Crops Analysis | October 13, 2023
Price action: December corn futures fell 2 3/4 cents on the session to $4.93 1/4 but gained 1 1/4 cent gain on the week.
5-day outlook: December corn futures failed to followthrough on Thursday’s reports driven strength, though losses remained fairly tight. The technical posture over the coming week remains bullish and bulls’ persistent knock on the psychological $5.00 level is weakening the area as resistance. Bulls are seeking a daily close above $5.00 to open the door for sustained strength. Some profit-taking is not unlikely in the interim, with line in sand support currently at $4.83. The October seasonal remains bullish, providing additional reason to expect strength over the coming week.
30-day outlook: Strength over the coming month is likely to be limited. The Ohio, Illinois, Mississippi and lower Missouri rivers were below flood stage this morning and temporary increases in water levels will occur along the latter three rivers after rain this week, though additional rain is necessary in order to prevent further restrictions to barge traffic. This should help the export situation in the short term, allowing elevators to offload some grain down the river and allow room for more grain. Basis has already improved across much of the Corn Belt, with much of the reason likely due to increased export demand. Total commitments quickly rose from the lowest level since 2019 in the past month, as current outstanding sales and accumulated exports stands nearly two million bushels over year ago.
90-day outlook: After October, the seasonal turns more bearish for corn futures. Production prospects will be better realized and a dramatic shift in production numbers is unlikely at this juncture. While USDA lowered 2023-24 carryout in Thursday’s report, ending stocks remain above 2 billion bushels, which is unlikely to favor the bulls in the medium term. That being said, the export situation has improved over the past month and our analysis points to an increase in the feed and residual forecast, which would act as a bullish catalyst if realized.
South American production also remains a focus over the coming quarter. USDA is optimistic on Brazilian corn production with an estimate of 129 MMT for 2023-24, above Dr. Michael Cordonnier at 125 MMT and Conab’s estimate of 119.4 MMT. If the lower production prospects are realized, quite possible as producers are waiting for additional precipitation to plant first crop beans which delays second crop corn plantings, it could draw additional demand for U.S. corn.
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 fell 9 3/4 cents to $12.80 1/4 but rose 14 1/4 cents on the week. December meal closed $2.90 lower at $390.00 but gained $17.90 on the week. December soyoil rose 101 points to 54.38 cents but gave up 97 points week-over-week.
5-day outlook: While nearby soybean futures traded within Thursday’s range, overnight strength eased as the session progressed amid profit-taking in meal futures following a reach to a near one-month high earlier today. USDA’s daily sales report of 117,300 MT of soybeans and 100,000 MT of soybean cake and meal to unknown destinations during 2023-24 provided little excitement to the complex. Evidence of waning imports to China proved a downer, as the country imported 7.15 MMT of soybeans in September, which was 2.21 MT (23.6%) less than the previous month and 570,000 MT (7.4%) less than last year as heft stocks at ports slowed arrivals. Traders will continue to weigh demand combined with USDA’s lower-than-expected production pegs into the coming week.
30-day outlook: Tighter-than-expected global ending stocks per USDA’s October World Agricultural Supply and Demand estimates will boost trade focus on weather in South America as producers plant the 2023-24 crop. While Conab, in its first forecast report for the new-crop cycle, reported farmers in the country are expected to produce a record soybean crop totaling 162 MMT, or 4.8% more than last year, weather throughout planting and the growing season will ultimately determine the country’s production. Thus far, weather conditions across Brazil have proven variable, with erratic rainfall in the center-west, with many areas too dry, while southern Brazil remains much too wet, as waves of expected rains continue to pose a threat summer crop planting, according to World Weather Inc.
90-day outlook: Lingering U.S. dollar strength amid persisting inflation have dinged U.S. export business over the past year. A higher-than-expected Consumer Price Index (CPI) reading earlier this week breathed life back into the dollar, confirming Fed’s recent rhetoric of higher-for-longer interest rates and extending prospects of crimped U.S. exports. Earlier today, however, in its Weekly Export Sales Report, USDA reported increased sales during the week ended Oct. 5. The government showed net sales of 1.057 MMT, which were up 31% from the previous week and 68% from the four-week average. U.S. export sales will continue to be a focal point as the marketing year progresses.
