Crops Analysis | October 6, 2023
Price action: December corn futures dropped 5 1/2 cents to $4.92 but gained 15 1/4 cents on the week.
5-day outlook: Corn futures struggled to reverse overnight weakness despite increasing support from outside markets as the U.S. dollar faded notably from early morning strength. While corn prices were weaker heading into the weekend, they retained most of Thursday’s gains and closed above prior resistance, which now serves as support. The 40-day moving average, currently at $4.89, has proven pivotal for corn futures, which is evidenced by the December contract’s test of the area for five straight sessions before Thursday’s breakout. A return below the 40-day would infer a failed breakout on the daily bar chart, a bearish omen. However, if prices remain above $4.89, the bullish technical posture should prevail over the coming week, though the upcoming October WASDE and Crop Production reports on October 12 could disrupt that thesis.
30-day outlook: October is historically bullish for corn futures, before succumbing to fresh selling pressure in the month of November. Strength in October should be viewed as a selling opportunity, especially as carry out is seen at over 2 billion bushels. Current data makes the likelihood of a large miss in production unlikely in the October Crop Production report released next week. That renders any sustained strength will need to come from the demand side, which has picked up slightly in the past month, but an excess of ending stocks will likely continue to keep sellers interested in selling rallies, limiting gains throughout the month.
90-day outlook: Following potential seasonal strength in October, the seasonal gets much more bearish through November. Add in continued falling river levels and lagging export demand, and the situation looks much more bearish for corn over the next quarter. The USDA is projecting a 385 million bushel jump in corn exports from 2022-23, and the current outstanding sales indicates that is unlikely. Granted, export demand can turn on a dime, especially if El Niño brings an early end to seasonal rains in Brazil, harming second crop corn production, current prospects indicate an abundance of domestic corn, which will weigh on prices into the winter months.
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 fell 14 3/4 cents to $12.66 and gave up 9 cents on the week. December meal closed $5.10 lower for the day at $372.10 and lost $9.10 week-over-week. December soyoil rose 7 cents to 55.35 cents but lost 48 cents on the week.
5-day outlook: November soybean futures’ overnight attempt to extend Thursday’s gains lost steam at this morning’s open, with profit-taking in meal ultimately casting a shadow over prices. However, the Labor Department’s early morning release of nonfarm payroll data, which proved stronger-than-expected, was an added culprit of general weakness across commodities as it favors the Feds recent “higher for longer” view on interest rates. Moreover, traders are looking toward USDA’s upcoming Crop Reports, due out Oct. 12, with positioning efforts likely appearing in the form of an extension of this week’s sideways consolidation.
30-day outlook: Traders will subsequently take direction from USDA’s monthly crop data in addition to South American weather over the next month as planting efforts progress in Brazil and Argentina. World Weather Inc. maintains weather will remain tenuous in western and northern Argentina, but rain will fall in most summer crop areas of Brazil during the next ten days, raising soil moisture for improved planting conditions. However, the forecaster notes Brazil’s rainfall will be erratic in center west, leaving some need for greater rain, although increasing showers are expected for late next week and on into mid-month. In contrast, too much rain is expected from Rio Grande do Sul to Parana, where delays to fieldwork are expected over the next ten days.
90-day outlook: U.S. exports will continue to be a focus as the marketing year progresses. Through much of the calendar year, importing countries have looked to South America to fulfill their supply needs amid a bountiful Brazilian crop and an elevated U.S. dollar. Meanwhile, U.S. supply prospects will continue to be monitored as domestic supplies continue to linger at tighter-than-usual levels. Though, with export commitments running over 30% behind this same time a year-ago, a sustained rally in the coming months will certainly require increased export sales activity.
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 10 cents to $5.68 1/4, near the session low but gained 26 3/4 cents for the week. December HRW wheat futures lost 16 3/4 cents to $6.73 3/4, near the daily low, but for the week rose 10 cents. December spring wheat futures fell 11 cents to $7.20 1/2 but gained 11 1/4 cents on the week.
5-day outlook: It was a choppy trading week for the winter wheat futures markets. There are still no solid technical clues prices have put in near-term market bottoms. The up-trending U.S. dollar index which this week hit a 10-month high is only making U.S. wheat less competitive on the world trade markets. An upbeat U.S. jobs report this week will likely keep the Federal Reserve hawkish on monetary policy, which means the greenback will likely continue to appreciate in the near term.
Traders will look to USDA’s October crop data, due out Oct. 12, for near-term market direction, however, any fresh developments on the Russia-Ukraine war/grain-shipping front will continue to be market-sensitive for the grains.
30-day outlook: Wheat traders in the coming weeks will keep a close eye on weather patterns in major global wheat regions. World Weather Inc. today said U.S. hard red winter wheat areas will experience net drying for a while, but rain in Oklahoma and north-central Texas overnight was welcome. The Pacific Northwest and parts of the Midwest will see a few showers in the coming days, but drier weather will dominate the forecast period. Meantime, the forecaster said rains in Russia and northern Ukraine will begin to improve wheat establishment, but southeastern Europe dryness will be persistent. China’s wheat planting should increase with limited rain in this coming week. Argentina wheat areas still need significant rain. Australia rain in the southeast this week was ideal in supporting reproduction and filling which will continue in New South Wales into late month. Greater rain is needed in western Australia and parts of south Australia.
90-day outlook: U.S. winter wheat seedings are presently around 3% behind normal, but that’s not yet significant. Much depends on southern Plains this winter and any impact El Niño has on rainfall. Persistent dry conditions would push wheat prices higher. However, corn’s price trend may have a greater influence on wheat prices in the coming few months.
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 rose 60 points to 87.14 cents and lost 1 point on the week.
5-day outlook: December cotton futures ended the week on a positive note after edging lower the past three sessions. Lending support was a fading U.S. dollar following a strong upward move in the wake of stronger-than-expected September non-farm payroll data. Lingering supply concerns hover over the market, with traders anticipating the government’s monthly crop report data, due out Oct. 12. A Bloomberg Survey indicates analysts expect U.S. production around 12.91 million bales, down from an estimated 13.13 million in September. Meanwhile, ending stocks are expected at 2.96 million bales, down from 3.00 million in September.
30-day outlook: Traders will continue to closely monitor U.S. harvest weather as hot, dry conditions have persisted in key growing areas throughout the growing season, curbing production prospects. World Weather Inc. reports dry weather will occur through much of the next two weeks in western Texas and southwestern Oklahoma, improving conditions for cotton maturation and harvesting, with a few light showers popping up on occasion. The Blacklands, Coastal Bend and south Texas will also see dry weather through the next two weeks, with a few light showers on occasion, but one round of organized rain is expected Thursday into next Friday, which may interrupt fieldwork and cause discoloration to some cotton.
90-day outlook: U.S. cotton demand continues to grab market attention, with the global economic concerns heightening fears of a sustained downturn in U.S. cotton sales. Currently, export commitments are trailing this time a year ago by nearly 30%, indicating waning interest in U.S. supplies. However, this week, USDA provided a bit of optimism in its weekly export sales data for week ended Sept. 28, which showed whopping net sales of 240,000 RB for 2023-24. Sales for the week were up nearly 185,000 RB from the previous week and noticeably higher than the four-week average. Meanwhile, China was the top purchaser at 126,200 RB, along with Vietnam and Macau.
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.
