Crops Analysis | November 3, 2023
Price action: December corn futures surged 7 1/4 cents to $4.77 1/4 but marked a 3 1/2 cent loss on the week.
5-day outlook: After trading down to a seven-week low overnight, outside markets lifted corn futures back above initial resistance, through December futures were unable to close near session highs, as sellers rewarded the rally. Meanwhile, bulls managed to negate a technical breakdown from Wednesday’s break below $4.74 support. While outside markets lifted prices today, that benefit could wane over the coming week. The U.S. dollar index sold over 2,000 points in the past two sessions, a huge move, and is quickly approaching oversold on the daily chart. A bounce in the dollar index and potential pullback in outside markets, just as likely as the S&P 500 rallied over 200 points (nearly 5%) from five-month lows this week, will put pressure back on corn prices. November is also the second most bearish month of the year, which will further pressure prices over the coming week. Bulls need to continue today’s recovery early next week, else a reversal to new lows is likely over the coming week.
30-day outlook: South American crop concerns were at the forefront of trader’s minds this week, which is likely to continue over the coming month as rain in Brazil remains erratic. Late planted soybeans likely mean late planted second-crop corn in east-central and northeastern Brazil. This, paired with relatively cheap corn prices pushing producers’ margins in the red, is likely to limit safrinha corn acres, the reason Dr. Michael Cordonnier cut his Brazilian corn production forecast 2 MMT to 123 MMT. Mato Grosso and northern Mato Grosso do Sul into western Goias will see an increase in showers over the next two weeks with enough rain to temporarily improve soil condition in northern parts of the region. Some additional showers are forecast in the second week of the outlook, though most areas will not see soaking rains, World Weather Inc. says. If crop concerns persist through the next month, futures may see some support, though the overwhelming bearish seasonal lasting throughout the month of November will likely keep a lid on prices.
90-day outlook: The upcoming USDA Crop Production Report and updated Supply and Demand are unlikely to show much of a change from October, barring any large shift in production, which is unlikely at this juncture. The balance sheet is still expanding year over year and the export situation is not improving much. While prices may bounce out of November, consistent with our study looking at 2010 to 2014, the expanding balance sheet is likely to continue to weigh on prices over the coming quarter. Brazil continues to take market share from the U.S. in exports, particularly in the Chinese market, leaving total commitments at just over a quarter of where they were a year ago, though outstanding sales stand at less than 10% of year ago, showcasing the lack of demand for the abundant U.S. crop.
What to do: Get current with advised sales.
Hedgers: You should be 100% sold in the cash market on 2022-crop. You should be 50% forward priced for harvest delivery on expected 2023-crop.
Cash-only marketers: You should be 100% sold on 2022-crop. You should be 35% forward priced for harvest delivery on expected 2023-crop production.
Price action: January soybeans rallied 23 1/2 cents to 13.51 3/4, marking the highest close since Sept. 15 and a 32 1/4-cent gain on the week. December meal surged $15.80 to $442.10 but lost 30 cents from a week ago. December soyoil fell 96 points to 49.36 cents, a near five-month-low close and lost 291 points on the week.
5-day outlook: Soybeans ended the week on a high note, with the nearby January contract observing an earnest effort toward levels not traded since mid-September. Bulls gained traction above key technical areas, including the 40-, 100- and 200-day moving averages, lending increased confidence for an extension higher in the coming week. However, a reach into near-term oversold territory could bring a corrective pullback next week, which could prove imperative for an extension towards the late August highs. Gains this week were largely due to unfavorable weather throughout Brazil combined with record September crush and the Fed’s decision to not raise interest rates. Moreover, earlier today, the Labor Department increased trade confidence that the recent tightening cycle has ended, as non-farm payrolls fell sharply in October, which sent the U.S. dollar spiraling lower. Market direction into next week will continue to stem largely from weather in South America, with the dollar also remaining a focus.
30-day outlook: As planting efforts progress in Brazil and Argentina, traders will continue to closely monitor weather throughout the countries. Argentine weather has improved recently, with much of the country receiving rains, deemed a “blessing” by the Rosario Grains Exchange. The moisture will allow producers to increase soybean planting efforts, which have been stalled due to persisting dry conditions. However, weather in Brazil continues to prove questionable for the soybean crop, as the center west and northeastern areas of the country continues to face hot and mostly dry conditions, while southern portions of Brazil have been persistently saturated with rains. World Weather Inc. reports limited or erratic rainfall is expected in center west and northeastern Brazil during the November 11-17 period, while Southern Brazil will see temporary relief from rains over the weekend, which will return late next week.
