Equity and energy markets pull prices lower.
Grain futures were lower overnight, succumbing to the large selloff in equity markets and energy futures that tumbled late Thursday into Thursday evening. The heavy selling affected the grain complex which trades 10% of the volume per hour versus day session, making it easy to setback. However, recovery occurred overnight with soybean oil making new monthly highs, pulled higher by Malaysian Palm oil, which rose to a new historic high of 5500 ringgits/MT. This recovered soybeans back to the 1420 value and helped corn and wheat also recover 80% of their evening losses. Indonesia plans to limit palm oil exports to lower domestic cooking oil prices, forcing key import customers to utilize cheaper soy oil/sunoil in the coming months.
There are high-level diplomatic efforts by US and Russian counterparts in Geneva, Switzerland, to cool tensions over the Russian troop buildup occurring along with Belarus/Ukraine and Russia/Ukraine lines. However, Russia is expected to stand firm in its demand that Ukraine cannot become a NATO member, which allows US/Europe strategic missiles to be placed, creating a Cuban missile crisis for Russia. Further, the Russian parliament acted to recognize the two pro-Russian eastern Ukrainian regions as independent and no longer part of Ukraine, which further adds to the tensions. This will keep a war premium bid into the weekend for wheat, as any troop movement would create an economic embargo against the world’s largest green exporter.
Overnight Chinese Dalian may corn rose to $11.01/bu, a record high and now all corn months in 2022 and into early 2023 are above $11.00. Dalian may soy meal close that $505.65/MT, up $10.65. US March corn has strong support at 5.95-6.00. With central plains drought extended well into February and Ukraine having a threatening environment that could halt wheat exports, it will be difficult to be bearish wheat as the mutual funds found it to be the first three weeks of January. As a result, grain prices look to have a higher price bias into the end of the month.
South American weather models agree that below normal rainfall trend will persist across the southern two-thirds of Brazil and the northern third of Argentina, including Paraguay, over the next week. High temps will be above normal, with highs in the 90s to lower 100s. This heat/dryness will further reduce soil moisture levels for reproducing crops. With rain still anticipated 1-3.50” inches in the next 10 days. This rain will help restore soil moisture into February for the southern region. South American total crop potential continues to be on the decline.
Cattle futures were lower yesterday, consolidating earlier week gains and waiting on the cattle feed report this afternoon. The cash trade mainly was steady at $137, with box beef prices continuing to extend gains with the choice higher by $1.38 and select gained $1.75. Today, cattle futures may find a further retreat with outside equity markets still holding lower from yesterday’s late break after the cattle market had closed.