Crops Analysis | December 30, 2022
Corn
Price action: March corn fell 1 cent to $6.78 1/2 after reaching a high of $6.85, the highest intraday price since Nov. 7, but is up 12 1/4 cents on the week.
5-day outlook: Corn turned mildly higher from spillover strength in the wheat and soy complex, with crude oil offering additional support as the nearby contract nears $80.00 per barrel. Weather in Argentina will continue to be the near-term focus as drought conditions have persisted through the planting and growing season. World Weather cites nearly widespread rains are expected this weekend are not likely to be great enough to prevent overall increases in crop stress and declines in yield potential as conditions should deteriorate before the rain and should decline again when the moisture is lost to evaporation next week. The forecaster notes temperatures will become hot late next week into the following weekend when highs in the mid-90s to lower 100s will be common with hotter conditions in some western locations. Prospects of a volatile open on Tuesday are increased due to the long holiday weekend.
30-day outlook: USDA’s next update to supply, demand and production on Jan. 12 will serve as the final crop estimates for the 2022 crop year and has a history of containing volatile surprises. While production will certainly be in focus, supply and demand data will receive an equal eye as global weather issues have persisted throughout the year, crimping supply, though ongoing Covid restrictions and surging prices have curbed demand. The nearly year-ago invasion of Ukraine has also changed global supply and demand fundamentals, as countries were forced to find other sources to fulfill import needs, ultimately creating new alliances and shifting the flow of exports.
90-day outlook: Traders will closely monitor demand prospects in the new year, since China eased its Covid restrictions at the beginning of December. Export sales will be of importance, which typically increase in the first quarter. USDA released weekly export sales earlier today for week ended Dec. 22. The agency reported net sales of 781,600 MT for the week, which were within the expected range of 600,000 and 850,000 MT and up from the previous week’s figure of 636,800 MT, but down 37% from the same week last year. Net sales of 170,000 MT were also reported for the 2023-24 crop year, advancing new crop commitments to 1.139 MMT.
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 soybean futures rose 7 3/4 cents to $15.24 and hit a six-month high. For the week, March beans rose 39 1/2 cents. March meal futures gained $12.50 to $4.71, hitting a contract high and for the week rising $19.70. March bean oil fell 229 points to 64.07 cents and closed at a technically bearish weekly low close. For the week, March bean oil lost 58 points.
5-day outlook: The technically bullish weekly high closes in March soybeans and meal futures sets the table for follow-through chart-based buying next Tuesday. Markets are closed Monday for the New Year holiday. In soybean oil, don’t be surprised to see more spreading action early next week, whereby speculators are buying soybean meal futures and selling bean oil futures.
Fundamentally, the soybean complex has been supported by dry weather in South American soybean regions. Traders will continue to closely monitor that situation. World Weather Inc. today said rain is expected late this weekend into early next week with good coverage, but erratic amounts that will often be light to locally moderate. “Much more rain is needed, but the outlook for most of next week is dry once again maintaining status quo conditions for many of the nation’s crops,” said the forecaster.
Meal futures may lead price action in the soy complex next week. Several eastern Iowa crushing plants are reported to be out of soybean meal.
30-day outlook: Weekly U.S. soybean export sales for week ended Dec. 22 were 705,800 MT for the 2022-23 marketing, near the middle of trade expectations. USDA also reported a daily export sale of 186,000 MT to unknown destinations during the 2022-23 marketing year. For soybean prices to remain elevated in the coming weeks, U.S. export sales will have to be stronger.
90-day outlook: The coming months will find soybean traders keeping an extra close eye on economic conditions in China. The Chinese government’s relaxation of Covid restrictions may prompt faster growth in the world’s second-largest economy in 2023—meaning better demand for soybeans. However, the significantly loosened restrictions have prompted a surge of infections in China, which may further damage its economy in the first and possibly even second quarters of 2023.
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 futures surged 18 cents to $7.92 Friday; that represented a weekly gain of 16 cents. March HRW futures climbed 21 1/2 cents to end the week at $8.88, which marked a weekly rise of 13 1/4 cents. March spring wheat jumped 24 3/4 cents to $9.38 3/4, a 7 cent rise from last Friday.
5-day outlook: This week’s grain and soy complex gains seemingly bode well for next week’s trading. The latest USDA Export Sales data proved supportive, with the weekly wheat number of 478,100 metric tons topping expectations ranging between 200,000 and 450,000 MT. Meanwhile, severe dryness in the U.S. HRW Belt and Argentina looks likely to limit U.S. and South American production in the coming months. News that Russian officials are hiking their tariffs on that country’s wheat exports to their highest level since last August likely encouraged late-week buying, since the move will boost Black Sea wheat by a commensurate amount, thereby potentially increasing interest in U.S. grain.
30-day outlook: Look for increased industry focus as January 12 nears. The USDA will release its Supply/Demand, Annual Crop Production, Winter Wheat/Canola Seedings and Grain Stocks reports that day. Each of those holds the potential to move the market. The various numbers could offset one another, but they might also combine to push prices in either direction. Futures could spend much of the balance of January adjusting to the new post-report environment, but the persistently poor export situation seems likely to continue limiting the upside potential of the various wheat markets. State reports on winter wheat conditions could also affect prices later in the month.
90-day outlook: The same factors affecting wheat futures are likely to continue doing so through much of the first quarter. The Russia/Ukraine situation and the U.N. grain export agreement will obviously prove important to the outlook, as will any further shifts in Russia’s tariffs on its wheat exports. The weather and its impact on the U.S. and Argentine crops will also exert considerable influence over domestic prices. Look for considerable interest in the late-February long-term baseline reports from the USDA, since those will hold preliminary acreage estimates for U.S. spring and total wheat plantings in 2022-23. That will be followed by the March 31 Prospective Plantings report.
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 76 points to 83.40 cents, after trading as high as 84.64 and is down 181 points on the week.
5-day outlook: Cotton futures turned higher after facing mild losses and touching a two-week low in the previous session on weakening demand prospects as Covid infections in China soar. Strengthening crude oil futures and a lower U.S. dollar led gains as weaker equities seemed to have little bearing on price action as the calendar year comes to an end. Traders will continue to focus on economic data which will likely drive prices as traders view the situation through the lens of future apparel demand. Karger price swings may occur as volume prospects increase in the new year. Increased volatility on Tuesday following the long weekend in observance of New Year is a distinct possibility.
30-day outlook: USDA’s Jan. 12 updates to production and monthly supply and demand will provide the cotton market direction to begin the new year. Final production estimates for the 2022-23 crop will be reported, with supply and demand estimates gaining an equal focus as Covid has crimped demand prospects throughout the year. While cotton acres will not be reported by the USDA until the end of March, price action over the next month could indicate acreage-buying as the cotton/corn ratio currently indicates corn is a more favorable crop in southern states.
90-day outlook: The easing of Covid restrictions in China could result in increased export sales as demand increases. However, implications of rising infections could dampen prospects. USDA released weekly export sales for week ended Dec. 22 earlier, reporting 82,300 running bales (RB) for the 2022-23 marketing year, which was a large increase over the previous week’s net cancellations of 87,800 RB, but notably lower than the 192,000 RB during the same week last year. Primary purchasers for the week were South Korea (17,800 RB), China (15,400 RB, including 8,800 RB switched from Vietnam and decreases of 400 RB), and Turkey (15,200 RB, including decreases of 2,400 RB). Export commitments are currently running 16.3% behind a year ago.
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.
