Crops Analysis | October 27, 2023
Price action: December corn futures rallied 1 1/2 cents to $4.80 3/4 but marked a 14 3/4 cent loss on the week.
5-day outlook: Corn futures saw little direction today, as prices continue to consolidate near $4.80. Outside markets were largely mixed on Friday as commodities were largely higher in anticipation of the rising conflict in the Middle East. Bonds spent most of the session near unchanged, though equity markets were mixed as the S&P 500 made a fresh five-month low. While December futures saw followthrough selling following Monday’s break of the month-long uptrend, selling has since stalled and prices have found backing at the $4.80 mark. December futures found firm support at the $4.74 mark throughout August and September, so additional selling pressure is likely to be limited. This will likely prove strong over the coming week and limit selling throughout the remainder of seasonally bullish October before the bearish seasonal of November takes firmer hold.
30-day outlook: While November is seasonally weak for corn futures, our analysis points to some opportunities for strength over the coming month. The upcoming USDA Crop Production Report is likely to feature another drop in production from the October forecast. The recent export reports have showcased increased foreign demand and early reports indicate a drop in Brazilian production for 2023-24, which would further justify a potential increase to the USDA export estimate in the November WASDE. The past four week’s in export sales have averaged 62% over the five-year average, indicating that the crop is “cheap enough” for importers.
What to do: Get current with advised sales.
Hedgers: You should be 100% sold in the cash market on 2022-crop. You should be 50% forward priced for harvest delivery on expected 2023-crop.
Cash-only marketers: You should be 100% sold on 2022-crop. You should be 35% forward priced for harvest delivery on expected 2023-crop production.
Price action: November soybeans rose 17 3/4 cents today and gave up a nickel on the week. December soymeal rose $12.90 to $442.40 and gained $18.50 week-over-week. December soyoil rose 53 points to 52.27 cents but is down 112 points from a week ago.
5-day outlook: Soybean futures ended the week on good note, with an extended soymeal rally amid strong U.S. demand breathing life into the complex. Varying weather across South America has heightened concern around global supply prospects, as center-west and northeastern growing regions of Brazil continue to face drier-than-usual conditions, which are expected for another week, according to World Weather Inc. Meanwhile, torrential rains continue to affect southern Brazil, with serious flooding raising the odds crops will need replanted. Earlier in the week, crop consultant Dr. Michael Cordonnier noted that while he left his Brazilian soybean production estimate unchanged at 162.0 MMT for the week, he reduced his bias going froward from ‘neutral’ to ‘neutral to lower.’ Cordonnier estimated that 30% of the country’s crop needed immediate rainfall and indicated that if the rainfall pattern in central Brazil does not improve quickly, his estimates could be lowered as early as next week. Soybeans will continue to find near-term direction from meal futures and South American weather.
30-day outlook: With harvest wrapping up across the U.S., traders will be especially tuned into USDA’s production update, due out November 9. In addition to a production update, the government will release its monthly supply and demand estimates. Earlier this month, using a yield of 49.6 bu. per acre, USDA pegged 2023-24 soybean production at 4.104 billion bu., down slightly from September, though ending stocks remained unchanged at 220 million bu.
90-day outlook: As the marketing-year progresses, market participants will maintain a watchful eye on U.S. exports. Currently projected at 1.755 million bu. for the 2023-24, exports are expected to be 12% lower than the previous marketing-year. However, a fresh U.S. crop could increase export sales as have recently been reflected in USDA’s Weekly Export Sales Report. On Thursday, during week ended Oct. 19, net sales of 1.378 MMT were reported, which were a marketing-year high and up 43% from the four-week average. Moreover, shipments of 2.389 MMT during the week reached a marketing-year high, up 20% from the previous week and noticeably above the four-week average. China was the main destination at 2.0 MMT.
Meanwhile, U.S. meal demand and crush will also be monitored closely in the wake of a drought-stricken Argentine crop earlier in the year and low-carbon fuel mandates, which have elevated U.S. soybean processing to record levels.
What to do: Get current with advised sales.
Hedgers: You should be 100% sold in the cash market on 2022-crop. You should be 45% forward sold for harvest delivery on expected 2023-crop production.
