Crops Analysis | December 2, 2022
Corn
Price action: March corn fell 14 1/4 cents to $6.46 1/4, down 25 cents for the week and the contract’s lowest settlement since Aug. 22.
5-day outlook: Corn futures broke down technically today as the March contract dropped under the November low of $6.53 1/2, the bottom of the past month’s trading range, fueling heavy fund liquidation. Futures closed near today’s lows, and bearish technicals could spur followthrough selling early next week, though a rebound would indicate the price drop has generated renewed buying interest. Soft export demand and weakness in wheat futures remain bearish near-term influences. USDA’s Dec. 9 Supply and Demand Report is likely to bring only minor adjustments that won’t likely be bullish and not significantly impact prices.
30-day outlook: South American weather will be closely followed into early 2023. Persistent dryness in Argentina is emerging as a greater concern and could provide some price support. Brazil’s conditions have been more favorable for crop development and that country is poised for a sharply stronger production. USDA currently estimates Brazil’s 2022-23 corn production at 126 MMT, up 8.6% from 2021-22. Outside markets such as the U.S. dollar and crude oil may also influence grains. Both turned more bullish for grain prices over the past week, with crude oil surging back above $80 a barrel and the U.S. dollar index dropping to a five-month low.
90-day outlook: Exports and the Ukraine war stand out as two key longer-term price drivers. Continued weakness in U.S. corn export demand indicates lower prices are needed to encourage more sales. Corn export commitments so far in the 2022-23 marketing year are 48.2% behind a year-ago levels, and USDA forecasts a 13% drop in exports for the full year. Mexico has been a relative bright spot, having purchased 9.1 MMT of U.S. corn so far in 2022-23, down 11% from a year ago. But current sales to what were U.S. corn’s No. 2 through No. 5 destinations last year – China, Japan, Canada and Colombia – are down 71% on the year, Reuters reported. With tight ending stocks forecast in 2022-23, corn’s price downside should be relatively limited, but the near-term path is likely lower.
What to do: Get current with advised sales. Wait to make additional 2022-crop sales.
Hedgers: You should have 50% of 2022-crop sold in the cash market.
Cash-only marketers: You should have 50% of 2022-crop sold.
Price action: January soybeans rose 8 3/4 cents to $14.38 1/2, up 2 1/4 cents on the week. January soymeal rose $2.50 to $424.10, up $17.80 for the week and the contract’s highest close since Sept. 21. January soyoil fell 216 points to 65.22 cents, down 649 points for the week and the lowest since Oct. 17.
5-day outlook: Soybeans climbed on corrective buying following sharp losses Thursday, with strength in soymeal, strong demand and a tight supply outlook continuing to underpin prices and encouraging buying on price weakness. The market may be poised for sideways trade over the next week as traders wait for USDA’s monthly Supply and Demand update Dec. 9. The report is likely to show only minor changes. South American weather will be closely followed, with dryness in Argentina becoming concerning but potential for moisture relief around the middle of December. Continued weakness in soyoil and other vegoil prices could limit buying interest.
30-day outlook: Persistent dryness in Argentina has already prompted some analysts to reduce their outlooks for the country’s crops and may remain price-supportive. Earlier this week, Crop Consultant Michael Cordonnier lowered his forecast for Argentina’s 2023 soybean production by 1 MMT to 49 MMT, citing “problematic” weather. Earlier in November, USDA cut its forecast 1.5 MMT to 49.5 MMT. Little rain and hot temperatures are expected in Argentina through the next week, stressing crops in central and northern parts of the country, World Weather Inc. said today. Dec. 11-16 “should not be as stressful” as temperatures may be cooler and rain should fall on much of the country, the forecaster said, “But much of the rain may be light and additional rain will be needed soon.” Brazil’s conditions are more favorable for crop development.
