Crops Analysis | January 6, 2023

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Corn

Price action: March corn futures settled 1 1/4 cents higher at $6.54 but fell 24 1/2 cents for the week. New-crop December futures slipped 1/4 cent to $5.91 and dropped 19 3/4 cents for the week.

5-day outlook: Bears seized solid near-term control of the market this week as corn futures broke down technically, which could lead to followthrough selling early next week. USDA’s Jan. 12 barrage of reports will set the tone for price action through winter. USDA is likely to lower its 2022-23 usage forecasts amid sluggish export and ethanol demand. The wild card will be the Dec. 1 stocks figure, which has a history of surprising traders and greatly moving the market. 

30-day outlook: Once the dust from the Jan. 12 reports has settled, focus will turn more to the South American growing season. Argentina’s corn production has been clipped by heat and drought stress, though an improvement in weather conditions in early 2023 could still boost later-planted corn. Brazil is projected to grow a record corn crop, but that will largely be dependent on the safrinha crop after the soybean harvest, which will account for around three-quarters of total production.

90-day outlook: Focus in late winter will turn to U.S. acreage prospects for this year. Corn acreage will increase, but possibly not as much as some anticipate. Late-winter price action historically hasn’t shifted a lot of acres, but it could impact some planting decisions. Late-winter/early spring weather will likely have just as much impact on undecided acres for 2023.

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.

 

 

Soybeans

Price action: March soybeans futures rose 21 3/4 to $14.92 1/2 but were down 31 1/2 cents for the week. March soymeal rose $12.70 to $477.60, a $6.60 increase over last week, while March soyoil firmed 75 points to 63.17 cents.                                

5-day outlook: Soybeans posted corrective gains to end the first week of the new year after facing sharp selling in the previous three sessions. World Weather Inc. expects the return of hot, dry weather next week along with infrequent rains over the next two weeks to accelerate increases in crop stress and declines in yield potential. However, the forecaster notes that much of Brazil outside of some southern areas will continue to see regular rounds of rain through the next two weeks keeping conditions for most developing crops favorable while slowing harvest of early soybeans in Mato Grasso. Soybeans will continue to pay close attention to the forecast in the next week, finding direction as it evolves.

30-day outlook: Consistent export sales over the next 30 days will be particularly important as South America begins to harvest soybeans. Chinese purchases of U.S. soybeans have been steady to this point in the marketing year but could shift as South American supplies become more available. Currently, USDA projects 2.045 billion bu. of soybean exports for the 2022-23 marketing year, which would be a 5.2% drop from the previous year’s figure. As of week ended Dec. 29, export commitments (exports = outstanding sales) were running approximately 5.1% ahead of a year ago, maintaining a steady pace. Sales trailed off slightly into the end of 2022, and could continue the trend, given the prospect of a record crop in Brazil.

90-day outlook: A close eye will remain on China as Covid cases surged following the country’s decision to ease its longstanding zero-Covid restrictions. Recent studies indicate that the wave of Covid infections spreading across China may have already peaked in some of the country’s largest cities, including Shanghai and Beijing. A further uptick in infections could be seen as travel is expected to double form year-ago during the upcoming Lunar New Year, which starts on Jan. 22.

What to do: Get current with advised cash sales. Be prepared to advance 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.

 

 

Wheat

Price action: March SRW wheat futures fell 3 1/4 cents to $7.43 1/2 cents, which was down 48 1/2 cents for the week. March HRW wheat futures dropped 7 3/4 cents to $8.32 and fell 56 cents for the week. March HRS futures declined 7 1/4 cents to $9.01 3/4 and dropped 37 cents for the week. 

5-day outlook: The sharp losses and weekly low-range closes in wheat futures open the door to followthrough selling next week. But preparations for USDA’s barrage of reports on Jan. 12 could encourage some corrective buying. While the wheat market will get updated 2022-23 ending stocks estimates, Dec. 1 stocks and winter wheat seedings, price direction after the report is more likely to come from the corn and soybean markets.

30-day outlook: Winter wheat crop condition ratings continue to decline, especially in the Southern Plains. But it’s difficult to get traders overly concerned about crop ratings during winter, especially when export demand is poor and forecasts suggest improved weather by spring. Any wintertime rally in wheat will likely have to be driven by buying in the corn and/or soybean markets.

90-day outlook: The extended weather forecast may offer some hope for improved conditions if La Nina fades as expected by spring. Even with improved spring weather, there’s risk some acres that were seeded to winter wheat will be abandoned for other crops. As the winter wheat crop breaks dormancy traders will pay closer attention to weather and crop condition ratings.

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. 

 

 

Cotton

Price action: March cotton rose 310 points to 85.68 cents, marking a high range close and finishing 277 points higher for the week.

5-day outlook: Cotton ended the first week of the year sharply higher after the U.S. dollar index reached its highest level since Dec. 1 but fell abruptly by midsession. Outside markets will continue to be price drivers, led by economic data that indicates the health of the economy and the overall demand for disposable goods. Potential acre buying is a possibility as current 2023 acreage prospects are projected to be solidly lower than last year.   

30-day outlook: USDA’s Jan. 12 WASDE Report will be a key price indicator over the next 30 days as final projections are made to the 2022-23 crop, in addition to demand fluctuations. A particular focus will likely be export demand. Though USDA currently projects over a 16% reduction from the previous year’s export sales, a further decline in export usage could occur as total commitments (exports + outstanding sales) are running 17% behind a year ago. Cotton sales for week ended Dec. 29 totaled just 39,600 running bales, notably lower than the previous week’s figure of 82,300 RB.

90-day outlook: Global economic conditions will be the focus during spring as implications of China’s easing of its zero-Covid policies manifest.  An uptick in China’s growth will provide a vital boost to economies that rely on Chinese demand as travel and production increases, although rising demand could drive up energy prices and raw materials, putting upward pressure on global inflation.

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.

 

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