90-day outlook: U.S. export sales will continue to prove important as the marketing-year progresses, along with the U.S. crush pace. Recently, U.S. exports have remained relatively steady, though an elevated dollar and improving relations between top importer China and top producer, Brazil have weighed on U.S. sales. Traders will continue to closely monitor domestic use amid increased crush in addition to China’s appetite for oilseeds as the marketing year progresses. Earlier this week, a Reuters report indicated the country’s imports are likely to remain elevated through the fourth quarter, though lackluster demand from hog farms could reduce purchases in early 2024.
What to do: Get current with advised sales.
Hedgers: You should be 100% sold in the cash market on 2022-crop. You should be 45% forward sold for harvest delivery on expected 2023-crop production.
Cash-only marketers: You should be 100% sold on 2022-crop. You should be 40% forward sold for harvest delivery on expected 2023-crop production.
Price action: December SRW wheat futures rose 7 cents to $5.72 1/2 and nearer the session high. On the week, December SRW lost 3 cents. December HRW wheat futures gained 2 cents to $6.43 1/2 and near mid-range. For the week, December HRW rose 1/2 cent. December spring wheat futures rose 10 1/4 cents to $7.21 and gained 1 1/4 cents on the week.
5-day outlook: More sideways-to-weaker trading action for the winter wheat futures markets this week as prices languish at lower levels. The wheat market bulls got only mild short-covering support today from a big drop in the U.S. dollar index and better risk appetite in the general marketplace that saw the U.S. stock indexes put in one of their best weekly performances of the year. Look for the winter wheat futures markets to continue to look to the corn and soybean futures markets for daily price direction next week.
30-day outlook: Weather patterns in major global wheat-producing regions will be closely examined in the coming weeks. World Weather Inc. today said rain has been falling and will continue to fall in the previously dry areas of Western Europe, Ukraine and southern Russia over the next couple weeks. Recent moisture in the U.S. Plains, Midwest and Pacific Northwest will be good for winter crop establishment. Warming is needed to stimulate new crop development in the northwestern Plains. Warming in the Pacific Northwest and central U.S. Plains should translate into better winter crop establishment. There is a need for rain in western Kansas, southeastern Colorado and the Texas Panhandle. India’s planting has progressed well and this will continue into early December. Australia wheat is still struggling in the west and a part of south Australia, where poor moisture in recent weeks has cut into yield potentials. Brazil’s southern wheat continues to fall in quality. Argentina rain recently has improved production potentials in the south.
90-day outlook: There were solid clues this week that U.S. interest rates may have peaked, including reports showing a U.S. economy that is cooling off a bit and a significant decline in U.S. Treasury yields. That pressured the U.S. dollar index sharply lower and to a six-week low Friday. If the U.S. dollar index has put in a near-term market top, which the big drop in bond yields this week begin to suggest, that would be a market-friendly development for the U.S. wheat markets in the coming months.
What to do: Get current with advised sales.
Hedgers: You should be 50% sold in the cash market on 2023-crop production.
Cash-only marketers: You should be 50% sold on 2023-crop production.
Price action: December cotton fell 18 points to 79.62 cents and plummeted 476 points on the week.
5-day outlook: December cotton suffered throughout the week despite strong export sales data, a plunging U.S. dollar and strengthening equities following the Fed’s decision to leave interest rates unchanged. The technical sell off sent the natural fiber plunging to a near five-month low in early morning trade, with key support around 79.25 cents limiting selling. Next week’s updated production estimates from the USDA, combined with supply and demand, due out Nov. 9, will largely be a focus as rumors of higher-than-expected production in certain growing regions have recently caught traders’ attention. However, a Bloomberg poll indicates traders expect production to decline slightly to 12.73 million bales, down from 12.82 million in October, while ending stocks are expected to rise 250,000 bales from last month.
30-day outlook: As harvest progresses in the U.S., weather will provide market direction. World Weather Inc. reports harvest weather in Texas will be good through the coming week, with drought in the southeastern U.S. helping to preserve and protect fiber quality. Meanwhile, recent rain in the Delta slowed fieldwork, but dry conditions have returned and will prevail for another week supporting harvest. Weather in the far west U.S. is also experiencing good harvest weather, with little change likely, according to the forecaster.
90-day outlook: While U.S. export sales reached a marketing-year high during the week ended Oct. 26, as reported in USDA’s Weekly Export Sales Report Thursday, demand concerns from China have recently hovered over the fiber. Heightened concerns have ultimately been triggered by average export demand compared to years past. However, strong purchases from China were reported in this week’s export sales data, with the country securing 324,000 RB during week ended Oct. 26, as well as the spot for the top purchaser during the week. Shipments also rose 35% during the week, reported at 132,200 RB, and were also up 15% from the four-week average. China, Pakistan and Mexico were the top destinations.
What to do: Get current with advised sales.
Hedgers: You should be 100% priced on 2022-crop in the cash market. You should have 60% of expected 2023-crop production forward sold for harvest delivery.
Cash-only marketers: You should be 100% priced on 2022-crop. You should have 60% of expected 2023-crop production forward sold for harvest delivery.
