Crops Analysis | October 7, 2022
Price action: December corn futures rose 7 3/4 cents to $6.83 1/4, a gain of 5 3/4 cents for the week.
5-day outlook: Corn ended the week on a firm note on strength in crude oil and stronger-than-expected U.S. job growth that may have eased recession concerns. The market largely extended the sideways pattern of the past month as traders monitored early harvest and geopolitical tensions centering on the Ukraine war. USDA’s weekly crop progress report will be delayed until Tuesday due to Monday’s Columbus Day holiday. As of Oct. 2, the U.S. crop was 20% harvested, behind the 22% average for that date the past five years. USDA will also update yield and harvest estimates in its Oct. 12 Crop Production Report. The U.S. crop will be lowered about 40 million bu. from USDA’s current forecast to an estimated 13.904 billion bu., based on a Bloomberg survey of analysts.
30-day outlook: While harvest has lagged the historical average, a generally favorable Midwest weather outlook the next few weeks suggests farmers are poised to make a big leap in progress. Expanding harvest pressure, combined with other bearish factors including weak exports, a strong dollar and slumping ethanol demand, could keep corn futures on a sideways-to-lower path in the month ahead. However, the market continues to generate buying interest on price pullbacks, and outside markets and money flow will remain important price influencers. Additionally, there is precedent for December futures that posted a September gain (as happened this year) to continue higher in October.
90-day outlook: As U.S. harvest winds down, market focus will shift to demand and South America. Corn futures have bullish long-term underpinnings with U.S. stockpiles in 2023 heading for a nine-year low. But nearer-term bearish factors, including the prospect for a huge South American crop, could hold sway. Brazil’s Conab forecasts the country’s corn planted area will rise 3.8% to 22.4 million hectares, though full-season corn plantings are expected to decline 1.5% with producers planting more soybeans. Conab projects Brazil’s total corn production will jump 12.5% to a record 126.9 MMT. U.S. corn export commitments so far in 2022-23 are running 50.3% behind the same period a year-ago.
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 rose 9 cents to $13.67, up 3 3/4 cents for the week. December soymeal rose $7.30 to $400.70 and December soyoil rose 58 points to 66.60 points.
5-day outlook: The soy complex ended the week firm behind bargain hunting and corrective buying following sharp losses earlier this week. But soybean future took considerable technical damage from the recent downturn and could face further fund selling pressure if the November contract fails to hold support around the $13.50 level. USDA harvest progress Oct. 11 and Crop Production updates Oct. 12 will be key to price direction next week. Earlier this week, USDA said the U.S. soybean crop was 22% harvested as of Sunday, behind the 25% five-year average. Based on the Bloomberg survey, USDA is expected to increase its estimate for the U.S. soybean crop top by about 2 million bu. to 4.38 billion bu.
30-day outlook: Harvest pressure will accelerate during the month ahead, and any continued weakness in the soymeal market could further burden soybean prices. Additionally, logistics problems on the Mississippi River have stirred concern over a possible slowdown in exports during the crop’s primary shipping period. Post-harvest U.S. soybean exports on the Mississippi have yet to ramp up as dry weather has significantly reduced water levels as slowed barge movement, and weather forecasts hold few prospects for near-term replenishment, Reuters reported. Fewer barges are able to navigate the waters, boosting freight rates to all-time highs.
90-day outlook: Market focus will increasingly shift to South American as the U.S. harvest wraps up, and many analysts expect large or record crops from Argentina and Brazil. Brazilian farmers are expected to increase soybean planted area by 3.4% to a record 42.9 million hectares, according to an initial forecast from Conab. The Brazilian crop estimating agency forecasts the 2022-23 Brazilian soybean crop at a record 152.4 million metric tons (MMT), which would be up 21.3% from this year. Crop consultant Dr. Michael Cordonnier forecasts 2022-23 Brazilian production at 151 MMT for soybeans.
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.
5-day outlook: Wheat futures posted moderate gains today but still ended down for the week, with the December SRW contract posting its largest weekly percentage decline since mid-July. Price direction next week will hinge in part on USDA’s weekly crop progress update Oct. 11 and monthly Supply and Demand Report the following day. Winter wheat planting has lagged the average pace and dryness in the Plains remains a concern. Earlier this week, USDA reported 40% of the winter wheat crop was planted as of Oct. 2, behind the 44% five-year average. USDA is expected to lower its estimate for U.S. wheat stocks at the close of 2022-23 to 554 million bu. from its current forecast of 610 million bu., already a nine-year low.
30-day outlook: Traders will focus on planting and early emergence of the U.S. winter wheat crop. The U.S. Plains hold some potential for near-term moisture relief, but the region requires more widespread coverage. Shower activity over the week ahead “will still be beneficial for some winter wheat emergence and establishment,” World Weather said. “However, deficits will remain and much more rain will continue to be needed. A weather disturbance may give some additional rain Oct. 14-17, especially in the southern half of the (HRW) region.
90-day outlook: Exports and outside markets, such as the U.S. dollar and crude oil, will be key long-term price drivers, and traders will closely follow economic readings and financial conditions for indications on whether a global recession may have begun or is nearing. U.S. wheat exports remain sluggish and with the U.S. dollar near 20-year highs, prospects for improvement are limited. Also, an agreement allowing Ukrainian grain shipments from Black Sea ports expires in November and any renewal remains in question given Russian President Putin’s recently comments expressing displeasure with the deal.
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 rose 116 points to 84.06 cents, down 128 points for the week.
5-day outlook: Cotton traders will look for near-term direction from the U.S. dollar as well as production updates in USDA’s Oct. 12 Supply and Demand Report. The dollar remains near a two-decade high and strengthened further today following stronger than expected U.S. jobs data. Stronger-than-expected economic data will pressure the Fed to stay the course with aggressive rate hikes to curb consumer purchasing power and overall demand, likely leaving the upside open for the dollar.
30-day outlook: Weather over the next month will be crucial for harvest progress as well as final production as hurricane season continues and damage from Hurricane Ian is evaluated. World Weather noted today’s forecast is drier for Wednesday through Oct. 21 than earlier advertised in western Texas and southwestern Oklahoma and after daily showers through Tuesday cause some discoloration of cotton, the mostly dry and warm weather beginning Wednesday should allow cotton to dry out and bleach white. The forecaster further stated that a few areas may become wet enough to cause increasing concerns over boll rot, but coverage of rain most days through Tuesday should not be great enough to prevent most cotton from drying out between rounds of rain. The Blacklands, Coastal Bend and south Texas will be mostly dry through Tuesday with a few light showers in south Texas before showers increase Wednesday through Saturday Oct. 15, with some interruptions to harvesting along with some temporary discoloration to cotton should result before drier weather returns Oct. 16-21. A slow Improvement of conditions in the Carolinas and Virginia were noted as well as the crop dries out from heavy weekend rains from Hurricane Ian.
90-day outlook: Traders will continue to closely monitor exports as well as acreage prospects for the 2023-24 crop. Exports are currently running 9% ahead of a year ago, compared to 11% ahead last week. USDA forecasts total cotton exports will fall 13.9% from a year ago to 12.6 million bales for the 2022-23 crop. Further reductions are expected for the 2023-24 crop as projections of world exports were slashed this week by the World Trade Organization, to an increase of 1%, down from earlier estimates of 3.4%. A close eye will remain on Europe as high energy prospects could weigh over the textile market, possibly inducing import cancellations. Lower than expected corn stocks along with lower-than-expected wheat production and increasing inputs could entice an acreage battle over the next several months, ultimately increasing the prospect of volatility as the new year approaches.
What to do: Wait on an extended corrective rebound to 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.
