Crops Analysis | November 4, 2022
Corn
Price action: December corn futures rose 1 3/4 cents to $6.81, a gain of 1/4 cent for the week.
5-day outlook: Corn futures posted modest gains following two-sided action but ended largely flat on the week as traders looked ahead to USDA’s Nov. 9 Crop Production and Supply and Demand Reports. Ahead of the reports, the market may extend a sideways trade that’s persisted since mid-September. USDA is expected to make only minor changes to corn numbers. The agency’s estimate for U.S. corn production may drop 8 million bu. from 13.895 billion bu., based on a Reuters survey of analysts, while estimated U.S. 2022-23 ending stocks may rise about 35 million bu., to 1.207 billion bu. USDA will also update weekly harvest progress after Monday’s close. Earlier this week, USDA reported the U.S. corn harvest at 76% complete as of Oct. 30, up from 61% a week earlier and ahead of the 64% average for that date the previous five years.
30-day outlook: After USDA’s Nov. 9 reports, market focus will shift toward demand and South American weather. One of the biggest near-term price risks remains the status of a deal allowing Ukrainian grain exports from Black Sea ports. Russia this week said it would resume its participation in the deal allowing Ukrainian grain exports but has not committed to participating beyond the current agreement’s Nov. 19 deadline. Russia wants the West to ease restrictions on a state agriculture lender to facilitate Russian grain exports, Reuters reported today. Uncertainty over any extension of the deal is sure to keep grain markets on edge, potentially leading to greater volatility.
90-day outlook: Longer-term demand fundamentals for corn have grown shakier amid a strong U.S. dollar, lagging exports and Brazil corn exporters winning Chinese customs approval. These factors suggest a near-term push above $7.00 will be difficult to achieve. While a tight supply outlook should limit price downside, it will likely take a bullish catalyst, such as a weather threat to South America’s crop, to drive a strong, sustained rally. U.S. corn export commitments so far in the 2022-23 marketing year are running 53.3% behind year-ago levels as of the week ended Oct. 27, compared to 52.7% behind the previous week.
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 surged 25 1/4 cents to $14.62 1/4, a gain of 62 cents for the week and the contract’s highest close since Sept. 22. December soymeal rose $6.10 to $420.40. December soyoil rallied 188 points to 77.17 cents, the contract’s highest close since June 9.
5-day outlook: Soybeans extended this week’s rally to six-week highs behind strength in crude and global vegoil markets and prospects for Chinese demand. Crude oil jumped nearly $4 to a four-week high. Strong demand fundamentals and bullish charts may provide followthrough support early next week, though traders may avoid taking large positions ahead of USDA’s Crop Production and Supply and Demand updates Nov. 9. USDA is expected modestly increase its estimate for U.S. soybean production to 4.315 billion bu. from 4.313 billion bu., based on the Reuters survey. U.S. 2022-23 ending stocks are seen rising to 212 million bu. from 200 million bu. USDA will update weekly harvest progress late Monday. Earlier this week, USDA said 88% of the soybean harvest was complete as of Oct. 30, up from 80% a week earlier and well-ahead of the 78% five-year average.
30-day outlook: After USDA’s Nov. 9 reports, South American weather and overseas demand will be key to price direction. Early-season conditions in Brazil have been mostly favorable, bolstering expectations for a record crop, but dryness is concerning in Argentina. A La Nina pattern will keep eastern Argentina, Uruguay and Brazil’s Rio Grande do Sul state in a below-normal precipitation pattern for a few more weeks, World Weather Inc. said today. “Soil moisture is not rated as poorly as one might imagine after two months of below normal rainfall, but a boost in rainfall will be needed soon.” In Brazil, net drying is expected for much of the coming week the next week except in the northeast where showers and thunderstorms will be possible. Soybean planting in Argentina's core farm belt region is far behind last year's pace due to a lack of rain, the Rosario grains exchange said in a report today.
