Crops Analysis | September 9, 2022

( )

Corn ­

Price action: December corn futures rose 16 1/2 cents to $6.85, up 19 1/4 cents for the week and the contract’s highest closing price since June 22.

5-day outlook: December corn rose a third straight week ahead of USDA’s Crop Production Report Monday that’s expected to reflect a reduced harvest outlook from extreme Midwest heat and dryness. The Crop Production Report, along with USDA’s monthly Supply and Demand update, also out Monday, will be key to the market’s near-term direction. USDA is expected to lower its estimate for the U.S. corn crop to 14.088 billion bu., down 271 million bu. from its August forecast, based on a Reuters survey of analysts. The average estimated U.S. yield is expected to be cut to 172.5 bu. per acre from 175.4 bu. per acre. Traders will also watch for the expected resumption of USDA weekly export sales numbers. USDA will release four weeks of weekly export sales data on Sept. 15 after technical problems forced the agency to halt reports the past two weeks.

30-day outlook: Harvest progress and initial yield reports will increasingly come into focus from mid-September into early October. Despite late planting, corn crop development is only slightly behind the usual pace, with 15% of the crop rated mature as of Sept. 4, compared to the five-year average of 18%. The market is heading into a seasonally weak period with harvest pressure likely to increase in coming weeks, but December corn remains in a seven-week uptrend and sub-par harvest results may embolden market bulls to test the $7.00 level. Outside markets, including crude oil and the U.S. dollar, may also be price influencers in grains. The U.S. dollar index posted a 20-year high earlier this week but ended the week with a sharp pullback.

90-day outlook: Export demand and geopolitics will be two keys to longer-term price direction as the U.S. harvest winds down, with USDA Crop Production reports Oct. 12 and Nov. 9 expected to be closely studied. Concerns over disruptions to global supplies escalated this week after Russian President Vladimir Putin expressed dissatisfaction with a deal to allow grain shipments from Ukraine. Putin and his Turkish counterpart Tayyip Erdogan will discuss implementation of a deal on Ukrainian grain exports when they meet in Uzbekistan next week. Putin earlier this week criticized the deal and said it may need to be reworked. Traders will also monitor initial progress of South America’s crops, with some analysts expecting a large jump in Brazilian corn production in 2022-23.

What to do: Get current with advised sales. Wait to make additional 2022-crop sales.

Hedgers: You should have 50% of 2022-crop sold for harvest delivery.  

Cash-only marketers: You should have 50% of 2022-crop sold for harvest delivery.

 

Soybeans

Price action: November soybeans rose 26 1/4 cents to $14.12 1/4, down 8 1/4 cents for the week. October soymeal rose $5.70 to $414.80. October soyoil rose 164 points to 66.68 cents.

5-day outlook: November soybeans extended Thursday’s late rebound on technical buying but still fell a second straight weekly decline ahead of USDA’s reports Monday. USDA is expected to lower its estimate for the U.S. soybean crop to 4.496 billion bu. from 4.531 billion bu. in August, based on the Reuters survey. But the expected crop would still be up from last year’s record 4.435 billion bu. production. The yield is expected to be reduced to 51.5 bu. per acre from 51.9 bu. last month. After the reports, traders will turn attention to late-season crop development and export demand, with USDA expected to resume weekly export sales reports Sept. 15.

30-day outlook: Much of trade focus over the month ahead will center on the finishing crop and early harvest results. Mostly favorable conditions for crop maturation and early harvesting are expected for much of the Midwest the rest of September, and despite extreme heat and dryness in some areas, U.S. farmers are poised to generate a record crop for the second year in a row. The strong crop outlook, combined with seasonal factors, may limit price upside in futures. Outside markets also lean bearish, with crude oil hitting an eight-month low this week and Malaysian palm oil futures down 8.2% for the week amid concerns Covid-related restrictions in China may curtail demand.

90-day outlook: USDA Crop Production updates Oct. 12 and Nov. 9 loom as two longer-term keys to price direction as the market zeroes in on the ultimate size of the U.S. crop. Export demand and South America’s upcoming crop season will also be closely watched. The U.S. Climate Prediction Center now gives 54% chances La Niña will persist through the January-March timeframe, and there are slightly greater than two-third odds of ENSO-neutral conditions during late spring/early summer 2023. “The longer La Niña lingers, the higher the potential will be for another less-than-ideal South America growing season,” World Weather Inc. said.

What to do: Get current with advised cash sales. Hedgers should maintain the 10% short hedge position in November futures at $14.73.

Hedgers: You should be 60% sold for harvest delivery on 2022-crop production. You also have 10% of 2022-crop production hedged in short November soybean futures at $14.73.

Cash-only marketers: You should be 60% sold for harvest delivery on 2022-crop production.

 

Wheat

Price action: December SRW wheat rose 40 1/2 cents to $8.69 1/2, up 58 1/2 cents for the week and the contract’s highest closing price since July 11. December HRW wheat gained 36 1/4 cents to $9.29 1/4, up 51 1/2 cents for the week. December spring wheat surged 29 1/4 cents to $9.27 1/2, up 37 1/2 cents for the week.

