from 2021 plantings of 93.357 million acres, if realized. Individual trade guesses ranged between 93.500 million and 89.700 million acres.
USDA releases its next weekly grain export inspection report later this morning. Last week, corn export inspections improved 28% to reach 57.7 million bushels and stayed on the higher end of trade guesses that ranged between 44.9 million and 63.0 million bushels. Cumulative totals for the 2021/22 marketing year are tracking moderately below last year’s pace so far, with 1.078 billion bushels.
Turkey made provisional purchases for 11.8 million bushels of corn from optional origins that will be for shipment between April 8 and May 5. The purchases are still subject to final confirmation and can be reduced or cancelled. Turkey remains an active grain buyer after suffering through a major drought last season.
The preliminary report from the CBOT showed daily futures volume moving to 158,630, with open interest dropping 13,796. Options volume moved to 75,773 and is now slightly favoring puts (40,059) over calls (35,714). Implied volatility for near-the-money May contracts remains relatively high, at 35.2%, and don’t expire for another 25 days.
Soybeans
Soybean prices followed a broad range of other commodities lower overnight, with losses of around 1% heading into Monday’s session. Spillover weakness from corn, wheat, crude oil and more were a big factor. The possibility that U.S. farmers will plant more soybean acres than corn acres this season also lurks in the background. Still, a disappointing South American crop has kept prices historically high, even touching the $17 per bushel benchmark a handful of times earlier this year.
The rest of the soy complex also suffered a moderate setback. Soymeal contracts tracked around 0.75% lower overnight, with soyoil contracts down around 1%.
Ahead of Thursday’s Prospective Plantings report, analysts expect USDA to show 2022 soybean plantings at 88.727 million acres. That would be well above 2021 plantings of 87.195 million acres, if realized. Trade estimates showed a fairly broad spread, meantime, with guesses ranging from 86.000 million acres all the way up to 92.208 million acres.
Will soybean export inspections trend back higher when USDA releases its next weekly report later this morning? Last week, inspections dropped 32% to 20.0 million bushels, which was also on the lower end of trade guesses that ranged between 18.4 million and 31.2 million bushels. Cumulative totals for the 2021/22 marketing year are significantly behind last year’s pace so far, with 1.570 billion bushels.
Last Friday, soybean basis bids held steady across most Midwestern locations but did trend 3 cents higher at an Ohio elevator.
The preliminary report from CBOT showed daily futures volume moving to 120,522 and open interest sliding 319 lower. Options volume moved to 51,758 and still modestly favors calls (28,376) over puts (23,382). Implied volatility for near-the-money May contracts moved to 25.2% and expire in 25 days.
Wheat
Wheat prices slumped overnight, with some contracts tumbling more than 3.75% as volatility continues to create extreme changes on an almost daily basis. Prices remain near historic highs despite today’s setback. The Russian invasion of Ukraine remains worrisome, but other outlets are revealing themselves on the world market, including some seldom-seen players such as India.
Will wheat export inspections continue to show improvements? Last week saw a modest rise to 12.1 million bushels but was still on the lower end of trade guesses that ranged between 10.1 million and 18.4 million bushels. Cumulative totals for the 2021/22 marketing year are also trending moderately below last year’s pace, with 608.1 million bushels.
Ahead of Thursday’s Prospective Plantings report, analysts expect USDA to show 2021/22 all-wheat plantings at 47.771 million acres. That would be more than a million acres above last season’s tally of 46.703 million acres, if realized. The total is comprised of an estimated 34.382 million acres of winter wheat, plus another 11.801 million acres of spring wheat.
China sold 20.1 million bushels of its state wheat reserves on auction late last week, which was 98.4% of the total available for sale. China has offered a flurry of similar grain sales so far this year as it seeks to quell high prices and support its local livestock industry.
Despite the ongoing geopolitical turmoil in the Black Sea region, the Russian consultancy Sovecon estimates that the country’s wheat exports in March will still reach 80.8 million bushels. Russia is the world’s No. 1 wheat exporter.
Egypt has engaged in talks with four countries about potential wheat imports as it looks to more stable supplies than the Black Sea region. So far, the country has made initial negotiations with Argentina, France, India and the United States. Egypt is the world’s top wheat importer.
Volume in HRW wheat moved to 63,902, while open interest fell 487 lower. Options were at 25,700, with calls (14,519) slightly favoring puts (11,181). Implied volatility for near-the-money May contracts are still extremely high, at 52.5%, and don’t expire for another 25 days.
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