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 rose 8 1/4 cents to $5.79 3/4 and near mid-range. For the week December SRW rose 11 1/2 cents. December HRW wheat futures fell 6 cents to $6.69 and near the session low. For the week, December HRW fell 4 3/4 cents. December spring wheat futures fell 1 1/2 cents to $7.22 but gained a penny and a half on the week.
5-day outlook: This week the winter wheat futures markets continued their choppy and sideways trading at lower price levels; look for more of the same next week. SRW garnered some strength today as USDA reported a daily sale of 181,000 MT of U.S. SRW wheat to China for delivery during 2023-24 – the second daily SRW wheat sale to China in just over a week. Look for wheat traders to continue to look to corn and soybean futures markets for daily price direction.
30-day outlook: Weather in major world wheat-growing regions is coming closer to the front burner of wheat futures markets. World Weather Inc. today reported Russia and Ukraine winter crop areas still need greater precipitation to ensure the best winter crop establishment. India’s rain in the north later this weekend and into next week could help get winter wheat off to a better-than-expected start for an El Nino year. Dryness in Western Australia is still a concern for wheat production. Brazil wheat is still facing a grain quality decline because of too much moisture. Argentina is still dealing with drought, although recent showers and those coming will offer some temporary relief. U.S. hard red winter wheat and wheat in the Pacific Northwest will need greater rain for improved crop establishment, said the forecaster.
90-day outlook: USDA this morning reported better-than-expected weekly U.S. wheat sales of 652,000 MT for 2023-24, a marketing-year high. Sales were up notably from the previous week and 67% from the four-week average. U.S. wheat sales abroad will have to continue to improve in the coming months for wheat futures prices to pull out of their downtrends and build fresh price uptrends.
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 114 points to 86.06 cents but lost 108 points on the week.
5-day outlook: December cotton rebounded following a four-day sell off, with USDA’s World Supply and Demand estimates proving a bullish catalyst amid lower-than-expected U.S. and global ending stocks. However, a higher-than-expected Consumer Price Index reading Thursday sent the U.S. dollar skyrocketing, ultimately muting the natural fiber’s response to the 200,000-bale drop in U.S. ending stocks and huge 10 MMT drop in global ending stocks. The report also reflected Brazilian 2023-24 production will exceed U.S. production for the first time, and the South American country is close to surpassing U.S. cotton exports. Traders will continue to weigh the fresh government updates and look to outside markets for near-term direction.
30-day outlook: Weather in key growing areas will be closely monitored over the next month as U.S. harvest efforts advance and planting in South America commences. World Weather Inc. reports Limited rain in areas of Texas and the Delta will be great for protecting fiber quality, though rain is expected in Texas during the second half of next week, which may raise a little concern over fiber quality, although the precip should be brief enough to limit the impact. Meanwhile, rain in the southeastern U.S. this week delayed harvesting and may have induced some temporary yellowing of mature cotton fiber, though drier weather will be quick to resume today through the first of next week. The forecaster reports Argentina remains too dry for cotton germination, emergence and establishment in the north, although some planting has likely begun. Conversely, in center-south Brazil, cotton areas are too wet for fieldwork, delaying progress. Additional rain is expected periodically, keeping cotton areas wet for a while.
90-day outlook: Traders will continue to closely monitor U.S. export sales as China has increasingly looked to Australia and South America to fulfill the country’s import needs. For the week ended Oct. 5, USDA reported net sales of 43,400 RB in its Weekly Export Sales Report, which were down 82% from the previous week and 63% from the four-week average. Top purchasers for the week included China, Indonesia and Mexico. Meanwhile, shipments of 104,000 RB during the week were a marketing-year low, down 31% from the previous week and 28% from the four-week average. Top destinations were China (35,600 RB), Pakistan (17,700 RB) and Mexico (14,900 RB).
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.
