Crops Analysis | November 18, 2022
Corn
Price action: December corn futures rose 1/4 cent to $6.67 3/4, the contract’s highest close since Nov. 7 and a gain of 9 3/4 cents for the week
5-day outlook: Corn futures faded from earlier strength but still ended higher for the week, supported by technical buying following Thursday’s higher close. The market’s strength despite the extension of the Ukraine export deal appears to have encouraged buyers, illustrating solid underlying support and buying interest on price dips. This week’s gains could fuel ideas the market established a near-term bottom after hitting a 2 1/2-month low at $6.51 1/4 on Tuesday. But with a holiday-shortened week ahead, trading volume will likely be light and prices may extend a sideways pattern.
30-day outlook: South American weather and the Russia-Ukraine war will be two potential price influencers in the remaining weeks of the year, along with outside markets such as the U.S. dollar and crude oil. The dollar has retreated sharply from 20-year highs posted in late September, and further weakness could be supportive to grain markets. However, slumping crude oil, which fell near two-month lows today, could burden grains if speculators trim bullish bets on commodities and concerns over recession escalate. Brazil weather has remained mostly favorable for early crop development. USDA estimates Brazil’s 2023 corn crop at 126 MMT, up 10 MMT from this year.
90-day outlook: Exports will be one key to price direction into early 2023. A surge in weekly exports have encouraged bulls, as USDA Thursday reported net U.S. corn sales during the week ended Nov. 10 at 1.17 MMT, more than quadruple the 265,300 MT from the previous week. But the longer-term export picture for U.S. corn remains lackluster and could make it difficult to sustain price rallies. So far in the 2022-23 marketing year, U.S. export commitments are running 51.8% behind a year-ago, compared to 54.1% behind last week. Ukraine risk and a tight supply outlook for 2023 should limit price downside over the longer-term.
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 11 1/4 cents to $14.28 1/4 but still dropped 28 3/4 cents for the week, the market’s third weekly decline in the past four. December soymeal rose $4.70 to $410.40, up $3 on the week. December soyoil rose 61 points to 72.74 cents, down 423 points for the week.
5-day outlook: Soybeans ended higher behind strength in soymeal and soyoil and from corrective buying following Thursday’s declines, but the lower weekly close suggests the market may have established a near-term top. Crude oil futures fell sharply, dropping under $78 a barrel to the lowest levels since late September amid concern Covid outbreaks in China may curb demand. The weakness in crude didn’t appear to deter buyers in the soy complex today, but further downside in oil price, as well as global vegoil, could weigh on soybeans in coming days. Trading activity is expected to slow during the holiday-shortened week ahead, which may lead to sideway-lower price action in soybeans.
30-day outlook: Traders will closely follow South American weather over the final few weeks of the calendar year. Brazil’s weather has been largely favorable for crop development, bolstering expectations for a record 2023 soybean crop. Rain during the next two weeks will be greatest in northeastern areas of the country, where additional increases in soil moisture will result and some flooding may occur, World Weather said. However, west-central and southern Brazil, along with Paraguay, are drier. Timely and widespread rain expected Sunday through Wednesday should support crop development, the forecaster said. Persistent dryness in key crop areas of Argentina may becoming increasingly concerning.
90-day outlook: Soybean futures still hold potential for short-term, post-U.S. harvest rallies, though the export window for the U.S. will be narrowing with fresh supplies from the initial South American harvest becoming available around the end of the year or early next week. But downside price risk over the longer term should be limited by strong demand fundamentals, as illustrated by rising crush and weekly exports topping 3 MMT, the highest for any week excluding marketing-year rollovers since September 2020. China’s 1.542 MMT in purchases accounted for over half the weekly figure, and traders will watch for any additional business from China.
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.
5-day outlook: Today’s technically bearish weekly low closes in December SRW and HRW futures may lead to followthrough selling Monday. This week’s four-month extension of the Russia-Ukraine grain-shipping deal is likely to continue to limit buying interest in the near term. USDA will update weekly crop conditions Monday. Earlier this week, USDA reported 32% of the U.S. winter wheat crop in “good” or “excellent” condition as of Nov. 13, up from 30% a week earlier and slightly better than analysts’ expectations for 31%. Wheat rated “poor” to “very poor” totaled 32%, down from 34% a week earlier.
30-day outlook: Less-than-ideal weather for some top global wheat producers, including Argentina and the U.S., may limit downside in wheat futures. Little precipitation is likely the next two weeks in much of the U.S. HRW wheat belt, World Weather said today, though the need for moisture will be reduced for a while due to crops becoming dormant or semi-dormant. There is still some potential for a weather disturbance to impact mainly southeastern production areas Wednesday into Thursday.
90-day outlook: U.S. wheat exports remain anemic and exports need to pick up in coming months to keep wheat prices from dropping further. The drop in the U.S. dollar index to a three-month low this week suggests the index has put in a major top. Further depreciation in the dollar index in the coming months would help make U.S. wheat more price-competitive on the world market and likely help to improve U.S. wheat export numbers.
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: December cotton fell 205 points to 84.99 cents, down 391 points for the week.
5-day outlook: Cotton futures fell a third consecutive session as the U.S. dollar found moderate strength and crude oil futures surged to the lowest level since Sept. 28, which may reflect Fed officials recently indicating that pausing interest rate hikes is an unlikely scenario, ultimately escalating recessionary fears amid growing supply concerns. U.S. economic data Friday indicated waning demand, as existing home sales in October fell 5.9% from September, marking the ninth straight monthly decline. Traders will continue to watch economic readings and outside markets.
30-day outlook: USDA’s monthly Supply and Demand update will be studied for additional insight to domestic production and supply as harvest continues to wind down following various weather anomalies. USDA’s previous Supply and Demand reports have reflected no reductions in harvested acreage and an increase in yield to 855 lbs., up from 842 lbs. in October, while demand prospects have been scaled back. Further insight from USDA will influence price direction in the final month of the year.
90-day outlook: Overall global economic conditions and demand will act as a catalyst for the market, with traders closely monitoring Covid infections in China and measures to curb its spread. While infections are on the rise, China has reportedly eased some restrictions by cutting the time foreign travelers into China must quarantine, as well as scrapping the system which penalized airlines for bringing the virus into China. Easing These actions could bode well for future demand of discretionary products and ultimately the export of U.S. cotton. For week ended Nov. 10, USDA reported cotton bookings of 25,100 MT, a marketing year low, but export sales are still running 0.3% over the same period last year. Export sales and shipments over the next several months will indicate whether the current demand levels will sustain.
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.