Cash-only marketers: You should be 100% sold on 2022-crop. You should be 40% forward sold for harvest delivery on expected 2023-crop production.
Price action: December SRW wheat futures fell 4 cents today to $5.75 1/2 and near mid-range. For the week prices fell 10 1/2 cents. December HRW wheat futures lost 11 3/4 cents to $6.43 and nearer the session low. Prices hit a two-plus year low today and for the week lost 27 cents. Spring wheat futures lost 4 1/2 cents to $7.19 3/4, marking a 11-cent loss on the week.
5-day outlook: The winter wheat futures markets were pressured today by news that Ukraine’s new Black Sea shipping corridor has resumed operations following a three-day pause. Technical selling was also featured today amid bearish charts. The technically oriented speculative wheat market bears will likely try to press their case early next week. This week’s gains in the U.S. dollar index put that market back in a more bullish technical posture, which is also a negative underlying element for the wheat markets. Look for the wheat futures markets to take daily price direction from corn and soybeans next week. Monday afternoon’s USDA Crop Progress report will be key since it will show the first fall reading of U.S. winter wheat conditions.
30-day outlook: Weather patterns in key global wheat-growing regions will be closely monitored in the coming weeks. World Weather Inc. reported rain and snow in the central U.S. Plains this weekend will increase topsoil moisture for some areas. The Pacific Northwest still needs warmer temperatures and moisture as will be the case in Montana to get wheat stands to improve. Meantime, wet weather in Europe and the western CIS will ensure plenty of moisture is around for better winter crop establishment in the coming weeks. China and India wheat conditions should be mostly good with planting expected in India over the next few weeks while it should be winding down in China. Western Australia will continue drying out and southern Brazil will remain too wet to support winter crops.
90-day outlook: U.S. wheat sales abroad remain anemic. The stronger U.S. dollar on the foreign exchange market is not helping U.S. wheat’s competitiveness. Geopolitics will also remain in play for the wheat market in the coming months. The Russia-Ukraine war and grain shipments out of the Black Sea will remain a wild card for wheat traders. Rising tensions in the Middle East that are likely to remain elevated for a few months are a negative for the grains, as it depletes risk appetite among the speculative bulls.
What to do: Get current with advised sales.
Hedgers: You should be 50% sold in the cash market on 2023-crop production.
Cash-only marketers: You should be 50% sold on 2023-crop production.
Price action: December cotton futures fell 21 points on the session before settling at 84.38 cents, marking a 198-point gain on the week.
5-day outlook: Cotton futures faced steady selling throughout the session, but the range stayed fairly tight as the market lacked fresh news to produce price action. The strengthening crude oil market was seemingly unable to aid in cotton strength as well, as oil prices in increased risk of the escalating conflict in the Middle East. Cotton futures rose steadily over the past week in a fledging bear-flag on the daily bar chart, indicating that some additional weakness is possible over the coming week. The range is tightening, indicating that a breakdown will occur sooner than later. The lack of fresh data on the crop is unlikely to provide a fresh catalyst either, further entrenching bear’s advantage over the coming week.
30-day outlook: Cotton bulls are looking for additional cuts to the production forecast in the November Crop Production report to reignite buying, but the deterioration of the crop has led to little effect on futures prices in the past month. That is, the production forecast fell in the October report and has faced sustained selling pressure since. A deteriorating export market continues to drive the market lower, that sees the lowest commitments since 2015. Unless exports improve beyond anecdotal reports or production is much lower than the USDA predicted in October, prices are likely to continue to fall over the coming month.
90-day outlook: The long-term outlook for cotton is largely dependent on production in Australia and Asia. El Nino has deteriorated precipitation in Asia and Australia, both of which produce abundant amounts of the natural fiber. The Indian cotton crop continues to need rain and crops are not performing well. Further restrictions on rainfall in those regions would lead buyers to target the U.S. crop, which could help support prices over the coming quarter.
What to do: Get current with advised sales.
Hedgers: You should be 100% priced on 2022-crop in the cash market. You should have 60% of expected 2023-crop production forward sold for harvest delivery.
Cash-only marketers: You should be 100% priced on 2022-crop. You should have 60% of expected 2023-crop production forward sold for harvest delivery.
