Crops Analysis | September 8, 2023
Price action: December corn futures fell 2 1/2 cents on the session to $4.83 3/4 but notched a 2 1/4 cent rise on the week.
5-day outlook: Price action on Friday was a testament to the uncertainty that lies in production, the market is waiting for more data before picking a direction. Next Tuesday’s Crop Production and Supply & Demand reports should give more insight into how the crop looks, as it is the first report with objective field data to back up the production estimate. While Tuesday’s reports will give a fresh look, uncertainty will remain in just how much the early maturation has affected the crop. Most analysts are expecting a cut in yield, though that is slightly offset by a likely increase planted and harvested acres. Historically, the USDA comes in above the average production estimate, just one out of the last 11 years saw production under the average trade estimate. Analysts have production pegged at 15.013 billion bushels with yield at 173.5 bu. per acre, down from the August USDA report at 15.111 billion bushels and 175.1 bu. per acre.
Showers are expected to spread across the Midwest from Saturday through Tuesday, though the moisture is unlikely to benefit the crop, World Weather Inc says. Maturation and harvesting should occur at a good pace over the next few weeks, outside of additional precip Sep. 17-19.
30-day outlook: Considering analysts generally underestimate crop production numbers and the bearish seasonality that sustains throughout September, prices are likely to remain weak over the coming month. Combines have already started to roll across the Corn Belt, adding harvest pressure on prices. River levels have already started to have a negative effect on barge freight and the lack of precip in the forecast points to freight and barge restrictions getting worse before it gets better. This is likely to weigh on prices in the short term, but could have a positive effect on carry, encouraging producers to store as much grain as they can.
90-day outlook: Brazil dethroning the U.S. as the world’s largest corn exporter has already had a negative effect on domestic grain prices and many analysts expect that trend to continue next year. Outstanding sales for new crop remain at historically low levels, though export demand can turn on a dime, especially if El Nino continues to negatively influence productions prospects in the Asia. Today’s weekly export sales of 949,700 MT for 2023-24 remain near marketing year highs, though outstanding sales are at the lowest level since 2019. Traders expected sales to range from 400,000 MT to 1.0 MMT for 2023-24. Unless the demand side of the balance sheet shows more strength, or production is far worse than anticipated, weakness is likely to persist over the coming months.
What to do: Get current with advised sales.
Hedgers: You should be 100% sold in the cash market on 2022-crop. You should be 50% forward priced for harvest delivery on expected 2023-crop.
Cash-only marketers: You should be 100% sold on 2022-crop. You should be 35% forward priced for harvest delivery on expected 2023-crop production.
Price action: November soybeans rose 3 1/2 cents to $13.63 but gave up 6 1/4 cents on the week. Meanwhile, December meal futures closed $6.10 higher at $401.40, gaining $1.80 week-over-week. December soyoil fell 28 points to 60.50 cents and lost 279 points on the week.
5-day outlook: Soybeans took mild strength from meal gains, remaining subdued before USDA’s release of fresh supply and demand data next week. August weather woes have reduced production expectations, with analysts anticipating an average yield of 50.2 bu. per acre, compared to 50.9 bu. per acre reported in August. A slight month-over-month increase in harvested acres to 82.84 million acres puts average expected production at 4.157 billion bu., up from 4.205 billion last month. Meanwhile, domestic ending stocks are expected on average at 255 million bu., down marginally from 260 million bu. in August. Ending stocks for 2023-24 are expected to fall to 207 million bu., from 245 million bu. projected in August. Traders will likely continue to position ahead of USDA’s updated figures, due out next Tuesday at 12 pm E.T.
30-day outlook: South American weather will start to become increasingly important as planting efforts begin to gather steam in Brazil. Rains have been frequent in Paraguay and southern Brazil, though World Weather Inc. indicates rain rains will become less frequent and lighter Sept. 15-22, but showers will occur Sept. 18-22. Meanwhile, rains are expected to be restricted through much of the next two weeks in central and northern Brazil where fieldwork should advance well and will need greater rain to improve conditions for planting and establishment of summer crops.
90-day outlook: A longer-term trade focus will continue to revolve around U.S. exports amid recent lackluster economic data from top importer China, which has consistently looked to South American supplies to fulfill its supply needs as of late. The start of a fresh marketing year will find traders tuning in to USDA’s weekly export data to gain insight into how demand will progress through the year. Earlier today, for week ended Aug. 31, USDA reported net sales of 1.783 MMT for 203-24, which were near the top-end of the pre-report range of 1.4 to 2.0 MMT. Top purchasers for the week included 863,900 MT to unknown destinations and 735,200 MT to China. While Soybean sales to date for 2023-24 total 15.941 MMT, compared to a 24.391 MMT during the same period a year ago.