90-day outlook: January futures’ sharp selloff Thursday could be a signal the market established a near-term top and may trade sideways into 2023, but strong crush demand and a tight supply outlook for should limit price downside. U.S. soybean exports have shown signs of slowing, and fresh impending South American supplies could limit rally attempts. USDA on Thursday reported net weekly U.S. soybean sales of 693,800 MT, up from 690,100 MT the previous week but at the lower end of expectations ranging from 550,000 MT to 1.0 MT. U.S. export commitments are running 0.4% ahead of a year-ago, down 1.4% ahead last week. USDA projected 2022-23 exports at 2.045 billion bu., down 5.2% from the previous marketing year.
What to do: Get current with advised cash sales. Wait to make additional sales.
Hedgers: You should be 60% sold in the cash market on 2022-crop production.
Cash-only marketers: You should be 60% sold on 2022-crop production.
Price action: March SRW wheat dropped 22 cents to $7.61, down 36 cents for the week and the contract’s lowest close since Jan. 14. March HRW wheat fell 19 1/2 cents to $8.70 3/4, down 41 1/4 cents for the week and a three-month low. March spring wheat fell 16 3/4 cents to $9.21 1/4.
5-day outlook: SRW wheat tumbled to an 11-month low as weak exports, a rebound in the U.S. dollar and bearish technicals fueled fund selling. Chart breakdowns and poor export demand may drive further selling early next week. Record Russian wheat production and uninterrupted Ukraine grain shipments from the Black Sea region are bearish fundamentals that will continue to pressure wheat futures for at least the near term. Any surprises in USDA’s Supply and Demand Report Dec. 9 may have a modest price impact.
30-day outlook: Weather patterns in major global wheat-growing regions will be increasingly followed. Drought continues to grip most of the U.S. Plains HRW belt. Precipitation in HRW regions is expected to be “quite limited” the next few weeks, World Weather said. Any precipitation will be confined mainly to southeastern areas where most of the moisture has occurred in the last couple of months. “Dryness isn’t as much of a concern right now but will be later in the winter and spring if much greater precipitation doesn’t occur,” the forecaster said.
90-day outlook: The Ukraine war and the U.S. acreage outlook in 2023 will be among longer-term wheat price influencers. September HRS futures’ discount to the March contract has widened the past two weeks, suggesting a rise in 2023 spring wheat plantings and spring wheat’s better export performance so far this marketing year. U.S. spring wheat export sales commitments are up 7.7% over 2021-22, with total U.S. wheat commitments being down 6.1%.
What to do: Wait on an extended price rally to increase cash sales.
Hedgers: 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: March cotton fell 165 points to 83.20 cents, still up 302 points for the week.
5-day outlook: Cotton futures turned moderately lower after reaching the highest level since mid-November the previous session amid prospects of easing Covid restrictions in China. Crude oil futures reached two-week highs on waning demand concerns, which underpinned a moderate rally in cotton. Traders will closely monitor China’s actions regarding Covid restrictions into next week in addition to slated changes in oil production, as OPEC+ is set to meet on Sunday. While production is largely expected to be unchanged from the cartel’s 2-million-barrel cut made on Oct. 5, comments from delegates earlier in the week implied additional cuts if oil prices continue to slip.
30-day outlook: USDA will update U.S. cotton production and global figures in its Dec. 9 Supply and Demand Report. With the U.S. crop 84% harvested as of Nov. 27, traders will watch for changes in production as growing conditions were disrupted by prolonged drought and hurricanes throughout key growing areas. Demand prospects will be closely observed as well, as reductions in exports could reduce the impact of a smaller domestic crop.
90-day outlook: Global economic conditions will be key to the cotton market’s long-term direction as implications of the Covid-19 pandemic persist. Traders will keep a close eye on Federal Reserve monetary policy shifts and China’s actions. Exports will have to pick up for cotton futures to sustain any rallies. USDA’s weekly export sales report for the week ended Nov. 24 showed cotton sales of 16,500 running bales (RB), after the previous week saw net cancellations of 116,00 RB. Export sales are currently behind a year-ago by 6.9%, notably lower than the previous week’s figure at 0.3% ahead of last year.
What to do: Wait on an extended corrective rebound to get current with advised 2022-crop sales.
Hedgers: You should be 70% sold in the cash market on 2022-crop production.
Cash-only marketers: You should be 70% sold on 2022-crop production.
