Crops Analysis | October 20, 2023
Price action: December corn futures fell 9 1/2 cents before closing at $4.95 1/2, settling near the session low, though marking a 2 1/4 cent gain on the week.
5-day outlook: After followthrough buying overnight and relative strength this morning, corn futures turned lower, ultimately closing below key support as risk markets went largely “risk-off” into the weekend. Tensions continue to rise in the Middle East which has sent both gold and treasury bonds higher into the weekend, both of which are regarded as safe-haven assets. December futures failing back below $4.99 indicates a failed breakout on the daily bar chart, which casts a bearish technical omen over the market over the coming week. That weakness will likely continue with a test of up trendline support, currently at $4.90 1/2, likely. While a break below this support line is possible, there seems to be little reason for the month-long support line to be broken at this juncture, leaving the near-term uptrend in place, though some profit taking is possible.
30-day outlook: The bullish October seasonal has held up well throughout the month, though there is only one full week of October remaining before the seasonal turns more bearish in November. There has been some relief on the Mississippi, Missouri, Ohio and Illinois rivers, lessening barge freight rates and making the U.S. more competitive in the world export market. This will likely limit the downside, along with our analysis that points to sustained strength over the period when prices are strong from the start of September until mid-October. The bearish harvest pressure paired with bullish export circumstances and recent uptrend leads to a mildly bullish outlook over the coming month.
90-day outlook: Over the course of the winter attention will turn to South American production. Brazilian soybeans are off to a slow start on planting as producers wait for rain before sowing the crop, which in turn delays the harvest of those soybeans and the planting of second crop corn. This delay in planting puts the corn crop at risk, which is the majority of Brazilian corn production. The USDA currently holds a higher production forecast than many other private forecasts- including Dr. Michael Cordonnier and Conab. Domestic corn prices are also at the lowest level in recent years, discouraging farmers in Mato Grasso, Brazil’s largest corn producing state, from selling both their 2022-23 and anticipated 2023-24 production. The depressed prices of corn are also likely to limit producers willingness to plant, which could in turn provide a catalyst for U.S. corn in the meantime. It will take a catalyst to help corn prices rally over the coming quarter, but the increased export outlook, early South American production concerns and our 2010-2014 analog study points to the possibility of sustained strength over the period.
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 13 1/4 to $13.02 1/4 but rose 22 cents on the week, while December meal rose 90 cents to $423.90 and gained $33.90 week-over-week. December soyoil rose 28 points to 53.39 cents but gave up 99 points on the week.
5-day outlook: Mild profit-taking efforts in meal futures following four straight days of gains pressured soybeans to end the week. However, corrective buying efforts in soyoil propped up the complex, ultimately limiting selling efforts. Traders found meal a buying opportunity following NOPA’s crush data, which showed record September crush, up from August and notably above pre-report expectations. Meanwhile, soyoil stocks totaled 1,107.64 million lbs., reflecting a 142.13 million lb. drop on the month, more than analysts anticipated. While soybeans face strong overhead resistance at the 100-, 200- and 40-day moving averages, an extended move in meal futures could find soybeans successfully breaching the area. Conversely, however, extended profit-taking efforts will likely find soybeans edging back below the $13.00 area, though notable support at the 10- and 20-day moving averages should stifle a profound move towards last week’s low.
30-day outlook: As U.S. producers continue to harvest soybeans at a solid clip due to mostly dry weather, weather conditions in South America as of late have not boded so well for planting efforts throughout the country. World Weather Inc. reports little rain and hot temps will stress crops from central Mato Grosso do Sul to much of northern Brazil through Monday and some newly planted crops may wither before showers become more frequent Tuesday through Nov. 3. The forecaster notes that while soaking rain is not expected in many areas, cooler temps along with high frequency of rain should induce steady improvement in soil moisture and conditions for crop development. Meanwhile, areas of southern Brazil have recently received excessive rains, slowing planting progress. Forecasts show Paraguay and southern Brazil will continue to see regular rain during the next two weeks, delaying fieldwork, though most of the rain will not be as heavy as what occurred recently, and flood conditions should not be significantly worsened. Soybean planting efforts in Argentina have not yet begun in earnest, though producers will likely begin following rains next week, which should improve germination following persistently dry conditions throughout much of the country.
