Crops Analysis | September 16, 2022
Price action: December corn futures fell 1/4 cent to $6.77 1/4, down 7 3/4 cents for the week.
5-day outlook: December corn fell for a fourth straight day and posted its first weekly decline in four as concerns over the global economy and a resurgence in the U.S. dollar weighed on grain markets. USDA’s lower than expected production and yield estimates sparked a rally to start the week, but the market gave back those gains and may remain under pressure as the U.S. harvest accelerates. USDA will update harvest progress after Monday’s close. Earlier this week, USDA said 5% of the crop was harvested as of Sept. 11, above the 4% average for the previous five years.
30-day outlook: Corn futures remain in an eight-week uptrend. However, with a disruptive U.S. rail strike averted, harvest picking up and a sub-14 billion bu. crop likely priced in for now, the market holds greater near-term downside risk than upside potential. The Midwest weather outlook also favors a brisk start to harvest, which may make it difficult to sustain any upside momentum near or above $7.00. Traders will closely watch early harvest yield reports as well as outside markets, such as crude oil, amid escalating concerns over a potential global recession USDA’s Sept. 30 Grain Stocks Report and Oct. 12 Crop Production update will help set the market’s tone into fall.
90-day outlook: USDA’s final Crop Production update of the calendar year Nov. 9 will be one key to longer-term price direction. We expect the estimated size of the U.S. harvest to continue shrinking. While we’re holding our average corn yield estimate unchanged at 168.1 bu. per acre, USDA’s 996,000-acre reduction in harvested acres prompted us to lower our production forecast by 169 million bu. to 13.590 billion bu. The smaller crop outlook, combined with USDA’s forecast for 2022-23 ending U.S. corn stocks to drop to a 10-year low, are bullish long-term influences. But outside markets and factors, including crude oil, the dollar and a potential recession, will also help drive grain markets the rest of 2022.
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.
Price action: November soybeans fell 3 cents to $14.48 1/2, still up 36 1/4 cents for the week. December soymeal fell $4.90 to $429.60, while December soyoil rose 166 points to 65.96 cents.
5-day outlook: Soybean futures fell a fourth consecutive day but still posted solid gains this week after USDA released lower than expected crop and yield estimates Sept 12. The soy complex ended the week on a soft note and may face further pressure next week with harvest pressure increasing and Midwest weather trending warmer. Mostly favorable conditions for crop maturation and early harvesting will continue during the next two weeks, World Weather Inc. said today. USDA will update crop condition and progress reports Monday. Earlier this week, USDA said 22% of the U.S. soybean crop was dropping leaves as of Sept. 11, behind the 28% five-year average.
30-day outlook: Traders will closely follow early harvest results, as well as bearish-leaning outside markets, including crude oil, U.S. equities and the U.S. dollar. Recession concerns ramped up this week, sending the S&P 500 index to a two-month low and crude oil lower as well. Further declines in those markets may prompt large speculators to cut long exposure in soybeans and other ag markets. A strong start to soybean exports in 2022-23, if it continues may support prices over the near-term, but increasing competition from Argentina may limit upside. Other key factors include USDA’s Grain Stocks Report Sept. 30 and Crop Production update Oct. 12.
90-day outlook: USDA’s Crop Production Report Nov. 9, the agency’s final harvest update of the calendar year, will be one key to longer-term price direction. November soybeans erased some of the post-USDA rally early this week but still posted the market’s first weekly gain in three, illustrating the market’s longer-term bullish potential with U.S. ending stocks projected at a seven-year low. We expect the ultimate size of the crop to be revised even lower. While we’re keeping our average U.S. yield estimate at 51.7 bu. per acre, USDA’s 580,000-acre reduction in harvested area led us to lower our crop forecast by 56 million bu. to 4.479 billion bu. But escalating recession concerns and a higher 2022-23 production outlook for South America could limit price upside.
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. Wait to make additional sales.
Hedgers: You should be 60% sold for harvest delivery on 2022-crop production.
Cash-only marketers: You should be 60% sold for harvest delivery on 2022-crop production.