5-day outlook: Winter wheat futures posted technically bullish weekly closes, suggesting followthrough chart-based buying from speculators may develop early next week. USDA’s monthly Supply and Demand report on Monday is expected to show a slight increase in the global wheat supplies. Global wheat ending stocks for 2022-23 are expected to rise to an estimated 268.10 MMT from USDA’s current estimate of 267.34 MMT. Traders will continue to closely monitor Ukraine grain shipments out of the Black Sea region, as Russian President Putin has objected to the destinations for the shipments. Also, India’s restrictions on rice exports added more worries regarding world food supplies. India, the world’s largest rice exporter, restricted its export sales to safeguard its domestic supply. USDA is expected to resume its weekly export sales report Sept. 15.

30-day outlook: Winter wheat planting progress will be closely watched over the month ahead. As of Sept. 4, 3% of the winter crop was planted, even with the five-year average, USDA reported. Outside markets will also be key to the wheat market’s direction this fall. The U.S. dollar index pulled sharply back from 20-year highs scored earlier in the week, which may encourage wheat market bulls. Crude oil prices this week fell to an eight-month low, a bearish element for grain markets. Still, a third weekly gain in wheat futures suggests prices have established near-term bottoms.

90-day outlook: The prospect of a global recession amid soaring inflation and COVID lockdowns in China remains a longer-term concern. However, recent economic reports, especially from the U.S., have contradicted notions that recession is imminent. The next few months will likely determine if indeed the U.S. and/or world economy actually experience recession. Grain markets will be significantly impacted either way.

What to do: Get current with advised hedges. Wait on a corrective rebound to increase cash sales.

Hedgers: You have 15% of 2022-crop hedged in short December SRW futures at $7.83. You should be 85% sold in the cash market on 2022-crop. You should be 30% forward-priced on expected 2023-crop for harvest delivery next year.

Cash-only marketers: You should be 85% sold on 2022-crop. You should also be 30% forward-priced on expected 2023-crop production for harvest delivery next year.

 

Cotton

Price action: December cotton rose 100 points to 104.84 cents, up 163 points from a week ago.

5-day outlook: Cotton futures will find near-term direction from USDA’s Crop Production updates Sept. 12. Farm Services Agency certified acreage data suggests USDA will increase cotton acreage; however, a considerable variance could surface between planted and harvested acres as droughty conditions have persisted through the growing season in much of Texas. On average, analysts estimate the USDA will increase the cotton crop by 200,000 bales. Other sources of market direction will be provided by outside markets, namely the U.S. dollar and crude oil. The dollar touched a 20-year high mid-week but weakened sharply since. Crude oil futures faced corrective selling through much of the week amid looming uncertainty over the reinstatement of a nuclear deal with Iran and implications of potential price caps on Russian oil.

30-day outlook: Weather will remain a key a driver as harvest approaches and hurricane season progresses. World Weather predicts infrequent rains during the next two weeks in West Texas, but most cotton that is still viable should have received enough rain recently to allow for cotton development to occur favorably for a while longer. The forecaster further stated that totally dry weather is not expected as much of the Panhandle and some western and northern locations in West Texas will receive up to 0.65” of rain and locally more over the weekend, however the Blacklands will be dry through much of the next two weeks while daily rounds of showers impact south Texas and the Coastal Bend Thursday through Monday Sep. 19. Forecasts of a continued weather pattern in portions of the southeastern U.S. into early next week could raise concern, but World Weather notes that drying later next week should prove timely and beneficial.

90-day outlook: Global economic conditions will continue to influence the cotton market the next several months. Attempts to reign in pandemic-induced inflation will continue to impact consumer purchases and the overall health of the global economy. Traders will watch Chinese economic data as well as exports as the strengthening dollar has reduced foreign buying power. While Chinese inflation reportedly dropped to an 18-month low in August, Covid flare ups and a deepening property crisis continues to weigh heavily on the economy despite efforts by the central bank to stimulate demand. Analysts familiar with the current state of the Chinese economy note that demand for credit remains weak and business and consumer confidence remain fragile. 

What to do: Get current with advised 2022-crop sales.

Hedgers: You should be 70% forward-priced for harvest delivery on expected 2022-crop production.

Cash-only marketers: You should be 70% forward-priced for harvest delivery on expected 2022-crop production.

 

Latest News

H&P Report negative compared to pre-report expectations
H&P Report negative compared to pre-report expectations

Nearly every category topped the average pre-report estimates.

After the Bell | March 28, 2024
After the Bell | March 28, 2024

After the Bell | March 28, 2024

Pro Farmer's Daily Advice Monitor
Pro Farmer's Daily Advice Monitor

Pro Farmer editors provide daily updates on advice, including if now is a good time to catch up on cash sales.

PF Report Reaction: Bullish USDA data for corn
PF Report Reaction: Bullish USDA data for corn

Corn planting intentions and March 1 stocks came in lower than expected.

Report Snapshot: USDA shows lighter-than-expected corn acres and stocks
Report Snapshot: USDA shows lighter-than-expected corn acres and stocks

USDA reported corn acres of 90.036 million acres for 2024 and March 1 stocks of 8.347 billion bu., both well below trade estimates. Soybean acres were slightly lower than expectations, while stocks were higher.