90-day outlook: Earlier today, the General Administration of Customs reported China imported 7.15 MMT of soybeans during September. Of the total, 6.88 MMT (96.2%) came from Brazil, which was a 23% increase from last year. Meanwhile, the U.S. exported a marginal 133,692 MT of soybeans to China during September, an 88.4% drop from last year. It’s been no secret the country has looked to Brazil for supplies in the wake of a record crop harvested in earlier in the year, though growing logistical issues could prove burdensome for China in securing supplies in the coming months. Not only is the Mississippi River facing low-water levels as dry weather continues to run rampant across the Midwest, but Northern Brazil is also facing similar issues as grain shipments have been halted due to a drought which has dropped Amazon River tributaries to the lowest level in over a century. Traders will continue to monitor logistics in both countries as well as purchases from China as the 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 futures fell 8 cents to $5.86 and near the session low after hitting a five-week high early on. For the week, December SRW gained 6 1/4 cents. December HRW wheat futures lost 6 1/4 cents to $6.70 and near the session low. On the week, December HRW rose 1 cent. December spring wheat fell 8 1/4 cents to $7.30 3/4, but gained 8 3/4 cents on the week.
5-day outlook: The SRW wheat futures bulls had a good week as a price downtrend on the daily chart was negated and prices pushed above the key 40-day moving average for the first time since early August. The SRW bulls do have a bit of upside momentum heading into trading nearly next week. However, HRW wheat continued to languish this week. Wheat traders will be watching price action in the corn market. December corn hit a nearly three-month high today but then the bulls just ran out of gas and prices dropped sharply. Wheat futures followed.
Risk aversion is elevated late this week and is likely to remain that way early next week. That’s likely going to continue to limit buying interest in the wheat markets.
30-day outlook: Weather patterns in major global wheat-producing regions will be in focus in the coming weeks. World Weather Inc. today reported U.S. hard red winter wheat areas will experience dry weather through the weekend and into early next week and then the region will get some needed rain next week. Winter wheat planting and establishment in the lower U.S. Midwest should advance favorably. Meantime, western Australia dryness will continue a concern. Argentina will get some rain this weekend into next week that may help late season yields in the far south. Southern Brazil wheat is seeing too much rain and more in the forecast. India’s weather will be good for winter crop planting, although some additional rain would be welcome to ensure the best emergence and establishment. China weather is also expected to be favorable for wheat planting, emergence and establishment.
90-day outlook: The U.S. dollar has appreciated on the foreign exchange market recently, due in part to “flight-to-quality” buying of the greenback amid the Middle East crisis. The heightened trader and investor anxiety in the marketplace is likely to persist for some time to come. That will keep the U.S. dollar index elevated. The stronger dollar is an underlying negative for the U.S. wheat markets, as it makes U.S. wheat, which has struggled to increase global market share, even more expensive to purchase in non-U.S. currency.
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 fell 187 points to 82.40 cents and lost 366 points on the week.
5-day outlook: Cotton futures faced notable selling to end the week, marking a three-month low intraday as demand concerns from China continue to hover over the market, combined with overall risk-off sentiments going into the weekend. The move followed two days of corrective buying following solid losses to start the week. Cotton’s near-term direction will largely be demand-driven as supply concerns from U.S. production curbs along with outside market strength have seemingly been swept under the proverbial rug as of late.
30-day outlook: While U.S. production curbs have seemingly become a stale trade topic for the natural fiber, as harvest efforts progress, traders will increasingly look to USDA’s monthly production updates as well as supply and demand data to harness a firmer grasp on the totality of domestic production cuts as a result of hot, dry weather in key grower Texas. Meanwhile, global weather could increasingly become a focus as Australia and South Africa continue to face persisting dry conditions.
90-day outlook: As traders continue to grasp global supply, demand will continue to be a longer-term focus as the year progresses. Top importer China has increasingly looked to Brazil and Australia to fulfill their supply needs. Earlier this week, USDA reported net sales of 71,300 RB during the week ended Oct. 12, which were up 64% from the previous week but down 36% from the four-week average. Meanwhile, shipments during the week totaled 109,900 RB which rose 6% from the previous week but were down 22% from the four-week average. Top destinations were China, Bangladesh and Pakistan.
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.
