Crops Analysis | December 16, 2022
Corn
Price action: March corn futures fell 1/2 cent to $6.53, up 9 cents on the week but down 14 cents so far this month.
5-day outlook: Corn futures posted modest declines following narrow-range activity as traders monitored South American weather and outside markets. Subdued, sideways trading may continue next week ahead of the Christmas holiday weekend. Weakness in crude oil and U.S. equities weighed on grain futures late this week as Federal Reserve Chair Jay Powell’s hawkish comments on inflation and interest rates fueled recession concerns, and outside markets may continue to influence ag markets next week. South American weather will be closely followed, and traders will watch USDA’s weekly export sales report Dec. 22 for a possible repeat performance of the stronger-than-expected corn number this week.
30-day outlook: Choppy-sideways price action may continue into the early part of the new year as trading volume dissipates around the holidays. South American weather will become an increasing trade focus. Persistent dryness and heat in Argentina remains price-supportive. Argentina’s planting remains slowed by drought and recent rainfall has been insufficient for rapid fieldwork, the Buenos Aires Grain Exchange said today in its weekly report. Corn planting was 43% done, five points behind last year. The exchange rates corn conditions 18% good, 59% normal and 23% poor. Still, conditions in Brazil are largely favorable and South American weather isn’t concerning enough yet to justify extended rallies. USDA’s final Crop Production Report for the 2022 crops, scheduled Jan. 12, will help set the market tone early next year.
90-day outlook: March futures’ modest recent gains may signal a short-term bottom was established earlier this month, and a stronger-than-expected weekly export sales number suggested buying interest on price declines. But the bigger export picture for corn remains bearish, with U.S. commitments so far in 2022-23 down 48% from 2021-22. Earlier this month, USDA lowered its forecast for U.S. corn exports in 2022-23 by 75 million bu. to 2.075 billion bu., a three-year low. The Ukraine war remains a major market risk, with a deal allowing shipments out of the country’s Black Sea ports expiring in March.
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 6 1/2 cents to $14.80, down 3 3/4 cents for the week. January soymeal rose $7.70 to $463.00, up $8.60 for the week and the contract’s highest close since Dec. 9. January soyoil fell 46 points to $63.36 cents, up 335 points for the week.
5-day outlook: Soybeans ended the week with modest gains as the market extended the past week’s sideways consolidation. Strong export demand and strength in soymeal underpinned soybean prices this week and should continue to do so next week, but the market likely will see choppy-sideways price action as volume tapers off ahead of the Christmas holiday weekend. Continued weakness in crude oil and vegoil may buyer interest. South America weather has been price supportive, and traders will watch closely for any potential shift in the dry pattern gripping Argentina and southern Brazil.
30-day outlook: South American weather will be one key to price direction into early 2023. Dryness in Argentina remains price-supportive but Brazilian weather is mostly favorable. Brazil produces about three times as many soybeans as Argentina so its conditions are assigned more weight, and the market appears unconvinced any major longer-term threats or production shortfalls are imminent. In Argentina, rain during the next two weeks “should not be great enough to prevent continued increases in crop stress in much of Argentina,” World Weather said today. Soybean planting in Argentina’s core production area was around 20% behind last year’s pace and overall, farmers had planted 51% of intended acres, the Buenos Aires Grain Exchange said in its weekly report. The exchange rated Argentina’s soybean crop as 19% good, 61% normal and 20% poor. USDA’s Jan. 12 Crop Production Report will also be a price influencer in early 2023.
90-day outlook: Rally attempts back near $15.00 are still possible but may be difficult to sustain barring a substantial turn for the worse in South America. But longer-term supply and demand fundamentals are still supportive and should limit extended downside risk. U.S. soybean exports have been strong in recent weeks but may fade as fresh supplies from the upcoming South American harvest reach the global pipeline. USDA on Thursday reported net weekly soybean sales totaling 2.943 MMT, up from 1.72 MMT the previous week and above expectations from 1.5 to 2.0 MMT. China led buyers at 1.253 MMT, including 197,000 MT switched from “unknown destinations.” U.S. soybean export commitments are now running 4.4% ahead of a year-ago, up from 0.3% ahead last week.
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 fell 3 3/4 cents to $7.53 1/2, up 19 1/4 cents for the week. March HRW wheat fell 16 1/2 cents to $8.44, still up 11 cents for the week. March spring wheat fell 9 1/4 cents to $9.09 1/2.
5-day outlook: March HRW and SRW futures both posted weekly gains for the first week in the past six, suggesting the markets may have established near-term bottoms. But today’s price weakness and the near-term technically bearish futures postures suggest some chart-based selling pressure early next week. Market focus next week includes an Arctic blast heading for the U.S. midsection, including HRW country, World Weather said, with snow cover needed in most areas to protect wheat from winterkill. Some snow is expected before the coldest temperatures arrive, however, “there is some concern of thin or no snow cover occurring in pockets of southwestern and interior western production areas,” the forecaster said.
30-day outlook: Disappointing U.S. wheat exports may continue limiting buying interest and rally attempts in wheat futures. However, stronger than expected export numbers in USDA’s weekly report suggest prices may have dropped far enough to prompt improved foreign demand. Still, sustained price gains will likely need another bullish element, such as a Ukraine grain-shipping disruption, to fuel a solid rally. USDA’s Winter Wheat and Canola Seedings Report on Jan. 12 will be a tone-setter in the first quarter of 2023.
90-day outlook: Wheat traders during the first few months of 2023 will watch weather in South American wheat regions, which at present need more moisture. Argentina’s wheat production outlook has been lowered due to drought. The Rosario Grain Exchange this week lowered its 2022-23 Argentine wheat crop forecast another 300,000 MT, to 11.5 MMT, which is well below the 19 MMT that was forecast at the start of the growing season.
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 rose 93 points to 81.96 cents, the contract’s highest close since Dec. 6 and a gain of 101 points for the week.
5-day outlook: Cotton futures extended a sideways to moderately higher pattern this week as traders disregarded weakness in U.S. equities and crude oil and strength in the dollar. Outside markets and economic indicators likely will continue to influence price direction next week. The market appears to have established a near-term price bottom and is close to break above a recent downtrend. Choppy, light-volume trading is expected ahead of the Christmas holiday.
30-day outlook: Traders will closely follow China after the country’s recent easing of its restrictive Covid Zero policy. Market bulls hope China’s recently slumping economy will pack back up again, while bears fear a surge in Covid cases that could crimp demand for cotton and other commodities. Some observers expect Covid cases to explode over the next 12 weeks due to China’s higher population of older adults. Experts note that there are not enough intensive care units in the country to handle a surge in demand, which would overwhelm its health care system. Higher infections in China could lead to a worldwide spike in Covid cases that could exacerbate an expected economic downturn.
90-day outlook: Economic data will be the key to cotton market direction in in the new year, as traders continue to assess the health of the global economy and the likelihood of recession. Waning growth in China, coupled with surging Covid infections could depress already-slumping demand for U.S. demand. U.S. exports are increasingly falling behind last year’s levels, with commitments so far in 2022-23 down 12.6% from the same period in 2021-22. Also, the USDA dropping its export forecast to 12.25 million bales, down 16% from the previous year. For the week ended Dec. 8, USDA reported net U.S. cotton sales of 18,600 running bales (RB), down from 32,600 MT the previous week.
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.