What to do: Get current with advised sales.
Hedgers: You should be 100% sold in the cash market on 2022-crop. You should be 45% forward sold for harvest delivery on expected 2023-crop production.
Cash-only marketers: You should be 100% sold on 2022-crop. You should be 40% forward sold for harvest delivery on expected 2023-crop production.
Price action: December SRW wheat fell 4 cents to $5.95 3/4 and hit a fresh contract low. For the week, December SRW inched up 1/4 cent. December HRW wheat lost 5 cents to $7.32 and on the week gained 9 1/4 cents. December spring wheat fell 4 cents to $7.70 3/4 but gained 11 cents on the week.
5-day outlook: It was another week of languishing for the winter wheat futures markets. The firmly bearish near-term technical postures are keeping the bulls very timid. However, the volatility and uncertainty of the Russia-Ukraine war and Black Sea shipping of grain are keeping the wheat bears from being aggressive. Wheat traders are focusing on next Tuesday’s monthly USDA supply and demand report for September. A Bloomberg survey showed analysts expect 2023-24 U.S. wheat ending stocks at 614 million bushels versus 615 seen in the August report. Don’t be surprised to see the wheat futures markets take their direction from corn futures next week, following the USDA report Tuesday.
30-day outlook: World Weather Inc. today said Canada’s Prairies and the northern U.S. Plains will experience good crop maturation and harvest weather over the next week to ten days. Little rainfall and warmer-than-usual temperatures are likely in that region. Spring wheat harvest progress and corn harvest progress and yield numbers will be in focus for wheat traders the next few weeks.
90-day outlook: USDA this morning reported weekly U.S. wheat sales of 370,300 MT for 2023-24, which were up 13% from the previous week, but down 11% from the four-week average. The numbers were at the low end of trade expectations. U.S. wheat sales abroad will have to improve in the coming months if U.S. wheat prices are going to sustain up-trending action. The stronger U.S. dollar index that this week hit a six-month high is not going to help U.S. wheat’s price-competitiveness on the world trade markets.
What to do: Get current with advised sales.
Hedgers: You should be 50% sold in the cash market on 2023-crop production.
Cash-only marketers: You should be 50% sold on 2023-crop production.
Price action: December cotton rose 53 points to 85.91 cents but gave up 384 points on the week.
5-day outlook: December cotton futures were able to make a mild rebound from corrective selling pressure through most of the week. Solid support is serving around the 40-day moving average of 85.48 cents, while the 20-day moving average of 86.28 cents provided resistance. Trade into next week will likely continue to edge sideways as traders position ahead of USDA’s September World Supply and Agricultural Estimates. A Bloomberg poll indicates an average pre-report production estimate of 13.57 million bales, down from 13.99 million in August. Meanwhile, ending stocks are expected at 2.87 million bales, down from 3.10 million in August. Market participants will take direction from USDA’s updated data, set for release Tuesday, Sept. 12 at 12 pm E.T.
30-day outlook: Weather in key growing regions will continue to be a market focus as the growing season comes to an end and harvest begins to progress. World Weather Inc. notes Texas weather will be hot and dry into the weekend which will maintain stress on crops. However, cooling with periods of rain from Sunday through most of next week should prove to be welcome in easing the drought and improving crop conditions, but the change comes too late in the season to seriously change production. The forecaster states that some irrigated crops will improve with the milder temps and rain.
90-day outlook: Traders will continue to closely monitor U.S. export sales to top importer, China, which continues to face weak consumer spending and shrinking credit growth. That could ultimately curb imports of the natural fiber, combined with a surging U.S. dollar. Earlier today, USDA reported weekly export sales data for week ended Aug. 31, which showed net sales of 85,100 RB, which rose 23,700 RB from the previous week. Top purchasers included Mexico, Costa Rica and China.
What to do: Get current with advised sales.
Hedgers: You should be 100% priced on 2022-crop in the cash market. You should have 60% of expected 2023-crop production forward sold for harvest delivery.
Cash-only marketers: You should be 100% priced on 2022-crop. You should have 60% of expected 2023-crop production forward sold for harvest delivery.
