Crops Analysis | December 9, 2022
Corn
Price action: March corn futures rose 1 1/2 cents to $6.44, the highest close since Dec. 2 but down 2 1/4 cents for the week, the second consecutive weekly decline
5-day outlook: Corn futures ended modestly firmer after USDA’s monthly Supply & Demand update brought few major surprises and did little to alter the longer-term tight supply outlook underpinning prices. Prices held up relatively well this week despite an apparent chart breakdown late last week, though March futures remain in a six-week downtrend. Follow-though buying early next week could foster ideas the market established a near-term bottom at a 3 1/2-month low of $6.35 posted Wednesday. Outside markets such as crude oil, which dropped near a one-year low today, could influence grain markets.
30-day outlook: With little fresh news specific to the grain markets the next few weeks, and trading volume tapering off ahead of the holidays, corn prices may trade choppy to lower into early 2023. Outside markets such as crude oil and the U.S. dollar, as well as geopolitical factors, could carry outsized influence through the holidays, and Ukraine remains a substantial market risk. South American weather will be closely followed, with dryness in Argentina increasingly concerning but Brazil still poised to harvest large crops. USDA today held its Brazil corn production forecast for 2022-23 unchanged at 126 MMT, up 8.6% from the 2021-22 crop.
90-day outlook: USDA’s final Crop Production Report for the 2022 crops, scheduled Jan. 12, will help key price direction early next year. Along with South American weather and production prospects, export demand will be a longer-term price driver for corn. Continued sluggishness in U.S. corn exports indicates lower prices are needed to encourage more sales and fresh South American supplies will enter the global pipeline early next year. Despite slight improvement in weekly export numbers, U.S. corn export commitments so far in 2022-23 are running 48% under the same period in 2021-22. In its report today, 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.
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 fell 2 1/2 cents to $14.83 3/4, up 45 1/4 cents for the week. January soymeal rose $5.20 to $471.60, a gain of $47.50 (11%) for the week. January soyoil fell 130 points to 60.01 cents, down 521 points for the week and the contract’s lowest close since July 27.
5-day outlook: Soybean futures faded after climbing to a fresh 2 1/2-month high overnight, with some pressure stemming from USDA’s higher than expected estimate for global supplies in 2023. USDA, in its Supply & Demand update hiked its forecast for global soybean stocks at the end of the 2022-23 to 102.71 MMT, up 540,000 MT from last month’s estimate and slightly higher than expectations for an increase of about 480,000 MT. Focus next week will shift to South American weather and potential further demand from China, after the country stepped up U.S. soybean purchases in recent weeks. Whether the soymeal market will extend this week’s steep rally will also be of keen interest.
30-day outlook: The near-term South American weather outlook leans price-supportive with dryness persisting in key crop areas of Argentina and in southern Brazil. Argentina rainfall is expected to remain restricted over the next two weeks, although there will be a short-term bout of needed rain falling in west-central through northern parts of the nation this weekend, World Weather Inc. said. “The rain will be welcome wherever it occurs, but not nearly enough to seriously improve the long-term outlook. Crop moisture stress will continue and so will the downward pressure on early season crop production. Substantial rain must fall soon to get the remaining summer crops planted and improve their long-term outlook.” Earlier this week, Crop Consultant Michael Cordonnier reduced his forecast for Argentina’s 2023 soybean production for the second week in a row, mostly recently by 1 MMT to 48 MMT.
90-day outlook: South American weather over the longer-term likely will become less of a bullish factor assuming forecasts for record production from Brazil hold up. Crop conditions in Brazil have been generally favorable during the growing season so far. Conab, for example, earlier this week estimated Brazil’s crop at a record 153.5 MMT and hiked its Brazilian soybean export forecast for 2022-23 to 96.6 MMT, up 140,000 MT from last month. USDA today kept its estimate for Brazil’s crop unchanged at 152.22 MMT, which would be up 20% from last year’s drought-reduced production. An outlook for record production and increased export competition from South America adds skepticism over soybean prices longer-term.
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 12 cents to $7.34 1/4, down 26 3/4 cents for the week. March HRW wheat fell 11 3/4 cents to $8.33, down 37 3/4 cents for the week. March spring wheat sank 8 cents to $9.01 1/2, down 19 3/4 cents for the week.
5-day outlook: SRW wheat ended the week near 14-month lows as the market remained under technical pressure that could generate further selling early next week. USDA’s Supply & Demand Report today held no major surprises for the wheat markets, with estimated ending U.S. stocks for 2022-23 unchanged at 571 million bu. Global wheat ending stocks for 2022-23 were lowered slightly more than expected to 267.33 MMT, down from 267.82 MMT in a November estimate and a six-year low. Outside markets like crude oil and the U.S. dollar will help drive market direction next week.
30-day outlook: Weak worldwide demand for U.S. wheat and a still historically strong U.S. dollar may continue to pressure wheat in coming weeks. But Ukraine remains a major risk, and while grain supplies have been moving out of Black Sea ports for weeks, war-related disruptions could happen at any time. Those concerns could help put a floor under wheat futures.
90-day outlook: Solid U.S. hard red spring wheat exports and tight global supplies of high-protein wheat are longer-term bullish factors but likely will continue to be negated by heavy bearish sentiment in the overall U.S. wheat market. Traders will continue to monitor dry conditions in U.S. Plains HRW wheat country in early 2023. World Weather expects the Texas Panhandle into southwestern Kansas and southeastern Colorado will be particularly dry in the next seven days. Blizzard conditions in western Nebraska and possibly northern Colorado are expected next week. Snow cover may become of greater importance in the second week of the outlook due to potential significant cold, especially in the northern half of the Plains, said the forecaster.
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 17 points to 81.02 cents, down 218 points on the week.
5-day outlook: Cotton futures rose despite USDA’s unexpected increase in its U.S. production figure. USDA, in its Supply & Demand Report today, pegged U.S. cotton production at 14.242 million bales, a 211,000-bale increase from November and contrary to traders’ expectations for a reduction of 71,000 bales. A 13-bu. yield bump to 868, the highest yield since 2018, drove the production increase as harvested acres were left unchanged. Subsequently, carryover rose 500,000 bales from November to 3.5 million bales, with total supplies increasing by 210,000 bales. Exports were slashed by 250,000 bales in addition to a 100,000-bale reduction to expected domestic use, however a 60,000-bale bump in unaccounted use helped offset the demand cuts. Immediately following the report’s release, cotton dropped sharply, but quickly recovered to post gains.
30-day outlook: China’s Covid easing measures will be closely monitored over the next 30 days as the effects of pulling back restrictions manifest. Many traders remain optimistic regarding the increased demand from the changes; however, infections could surge in the near-term. Signs of revived demand for travel and other services have already surfaced, but China’s fragile healthcare system and low vaccination rates have left the country ill-prepared for a big wave of infections, which could spark labor shortages and make wary consumers even more skittish, according to Reuters. Th
90-day outlook: U.S. and global economic data will be key to cotton market direction in 2023 as traders try to gauge whether widespread predictions for recession come true. Recent Chinese figures indicate waning growth, with the country’s exports in November down 8.7% from the same month the previous year and weaker than expectations of a 3.9% drop. U.S. exports could stumble further if the global economy falters, with weekly export sales down 10.2% from year-ago levels. USDA’s drop in export usage to 12.25 million bales reflects a 16.2% drop in U.S. exports from 2021-22.
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.
