Crops Analysis | October 21, 2022
Price action: December corn futures rose 1/4 cent to $6.84 1/4, a decline of 13 1/2 cents for the week.
5-day outlook: Corn futures erased overnight declines to post modest gains in nearby contracts with support from a pullback in the U.S. dollar and strength in U.S. equities. Traders next week will continue to monitor shipping problems on the Mississippi and updates on the Ukraine export deal. Turkish President Tayyip Erdogan said he sees no obstacles to extending the deal allowing Ukrainian Black Sea grain exports, after discussions with his Russian and Ukrainian counterparts this week. Erdogan’s remarks struck a more upbeat tone than that from Russian officials this week. USDA will report harvest progress Monday. Early this week, USDA said 45% of the U.S. corn harvest was complete as of Oct. 16, up from 21% the previous week and ahead of the 40% average for that date the previous five years.
30-day outlook: Harvest is over half complete and will be a diminishing source of pressure in coming weeks, but shipping snags tied to low Mississippi River levels likely will be a market factor at least into early November. Arguably the biggest outside variable is whether the Ukraine export deal is extended, and grain markets will remain on edge as long as that question remains unsettled. More sideways price action is possible ahead of USDA’s Nov. 9 Crop Production Report, but there’s also potential for significant volatility.
90-day outlook: Once the U.S. harvest ends, market focus will shift to export demand and the South American crop, which is off to a generally favorable start. While an outlook for tight supplies in 2023 should provide long-term support, sluggish U.S. exports may limit price upside. U.S. export commitments for 2022-23 as of last week were running 52% behind the same period in 2021-22. Continued strength in the U.S. dollar could also burden export prospects.
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: November soybeans rose 4 cents to $13.95 1/2, the highest closing price since Oct. 13 and up 11 3/4 cents for the week, the contract’s third consecutive weekly gain. December soymeal rose $4.60 to $417.90. December soyoil rose 108 points to 71.50 cents, a four-month closing high.
5-day outlook: Soybeans rebounded from overnight declines to end the week on a firm note, supported by a recent upturn in export demand, with China making several purchases over the past two weeks. Traders will watch for any additional Chinese demand next week, after USDA reported a combined 1.955 MMT in daily soybean sales last week and this week. USDA’s crop progress update Monday likely will show the U.S. harvest close to over. USDA reported the soybean crop was 63% harvested as of Oct. 16, up from 44% a week earlier and above the 52% five-year average.
30-day outlook: Abating harvest pressure in coming weeks could help soybean futures extend the past week’s gains, or at least keep prices underpinned, and further China demand could propel a move back above $14.00. Chinese purchases propelled the biggest weekly U.S. soybean export sales figure (2.336 MMT) in a year, as USDA reported Thursday. Still, the market faces bearish influences from an outlook for record South American production and low Mississippi River levels that have slowed export shipments. USDA’s Nov. 9 Crop Production update will help set the tone through the balance of calendar 2022.
90-day outlook: Once the U.S. harvest is wrapped up, market focus will shift to South American weather and export demand. A tight supply outlook for 2023, with U.S. supplies heading for a seven-year low, remain a long-term price support, but upside may be limited if the South America crop gets off to a good start. Earlier this week, Archer-Daniels-Midland Co. on Wednesday said it expects to boost its soybean exports from Brazil’s 2022-23 crop-year by 11%, reflecting an outlook for a record crop. Brazil’s soybean output is estimated at a record 152.4 MMT, up 21% from last year.
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 1 1/2 cents to $8.50 3/4 and for the week lost 9 cents. December HRW futures fell 1 1/2 cents to $9.48 1/4 and on the week fell 4 cents. December spring wheat slipped 1 cent to $9.61 1/2, up 7 1/4 cents for the week.
5-day outlook: Winter wheat futures markets languished this week as traders looked to corn and other outside markets for direction. Expect wheat traders to continue to look to the outside markets for direction next week. However, selling interest in wheat has been limited by ongoing concerns about the continuation of the Ukraine grain-shipping agreement between Russia and Ukraine. This fundamental will continue to be front-burner issue for the wheat markets for at least the next several weeks.
30-day outlook: Weather patterns in U.S. wheat country still lean bullish. Most of the regions remain dry and in need of rain/snow in the coming weeks. World Weather Inc. today reported “a very interesting pattern continues to set up across the U.S. Great Plains that suggests a unique opportunity for significant rain to fall in some important winter wheat production areas late this weekend and early next week.” The storm will likely bring “significant moisture” to Oklahoma, north-central Texas, southeastern Kansas and farther east into Missouri with lighter rainfall in the Texas Panhandle. However, the remaining hard red winter wheat production area is expected to be largely missed by the event.
90-day outlook: It’s typically a slow time of year for U.S. wheat export activity. However, traders worry the strong value of the U.S. dollar on the foreign exchange market will continue to constrain U.S. wheat sales abroad. The recent low wheat export numbers need to improve in coming weeks/months to keep wheat futures prices at their present levels that are still historically elevated.
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.
Price action: December cotton rose 173 points to 79.13 cents after earlier dropping to the lowest level since late 2020. The contract fell 402 points this week.
5-day outlook: Cotton futures ended the session higher but reached a contract low amid global demand concerns for the natural fiber. Traders will continue to monitor exports over the coming months as recessionary fears loom. However, a near-term bottom in cotton could lead to increased speculative and acreage buying after the crop has consistently encountered low trade volumes over the course of the calendar year, which has led to sharp price declines over the summer and early fall as speculative capital has exited the cotton market. However, outside markets and the global economy will largely affect the possibility of increased trade volume in cotton, as equities, crude oil, and the U.S. dollar play an important role given that cotton is tied to discretionary products.
30-day outlook: As harvest continues, traders will remain focused on weather in key growing areas in addition to supply data as it continues to become available. World Weather notes crop maturation and harvest conditions are not likely to be ideal for a while in West Texas with rains expected early next week and again late next week and into the following weekend, however each episode should be brief and light, limiting its impact on fiber quality. The forecaster predicts weather in the U.S. Delta will continue mostly good for harvesting, with frost and freezes this week aiding defoliation, which should lead to faster harvesting later this month and in November. Rains are possible in the Delta for a brief period next week, disrupting harvest for a bit, with some showers also impacting the southeastern states temporarily. USDA will update production on Nov. 9 in addition to overall supply and demand.
90-day outlook: Exports will be keenly observed as the end of the calendar year inches closer. Weekly cotton export sales continue to fall behind year-ago levels, likely signifying that apparel demand is crashing amid lackluster economic conditions and market share has shifted to synthetic fibers. USDA reported export sales at 84,500 running bales (RB) for week ended Oct. 13, with Pakistan (27,600 RB) and Egypt (22,000 RB) as the primary purchasers. Exports for the week were reported at a meager 400 RB, delivered to Turkey. USDA reduced U.S. cotton exports 100,000 bales to 12.5 million bales for the 2022-23 season. Further decreases to exports will likely cast a lingering bearish shadow over the cotton market as the new year approaches.
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.
