Crops Analysis | October 28, 2022
Corn
Price action: December corn fell 1 1/2 cents to $6.80 3/4, down 3 3/4 cents on the week and the second consecutive weekly decline.
5-day outlook: Corn futures fell to the lowest levels in over a week on weak export demand and an upturn the U.S. dollar. The market may extend a sideways trade that’s lasted since mid-September as traders watch for updates on the Ukraine export deal. Harvest pressure is fading even though progress was slowed this week by widespread Midwest rains. USDA will update weekly harvest progress after Monday’s close. Earlier this week, USDA reported harvest at 61% complete as of Oct. 23, up from 45% a week earlier and ahead of the 52% average for that date for the previous five years.
30-day outlook: USDA’s Nov. 9 Crop Production Report will be one key to the market’s direction the rest of the year. Earlier this month, USDA made a slightly smaller than expected cut to its production estimate, dropping the number to 13.895 billion bu., but that still marked the second straight monthly reduction. Perhaps the greatest outside risk is the status of the Ukraine export deal, which expires Nov. 19. Russian officials continue to express resistance to any extension of the deal, but experts still expect Russia to agree to extend. Earlier today, Russia said only 3% of food exported under the U.N.-brokered deal has gone to the poorest countries.
90-day outlook: Market direction into early 2023 will hinge in part on the crop outlook in South America. Brazil’s corn and soybean crops appear to be off to a good start, but dryness has plagued Argentina. The tight supply outlook in 2023 remains a long-term bullish influence, though soft U.S. exports may limit attempts to rally corn futures back near or above $7.00. 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 may also limit price upside.
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 5 1/2 cents to $13.87 3/4, down 7 3/4 cents on the week and the first weekly decline in four. January soybeans rose 6 3/4 cents to $14.00 1/4. December soymeal surged $10 to $425.40, a five-week closing high. December soyoil fell 51 points to 71.79 cents.
5-day outlook: Soybean futures rebounded from early losses to end with modest gains, but the November contract still posted its second consecutive weekly decline. Sideways trade may persist another week as traders await USDA’s Nov. 9 Crop Production update, barring any outside events that might spark buyer interest. The U.S. soybean harvest is nearly finished, even though rains slowed progress this week. USDA late Monday said 80% of the soybean harvest was complete as of Oct. 23, up from 63% a week earlier and well-ahead of the 67% five-year average.
30-day outlook: The Nov. 9 USDA report will help set the market’s tone through the rest of the year and South American weather will be closely followed. Mostly favorable early-season conditions in Brazil have been mostly favorable, bolstering expectations for a record crop, but dryness remains concerning in some areas of Argentina. The soybean situation in Argentina is a “mixed bag,” Crop Consultant Michael Cordonnier wrote earlier this week. “The weather has been very dry in Argentina and very few if any soybeans have been planted,” Cordonnier said. Still, November is the country’s primary planting month and “there is plenty of time for improved soil moisture before the soybeans need to be planted.”
90-day outlook: Demand fundamentals remain strong, illustrated by soyoil futures rally to four-month highs earlier this week and soymeal’s surge today. China will also be a key price influencer after the country boosted purchase this month. Earlier today, USDA reported daily soybean sales of 126,000 MT for delivery to China during the 2022-23 marketing year. Including today’s sale, China made five USDA-announced soybean purchases this month totaling 1.509 MMT, compared to 240,000 MT in September. Export commitments so far in 20222-23 are running 4.7% ahead of year-ago levels, USDA numbers showed.
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 futures dropped 9 1/4 cents to $8.29 1/4, a five-week low and down 21 1/2 cents for the week. December HRW wheat futures also hit a five-week low and fell 7 1/4 cents to $9.25, down 23 1/4 cents for the week. December spring wheat fell 8 cents to $9.42 1/2, down 19 cents on the week.
5-day outlook: Winter wheat prices are trending down and Friday’s technically bearish weekly low closes in December futures sets the market up for followthrough chart-based selling early next week. Traders will continue to closely monitor updates on the soon-to-expire deal allowing Ukrainian grain shipments out of the Black Sea region. On Monday, USDA will release its first national winter wheat crop condition ratings. Based on individual state conditions and pasture/range conditions, we expect the initial “good” to “excellent” rating will be 35% or lower, which would be the lowest ever for the end of October and break the record-low of 40% in 2012.
30-day outlook: The Ukraine export deal will be one key to market direction. Russian officials this week continued to convey resistance to an extension, fueling greater uncertainty and potential volatility in grain markets. SRW futures sharp drop in October compared to the end of September appears to suggest optimism an extension will happen. Weather in the U.S. Plains slightly leans bullish. Beneficial rain continued today in the southern half of Oklahoma, helping improve winter wheat germination and establishment, World Weather said, however, “most of the region still needs greater rainfall.
90-day outlook: Recent USDA weekly export sales numbers showed improvement, but overseas demand remains weak with U.S. wheat uncompetitively priced on the global market. U.S. export commitments so far in 2022-23 are running 10.5% below year-ago levels. Continued strength the U.S. dollar is also a bearish longer-term factor.
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 fell 300 points to 72.11, the lowest close for a nearby contract since December 2020 and down 702 points from a week ago.
5-day outlook: Cotton futures extended a steep slide as the U.S. dollar turned stronger late this week and crude oil futures dropped. Outside markets will continue to be key to near-term direction as traders monitor economic data for indications whether a recession is imminent. U.S. third-quarter GDP was higher than expected at 2.6%, indicating a rebound from a contraction in the first half of the year, consumer spending data was disappointing.
30-day outlook: Continued harvest progress depends primarily on weather conditions in the southern Plains and Delta. World Weather predicts two more rounds of rains the next two weeks from western Texas into southwestern Oklahoma, leading to temporary harvest interruptions. The forecaster notes that both the U.S. Delta and Southeast will see a little rain periodically, but no damage to cotton fiber is expected in any of these areas. The Delta will be the wettest this weekend and the Texas Rolling Plains will get significant rain later today.
90-day outlook: Export activity will be watched closely in months ahead as traders try to gauge the health of the global economy. Recent COVID restrictions in China have fueled concern over demand and contributed to futures’ sharp declines. USDA on Thursday said China cancelled 49,917 running bales of U.S. cotton for 2022-23. Overall, net U.S. cotton sales during the week ended Oct. 20 totaled 68,400 RB, down from 84,500 the previous week. Export commitments so far in 2022-23 are running 0.1% ahead of year-ago levels, compared to 4.5% ahead the previous week.
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.