Price action: December SRW wheat rose 14 3/4 cents to $8.59 3/4, down 9 3/4 cents for the week. December HRW wheat gained 9 cents to $9.35 1/4, up 6 cents for the week. December spring wheat rose 10 cents to $9.38 3/4, up 11 1/4 cents on the week.
5-day outlook: Wheat futures ended the week on a firm note, which kept the market’s technical posture leaning firm/bullish and could generate followthrough buying early next week. But any price upside may be capped by U.S. dollar strength and growing concerns over demand and the global economy. Dry conditions in the U.S. Plains with peak seeding season ahead remain a concern. USDA will update weekly planting progress on Monday. Early this week, USDA said 10% of the winter wheat crop was planted as of Sept. 11, ahead of the 7% average for the previous five years. U.S. spring wheat harvest is mostly done, shifting focus to HRW and SRW planting and crop outlooks in other wheat-producing countries.
30-day outlook: Traders will closely follow Plains weather and winter wheat seeding progress over the month ahead, with continued dry conditions likely keeping a floor under prices. Some additional rains expected the next seven days “will be beneficial but is unlikely to be enough to satisfy the needs for winter planting in most areas, especially with temperatures being above to well above average,” World Weather said. Continued slumps in U.S. equities and crude oil may weigh on grain markets.
90-day outlook: U.S. wheat exports remain sluggish with the grain still uncompetitively priced on the global market. USDA reported disappointing weekly export sales Thursday, and export commitments so far in 2022-23 are running 2.0% behind year-ago, compared with 2.1% ahead of last week. Further price upside will be difficult if U.S. sales abroad do not improve. The shaky Russsia/Ukraine/United Nations agreement to get grain shipped out of Ukraine is still holding, but the situation remains fluid and any military escalation by Russia could quickly send wheat futures higher.
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.
Price action: December cotton fell 400 points to 99.29 cents, the lowest close since Aug. 9 and 555 points lower on the week.
5-day outlook: Outside markets will continue to largely affect the near-term direction of cotton as the U.S. dollar remains strong, equities are weaker, and crude oil futures maintain their bid below $90.00 per barrel. Increasing fears of a global slowdown have weighed heavily on cotton throughout the week, marking the second weekly decline in the last three as worries of a significant reduction in world demand is imminent. Traders anticipate the Fed will continue its aggressive monetary tightening following an unexpected increase in the U.S. Consumer price index (CPI), which reflected an 8.3% rise in inflation for August, down from 9.1% in June, however core inflation was pegged at 6.3%, up sharply from June and July’s rate at 5.9%.
30-day outlook: U.S. harvest progress and production updates in USDA’s next Supply and Demand update Oct. 12 will drive cotton futures direction over the next month. On Monday, USDA increased production estimates by 1.262 million bales to 13.832 million bales while analysts expected a slight increase of 200,000 bales. Harvested acreage was increased to 7.88 million acres, up from the prior month by 747,000 acres, although yield was reduced by 3 lbs. to 843 lbs. per acre. As a result, carryover was ultimately raised by 900,000 bales to 2.7 million bales, 840,000 bales above pre-report estimates. Futures production updates will solidify the current U.S. crop in addition to possible supply implications resulting from weather issues in other, global cotton growing regions.
90-day outlook: Global economic data will drive cotton in the coming months as traders anticipate a recession, though the extent of which remains vastly unknown. The U.S. yield curve continues to invert, with some predicting it could have much more to go. China’s economy, on the other hand, reflected surprises in August data that pointed to faster-than-expected growth in factory output and retails sales. Industrial output grew 4.2% in August, compared to a year earlier, and the fastest pace since March. Retail sales rose 5.4%, he largest year-over-year increase in 6 months. The Chinese real-estate sector continues to falter as home prices, investments and sales extended losses. Last month, property investments fell 13.8%, the fastest pace since December 2021.
What to do: Get current with advised 2022-crop sales and hedges.
Hedgers: NEW ADVICE -- Hedge 30% of 2022-crop in short December futures. Our fill was 99.58 cents. 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.