90-day outlook: Longer-term supply and demand fundamentals, including strong crush margins, remain generally bullish, which could buoy the soy complex into 2023. The export window for U.S. soybeans will be open until fresh South American supplies become available late in early 2023, but Brazilian soybeans are currently priced below U.S. supplies. China will be closely followed after the country boosted purchases last month. USDA on Thursday reported net weekly soybean sales of 830,200 MT, down from 1.026 MMT the previous week, with China the top buyer at 745,000 MT. Soybean export commitments so far in the 2022-23 marketing year are running 0.1% ahead of a year-ago levels, versus 4.7% ahead a week earlier.
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.
5-day outlook: Wheat futures gave back much of an early-week rally but still ended with solid gains for the week. Prices may continue a sideways pattern next week as traders watch for updates on the Ukraine export deal and wait for USDA’s Nov. 9 Crop Production and Supply and Demand Reports. Weather in the U.S. Plains will also be followed. Precipitation expected over the next week will be greatest in the eastern half of the HRW region, where an increase in topsoil moisture is expected, World Weather said. Some light showers will occur in the west, though it will have limited effect on soil moisture. “More precipitation will continue to be needed,” the forecaster said.
30-day outlook: USDA’s record-low winter wheat crop ratings issued this week will limit selling interest in wheat futures in the coming weeks. However, with U.S. wheat exports in 2022-23 on track for a 51-year low, sustained rallies may be few and far between. Wheat bulls are encouraged by prospects USDA will lower estimated global ending wheat stocks that are heading for a six-year low.
90-day outlook: Wheat traders will continue to look to the key outside markets for price direction. Front-month crude oil futures rallied near a four-week high today, which may encourage speculative futures bulls to be more aggressive on the long side of wheat. Also, the U.S. dollar index has become wobbly lately, posting big losses today. Further and sustained weakness in the U.S. dollar in coming weeks could help keep a floor under wheat futures by making U.S. wheat exports more competitive on the world markets.
What to do: Wait on an extended price rally to increase cash sales.
Hedgers: December SRW futures hit our buy stop at $8.50 to exit the 15% 2022-crop hedge. We registered a 67-cent loss on the position. 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 rose 405 points to 87.05 cents, the contract’s highest close since Oct. 11, a gain of 1,494 points, or 21%, for the week and the largest weekly gain in nearly 12 years.
5-day outlook: Cotton rallied for the fourth consecutive session after reaching 22-month low earlier in the week. A sharp selloff in the U.S. dollar coupled with strength in crude oil and U.S. equities provided bullish impetus that spurred further short covering, and further support was tied to speculation China is poised to exit harsh zero-COVID policies. Economic news today encouraged buyers, as U.S. non-farm payrolls increased by 261,000 in October, higher than expectations for a gain closer to 200,000. USDA’s Nov. 9. Crop Production and Supply and Demand updates will be closely scrutinized. U.S. cotton production is expected to be lowered to 13.62 million bales from the 13.81 million bales USDA estimated in October.
30-day outlook: Traders will continue to monitor weather as harvest winds down. World Weather notes that harvest delays will return to the Delta this weekend, as well as parts of the Carolinas and southern Virginia, with potential for heavy rains Tuesday to Thursday. While much of the crop should be harvested by that time, unharvested areas could be vulnerable to damage if heavy rains to impact the region. The forecaster predicts that much of western Texas and southwestern Oklahoma will see little to no precipitation and good harvest conditions through the next two weeks, with a few light showers today from northern parts of West Texas into the eastern Panhandle and southwestern Oklahoma.
90-day outlook: Export activity has been sparse in recent weeks, but traders anticipate a rebound in shipments after USDA on Thursday reported net U.S. sales at 191,800 running bales (RB) for the week ended Oct. 27, the highest since August. China was the primary purchaser at 122,000 RB, with Pakistan reported at 23,200 RB and Turkey at 15,800 RB. Additional export business will be key to cotton price direction as the new year approaches, with economic conditions in China, along with global growing conditions and production updates.
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.
