Crops Analysis | November 11, 2022
Corn
Price action: December corn rose 4 3/4 cents to $6.58, down 23 cents for the week and the third weekly decline in the past four.
5-day outlook: Corn futures rose for the first time in five sessions, joining a rally in soybeans as the U.S. dollar tumbled near a three-month low and China’s easing of Covid restrictions fueled expectations for stronger demand. With the U.S. harvest largely complete, price direction next week will depend in part on outside factors, such as China, Ukraine and crude oil. Corn futures’ technicals took a bearish turn this week despite today’s firmer close, and price weakness early next week that pushes the December contract below $6.50 could spark further fund liquidation. USDA will update weekly harvest progress after Monday’s close. Early this week, USDA reported 87% of the U.S. corn harvest complete as of Nov. 6, up from 76% the previous week and the 76% average for the previous five years for that date.
30-day outlook: The status of an agreement allowing grain exports from Ukraine’s Black Sea ports will be one key to near-term price direction as the deal’s Nov. 19 expiration nears. Talks between a Russian delegation and senior U.N. officials to address Moscow's grievances over the deal continued today in Geneva. Moscow has indicated that it is prepared to quit the deal. Recent weakness in grain futures would seem to reflect little concern, but futures still hold potential for explosive upside and greater volatility if the Russia-Ukraine conflict takes a turn for the worse. Absent a bullish outside event, corn prices hold potential for further downside amid weak exports and prospects for large South American production.
90-day outlook: USDA Crop Production and Supply and Demand updates earlier this week carried few surprises. Despite USDA’s slightly stronger demand outlook for corn in 2022-23, larger-than-expected production and yield numbers contributed to other bearish near- to mid-term headwinds, including sluggish exports and a favorable South American outlook. A tight supply outlook for 2022-23 should limit extended downside price risk, and there’s potential for short-term rallies, especially if the Ukraine export deal falls through, as the country is a major corn exporter. Also, dryness in Argentina is becoming concerning. Earlier this week, Crop Consultant Cr. Michael Cordonnier lowered his Argentine corn crop estimate by 1 MMT to 50 MMT, citing “continued adverse weather and potentially lower acreage.”
What to do: Get current with advised sales. Wait to make additional 2022-crop sales.
Hedgers: You should have 50% of 2022-crop sold for harvest delivery.
Cash-only marketers: You should have 50% of 2022-crop sold for harvest delivery.
Price action: January soybeans rose 27 cents to $14.50, still down 12 1/4 cents for the week. December soymeal rose $3.30 to $407.40, down $13 for the week. December soyoil rose 88 points to 76.97, after posting a five-month high of 78.64 cents.
5-day outlook: Soybeans rallied in a corrective rebound from Thursday’s losses, boosted by strength in soyoil and crude oil and prospects for increased demand from China and other top buyers before South American supplies become available later this year. Outside markets likely will continue to be key to soy complex price direction next week, as traders watch for any additional soybean purchases from China. Earlier this week, USDA reported daily soybean sales totaling nearly 877,000 MT for delivery to China, Mexico and “unknown destinations” during the 2022-23 marketing year. USDA will update weekly harvest progress after Monday’s close. Earlier this week, USDA said the U.S. soybean crop was 94% harvested as of Nov. 6, up from 88% the previous week and ahead of the 86% five-year average.
30-day outlook: With the U.S. soybean harvest finished, trade will increasing fixate on South America, where generally favorable conditions in Brazil have bolstered expectations for a record crop. Argentina, however, continues to struggle with dryness. In Brazil, a few more rounds of timely rains during the next 10 days will induce further improvements in soil moisture and conditions for planting and crop development across the driest areas in western and northern Brazil, World Weather Inc. said today. In Argentina, two rounds of rain the next 10 days will induce “notable improvements” in conditions for planting and establishment of summer crops in much of the country, while the soil should be dry enough in most areas that planting advances well between rounds of precipitation. “Rain is not likely to be heavy enough to induce a lasting increase in soil moisture and additional rain will be needed soon to maintain improvement in soil and crop conditions that result from the coming rain.”
