Crops Analysis | December 23, 2022
Corn
Price action: March corn futures rose 5 3/4 cents to $6.66 1/4, the contract’s highest close since $6.67 on Nov. 30 and a gain of 13 1/4 cents for the week, the second straight weekly advance.
5-day outlook: Corn futures extended this week’s climb to three-week highs behind fresh export business, strength in crude oil and short-covering ahead of the three-day Christmas holiday weekend. USDA reported a daily sale of 150,000 MT of corn to Mexico during the 2022-23 marketing year. Two consecutive weekly gains reinforced beliefs the market established a near-term bottom earlier this month and strengthening technicals could encourage followthrough buying once trading resumes following the three-day Christmas holiday weekend. Trade activity is likely to be light, which could encourage choppy-sideways price action.
30-day outlook: South American weather will be one key to market direction over the month ahead, along with USDA’s final corn and soybean numbers for 2022-23 in its Jan. 12 Crop Production Report. Persistent dryness and heat in Argentina remain price-supportive, and planting progress has been slowed by drought and, the Buenos Aires Grain Exchange said today in its weekly report. An estimated 51.8% of Argentina’s corn crop was planted, 8.4 percentage points behind last year’s level. But crop conditions in Brazil are largely favorable, bolstering expectations for a record harvest, South American weather would have to take a severe turn for the worse to justify extended rallies.
90-day outlook: After untimely heat and dryness in parts of the Midwest last summer cut yields, U.S. corn ending stocks for 2022-23 expected to drop to a 10-year low. The tight supply picture puts a floor of support under the market and should attract buyers on extended price declines, similar to what happened in November. But extended price rallies will also be limited as export demand for U.S. corn is poor. Export commitments (exports + outstanding sales) are running 48% behind last year and USDA estimated 2022-23 exports at only 2.075 million bu., down 16% from last year and 25% below two years ago. Any pickup in export demand would likely need to be triggered by South American crop shortfalls. While drought has plagued Argentina and southern Brazil, Brazil’s safrinha crop will determine the level of concern in South America.
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: March soybeans rose 12 1/2 cents to $14.84 1/4, a gain of 3/4 cent for the week. March soymeal rose $3 to $451.30. March soyoil rose 64 points to 64.65 cents.
5-day outlook: Soybean futures ended the week on a firm note behind fresh export business and gains in the crude oil market, which rallied more than $5 for the week. Early today, USDA reported a daily sale of 124,000 MT of soybeans for delivery to “unknown destinations” during the 2022-23 marketing year. South American weather and outside markets such as crude oil may influence bean futures next week, though trading activity is likely to be light, meaning choppy-sideways price action is possible.
30-day outlook: Price direction into early 2023 will hinge in part on South American weather. Dryness in Argentina remains price-supportive, though some rain relief may reach key crop areas over the weekend. However, “drier weather returns next week, and an erratic rainfall pattern is expected through the end of the month which will likely fail to generate enough rain for a serious improvement in soil moisture or crop conditions,” World Weather said. “A general soaking rain is needed immediately to improve the long-term prospects for crops.” Conditions in Brazil are generally favorable and the country is widely expected to produce a record soybean crop, which is limiting bullishness over Argentina’s dryness. It likely would take a severe turn for the worse in Brazil to drive a sustainable weather-driven rally in soybeans. USDA’s Jan. 12 Crop Production and quarterly Grain Stocks Reports could also influence prices.
90-day outlook: Longer-term supply and demand fundamentals are still price-supportive and should limit market downside, with U.S. soybean stockpiles expected to shrink to a seven-year low. However, global stocks are expected to be the second highest ever behind only 2018-19. A soybean rally back near $15.00 is still possible, especially with fresh supplies from the South American not coming immediately. Unless dryness in southern Brazil expands and seriously threatens yields, traders are unlikely to get too concerned. With U.S. 2022-23 exports forecast to drop 5.2% from 2021-22, price rallies above $15.00 may be hard to sustain and should be viewed as selling opportunities, especially with a record Brazilian crop coming and U.S. soybean acreage likely to expand again for the 2023 growing season.
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 rose 13 3/4 cents to $7.76, the contract’s highest close since Dec. 1 and a gain of 22 1/2 cents for the week. March HRW wheat gained 8 3/4 cents to $8.74 3/4, up 30 3/4 cents for the week. March spring wheat climbed 9 1/2 cents to $9.31 3/4.
5-day outlook: Technically bullish weekly high closes in March SRW and HRW futures today suggest follow-through chart-based buying early next week. Prices this week were driven higher by extreme cold and wind in the U.S. midsection that may have damaged the winter wheat crops. World Weather today reported temperatures in hard red winter wheat country will be trending warmer into next week and eventually above average. “Greater precipitation in the second week of the outlook could help to increase soil moisture some,” said the forecaster.
30-day outlook: Recent disappointing U.S. wheat sales abroad may limit rally potential in the winter wheat futures markets in coming weeks. Sustained price gains will likely need another bullish factor, such as a Ukraine grain-shipping disruption. USDA’s Winter Wheat and Canola Seedings report, as well as the quarterly Grain Stocks report, on Jan. 12 hold the potential to move the markets and will be closely scrutinized by traders.
90-day outlook: Weather in major wheat-producing countries will be in focus early in 2023. World Weather said there has been no damage from cold weather in Europe or China so far this year. Australia’s late season harvest is advancing well and the same is true for the bulk of harvesting in Argentina. “Production cuts in Argentina are still significant and there will be no improvement in the situation since harvesting is well under way and crops are already mostly mature,” the forecaster said. Winter wheat in India should be establishing favorably, although rain will be needed soon. “Wheat in China and Europe is in good shape with most crops dormant and poised to resume development in the spring relatively well.”
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 91 points to 85.21 cents, a gain of 329 points for the week.
5-day outlook: Look for light trading in the financial and commodity markets next week, although next Friday’s triple-witching trade on the last day of the week, month, quarter and year might cause outsized price moves in the financial markets. The weekly USDA Export Sales report will also be delayed until Friday morning. Traders are unlikely to be expecting strong numbers for the week ended Dec. 22. Reports of huge Covid-19 outbreaks across China after the CCP relaxed quarantines are unlikely to inspire much confidence about that country’s demand for cotton to be used by its manufacturing sector or for consumer apparel in the near future. It will be interesting to see if the market can edge upward and confirm the tendency for December futures gains exhibited in recent years.
30-day outlook: The cotton market apparently faces the same problems it has confronted since last summer. Weak export demand on top of greatly reduced domestic manufacturing usage from former levels is undercutting prices despite diminished domestic supplies. As usual, the USDA will publish its final estimates for most 2022 U.S. crops, along with its latest monthly supply and demand estimates, on January 12. Early projections for 2023 U.S. cotton plantings are quite low, which may prove somewhat price supportive. Otherwise, the strong corn versus cotton price ratio could cause considerable ground in the southern states to shift from the fiber to the grain. A sustained cotton rally in early 2023 would likely represent the market bidding for acreage.
90-day outlook: The National Cotton Council will hold its annual meeting over the weekend of February 10-12, with that culminating in the publication of its winter survey of domestic producers as to the likely size of 2023 U.S. cotton plantings. The USDA will follow with its long-term baseline numbers in late February, with the annual Prospective Plantings report coming on March 31. The potential for the 2023 crop will become an increasing focus of the traders and farmers, although they will continue watching the weekly export shipments and sales data to see if demand for U.S. cotton has improved. At this juncture that seems rather unlikely, but nothing about the outlook is set in stone.
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.
