Crops Analysis | Oct. 14, 2022

Corn ­

Price action: December corn futures declined in concert with the deferred contracts, dropping 8 cents to $6.89 3/4 to end the week. That represented a weekly rise of 6 1/2 cents.

5-day outlook: The U.S. dollar took back the bulk of Thursday’s sizeable drop on Friday, which, along with a significant setback in the equity indexes, exerted downward pressure upon the corn market to end the week. The stronger greenback likely combined with talk of growing Chinese interest (and activities to facilitate the move) in increasing their imports of Brazilian corn likely weighed on futures. Those developments could exert increasing bearish influence over the corn markets in the days ahead, as will the accelerating U.S. harvest. But the diminished size of the U.S. crop, as well as the declining likelihood that Putin’s Russia will accede to a renewal of the U.N. export deal on Ukrainian exports, will probably provide sustained price support.

30-day outlook: Harvest pressure seems likely to persist through Thanksgiving, which could limit the market’s potential upside. Recent export data hasn’t been terribly supportive either. But the probable end of the U.N./Russia export deal for Ukrainian grain should provide sustained support, especially if Russia again attacks export ships and/or Ukrainian facilities. Bulls may also be encouraged by persistent dryness across the Wheat Belt, especially if wheat futures resume their recent advance. Look for traders to slowly turn their focus to the next USDA Crop Production report on November 9. The corn crop reductions seen in September and October suggest the crop will diminish slightly on coming reports.  

90-day outlook: Price prospects seem likely to improve as the U.S. harvest winds down, especially if dry weather continues dominating the Great Plains, whereas sustained U.S. dollar strength and concerns about a global recession could work against the market. The prospect of record South American crops may limit upside potential as well. Conversely, with domestic stocks projected at pipeline levels and fertilizer prices remaining elevated, bears may have little luck in trying to force the market lower. Surging fertilizer costs curbed U.S. corn plantings early this year. Greater expenses seem likely to limit nitrogen applications this fall and seem likely to support the market this winter.

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.

Soybeans

Price action: November soybeans fell 12 cents to 13.83 3/4, but finished 16 3/4 cents higher than last week.

5-day outlook: The soy complex ended the week on a softer tone despite USDA’s lower-than-expected crop projections earlier in the week. Outside markets proved unfriendly as the U.S. dollar made strong gains after inflation increased more than anticipated by 0.4% in September, increasing the likelihood of a continuation of robust rate hikes in November and December. Traders will continue to monitor harvest progress and geopolitical tensions as the Black Sea grain export agreement is reevaluated Sunday in a meeting set to occur in Moscow. USDA’s weekly harvest progress will be reported per usual on Monday after the close.

30-day outlook: Midwest weather has proven favorable for harvest, with World Weather noting similar conditions through the next two weeks with light showers into Tuesday likely to cause only temporary interruptions to fieldwork, mainly from Michigan to central and northern Ohio. Traders will also continue to closely monitor low river levels which have slowed barge traffic enroute to the Gulf.  South America has experienced advantageous planting conditions as rains have increased moisture levels in Brazil. World Weather forecasts regular rain through Thursday in much of southern Brazil and Paraguay, slowing fieldwork with drier weather to return Oct. 21-28, allowing for quick improvements for conditions for fieldwork. The forecaster noted further that soil moisture should be high enough to support planting and establishment of summer crops through the end of the month with rain likely needed again in early November.

90-day outlook: Traders will continue to keep a close eye on global economic conditions and supply, in addition to export stability over the coming months. Traders will remain intently focused on the size of the U.S. crop as well as South American prospects as supply has reached its tightest levels in seven years. To date, weekly soybean export sales continue to prove steady over last year as they outpace the 2021-22 marketing year by over 7%. Daily export sales were also reported earlier with large sales to China (198,00 MT), unknown destinations (198,000 MT), and Philippines (230,000 MT meal).

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.

Wheat

Price action: December SRW wheat fell 32 1/2 cents to $8.59 3/4 at Friday’s close, 20 1/2 cents lower than a week ago.

5-day outlook: Wheat started the week off strong as geopolitical tensions continued to rise after an explosion affecting a Crimean bridge, connecting Russia and the illegally annexed region in 2014, with Russia responding with an attack on several Ukrainian cities which killed over 100 people. Russia has deemed the bridge attack an act of terror; however, Ukraine hasn’t officially claimed responsibility for the blast. Putin is placing blame on Ukraine’s Secret Service. Traders are likely positioning for the Sunday meeting in Moscow as U.N. officials are slated to meet to discuss the Black Sea grain export agreement. Russian officials have made a string of contradictory comments this week on whether the grain deal is likely to be renewed, according to Reuters.

30-day outlook: Winter wheat planting conditions will be crucial over the coming month as dry conditions have persisted through many key growing areas in the U.S. World Weather notes that hard red winter wheat areas will likely miss most of the southern Plains rain event this weekend and early next week, with some rain expected to impact Oklahoma and parts of Texas, mostly outside of the Panhandle. The forecaster further indicated winter wheat planting in the Midwest should be advancing relatively well.

90-day outlook: Traders will closely monitor global economic data in addition to the direction of the U.S. dollar and crude oil as recession fears loom. U.S. wheat exports continue to prove sluggish as the dollar maintains strength near a 20-year high, with limited signs of a downside retreat. Weekly export sales released earlier revealed lackluster wheat exports through the week ended Oct. 6, with sales reported just above the low end of expectations in the 200,000-500,000 MT range at 211,800 MT. Japan (65,200 Mt) and Thailand (55,000 MT) were the primary purchasers for the week. Exports for the week were reported at 560,500 MT, primarily to China (135,600 MT) and Iraq (105,000).  

What to do: Get current with advised hedges. Wait on a corrective rebound to increase cash sales.

Hedgers: You have 15% of 2022-crop hedged in short December SRW futures at $7.83. 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: December cotton futures fell 164 points to 83.15 cents and near the daily low. For the week, December cotton lost 108 points.

5-day outlook: Today’s technically bearish weekly low close in December cotton suggests more chart-based selling pressure early next week. The stock and financial markets are presently roiled, which is keeping cotton futures bulls mostly standing on the sidelines. Cotton traders will continue to look to the key outside markets (crude oil, the U.S. dollar index and U.S. stock indexes) for direction next week. If the stock market continues its sell off, cotton prices would likely do the same.

30-day outlook: USDA today reported U.S. cotton net sales of 144,800 running bales (RB) for 2022/2023, primarily for Pakistan (55,300 RB), Bangladesh (31,700 RB) and China (14,400 RB). Total net sales of 34,800 RB were reported for 2023/2024. Exports of 168,100 RB were primarily to China (39,700 RB), Vietnam (26,700 RB) and Pakistan (25,500 RB). These disappointing weekly numbers suggest the strong U.S. dollar is crimping world demand for U.S. cotton. If the greenback remains elevated in the coming weeks/months, U.S. cotton sales abroad are likely to continue to underperform.

World Weather Inc. today said West Texas rainfall recently did not seriously change the condition of cotton fiber and the same is expected late this weekend into early next week as additional rain falls. U.S. Delta weather and that in the southeastern states should be mixed with bouts of rain and sunshine in the next two weeks. Xinjiang, China harvest weather should be favorable in the next couple of weeks. Central Asia harvest progress should go well, too, said the forecaster.

90-day outlook: Dour global economic projections from the International Monetary Fund this week, as well as downbeat comments on the U.S./global economy from respected JP Morgan chief Jamie Dimon, suggest weakening world economic growth in the coming months is likely. That does not bode well for consumer demand for apparel or for the natural fiber and its price in the coming months.

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.