90-day outlook: Longer-term market direction into 2023 will hinge in large part on export demand and South American crop development. The window for U.S. exports should remain open a bit longer before fresh South American supplies become available later this year, but U.S. sales in recent weeks have tapered off. Brazilian farmers are now expected to plant 350,000 hectares more soybeans than previously thought, which prompted Conab to raise its 2022-23 Brazilian soybean crop estimate by 1.2 MMT to a record 153.5 MMT. USDA Thursday reported net weekly U.S. soybean sales at 794,800 MT, down from 830,200 MT the previous week and the third straight weekly decline. Sales were down 35% from an average of 1.229 MMT the previous four weeks. U.S. soybean export commitments so far in 2022-23 are running 0.4% behind a year-ago, versus 0.1% ahead last week.
What to do: Get current with advised cash sales. Wait to make additional sales.
Hedgers: You should be 60% sold for harvest delivery on 2022-crop production.
Cash-only marketers: You should be 60% sold for harvest delivery on 2022-crop production.
Price action: December SRW wheat rose 10 1/4 cents to $8.13 3/4 but fell 34 cents for the week. December HRW wheat gained 18 1/4 cents to $9.43 1/2, down 9 3/4 cents for the week. December spring wheat gained 14 1/4 cents to $9.45 3/4, down 8 3/4 cents for the week.
5-day outlook: Short covering boosted winter wheat futures in the wake of a drop to two-month lows Thursday. Winter wheat’s near-term technical posture deteriorated this week, suggesting chart-based selling pressure early next week. A sharp drop in the U.S. dollar index late this week may help limit selling interest next week. Traders will examine Monday afternoon’s weekly USDA crop progress reports. Record-low winter wheat crop ratings improved modestly this week and rains expected in parts of Oklahoma and Texas next week may provide some benefit to the wheat crops there.
30-day outlook: Weak export demand and USDA’s slightly larger global supply outlook for 2023 may continue to pressure wheat futures in the coming weeks. However, there are technical signs the U.S. dollar index has put in a major top. If that’s indeed the case, U.S. wheat may become a bit more competitive on the world markets in the coming weeks and months. Traders will be watching South American wheat crops closely in the coming weeks. Argentina's Buenos Aires Grain Exchange cut its wheat harvest forecast to 12.4 MMT from 14 MMT previously, citing drought and frosts.
90-day outlook: The status of the Ukrain export agreement remains a major market risk as the deal’s Nov. 19 expiration nears. Traders remain skeptical that the grain deal can remain intact for an extended period of time, especially with Russia losing ground in its war with Ukraine.
Price action: December cotton rose 161 points to 87.99 cents, up 106 points cents for the week.
5-day outlook: Cotton futures extended Thursday’s gains as a lower-than-expected inflation reading sent the U.S. dollar tumbling. Dovish Fed comments also weighed on the dollar, sending it near a three-month low. The dollar and other outside markets, such as crude oil futures, will continue to help set the tone in cotton next week. USDA will update weekly harvest progress after Monday’s close. As of Nov. 6, the crop was 62% harvested, up from 55% a week earlier and ahead of the 55% five-year average.
30-day outlook: Government updates to production, supply and demand will continue to be a catalyst for cotton. Recent updates on Nov. 9 indicated a larger-than-expected U.S. crop, with USDA increasing production from October by 219,000 bales, a largely unexpected figure as traders anticipated a reduction of 190,000 bales on average. The increase came from a 13 lb. yield bump, with harvested acreage unchanged at 7.876 million acres. U.S. carryover was also 200,000 bales higher from Oct. because of increased production, with demand mostly unchanged aside from a 20,000-bale bump in unaccounted use. However, global carryover was pegged at 87.27 million bales, down from 87.87 million bales in October. USDA will provide additional updates on Dec. 9.
90-day outlook: Export demand has been an increasing focus for traders as China’s demand may have been crimped by the country’s zero-Covid policies, along with a strong U.S. dollar. Waffling reports of easing restrictions in China prove difficult to grasp the level at which demand might be affected, though continued exports will help illustrate economic conditions. For week ended Nov. 3, USDA reported sales of 145,800 running bales (RB), a 24% drop from the previous week, but 14% higher than the same week last year. Top purchasers for the week were China (57,300 RB), Pakistan (40,500 RB), and Vietnam (23,400 RB). Exports for the week were reported at 108,000 RB, with total exports for the marketing year at 2.774 million bales, up from last year’s pace by nearly 30% for the same period. However, accumulated commitments are up by a meager 1.6% from the previous year.
What to do: Wait on an extended corrective rebound to get current with advised 2022-crop sales.
Hedgers: You should be 70% forward-priced for harvest delivery on expected 2022-crop production.
Cash-only marketers: You should be 70% forward-priced for harvest delivery on expected 2022-crop production.
