Crops Analysis | September 23, 2022
5-day outlook: Corn futures plunged to the lowest level in over two weeks as the U.S. dollar’s rally to 20-year highs and escalating recession concerns fueled a broad commodity market sell-off. Crude oil futures fell under $80 per barrel for the first time since early January. Outside markets, along with rising tensions with Russia, likely will continue to influence grain markets next week. Traders will also watch for USDA’s weekly updates on harvest progress Monday, along with the agency’s quarterly Grain Stocks Report Sept. 30. Earlier this week, USDA reported 7% of the U.S. crop was harvested as of Sept. 18, up from 5% a week earlier but slightly behind the 8% average for the previous five years.
30-day outlook: Corn futures remain in a nine-week uptrend, but today’s declines sent the December contract near trendline support around $6.58. Shrinking estimates for the U.S. crop and projected tight ending stocks for 2022-23 are supportive over the long-term, macroeconomics and outside markets are decidedly bearish, and speculative money flow out of commodities, if it continues, will further burden grain prices. Early harvest yield results will be closely followed, and USDA’s Oct. 12 Crop Production update will help set the market’s tone next month.
90-day outlook: We expect the estimated size of the U.S. crop to be revised lower, but a smaller crop is likely already factored into current prices levels, meaning demand will be one key to longer-term market direction. Domestic ethanol demand has dropped off sharply recently and U.S. exports are off to a slow start in 2022-23. USDA Thursday reported net U.S. corn sales of 182,300 MT for the week ended Sept. 15, down sharply from 583,100 MT the previous week and well below trade expectations for 400,000 to 850,000 MT. USDA’s final Crop Production update of the calendar year Nov. 9 will also be closely studied.
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 tumbled 31 1/4 cents to $14.25 3/4, down 22 3/4 cents for the week and the contract’s lowest closing price since $14.12 1/4 on Sept. 9. December soymeal dropped $5.60 to $423.30 and December soyoil fell 278 points to 63.68 cents.
5-day outlook: Soybean futures plunged to two-week lows as the soy complex followed corn and wheat lower amid intensifying macroeconomic concerns. Outside markets, such as crude oil, likely will continue to influence the soy complex next week. Harvest activity is expected to accelerate in coming weeks in light of a generally favorable Midwest weather outlook through early October. Earlier this week, USDA reported 3% of the U.S. crop was harvested as of Sept. 18, under both the 5% five-year average and analyst expectations, also 5%. Harvesting “should become aggressive Monday through at least Oct. 5,” World Weather Inc. said today. USDA reports its quarterly Grain Stocks update Sept. 30.
30-day outlook: Accelerating harvest may burden soybean prices over the coming month, and U.S. equities and other outside markets could be another source of pressure. The S&P 500 index sank around 3% today to the lowest level since mid-June. Stepped-up competition from South American soybeans adds another bearish element, as Argentina’s devaluation of its peso earlier this month has sparked exports. China booked as much as 3 MMT of Argentine soybeans the past two weeks, almost as much as the roughly 3.75 MMT it imported from Argentina all of last year, Bloomberg reported, citing people familiar with the matter.
90-day outlook: Signs of softening U.S. export demand and an outlook for a sharp improvement in South American production loom as bearish longer-term influences. USDA Thursday reported net weekly U.S. soybean sales of 446,400 MT for 2022-23, down sharply from 843,000 MT the previous week. U.S. export commitments so far in 2022-23 are running 9.9% ahead of a year-ago, down from 11.8% ahead as of last week. Agribusiness consultancy Datagro estimated 2022-23 South American soybean production at a record 219.34 MMT, up 21% from 181.95 MMT in 2021-22. But tight U.S. soybean stocks in 2022-23 may limit price downside. USDA’s Crop Production Report Nov. 9 will another key to longer-term price direction.
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 fell 30 1/4 cents to $8.80 1/2, but still rose 20 3/4 cents for the week. December HRW wheat dropped 29 cents to $9.50 1/2, up 15 1/4 cents for the week. December spring wheat tumbled 28 1/2 cents to $9.49 1/4, up 20 1/2 cents for the week.
5-day outlook: Wheat futures plunged amid growing economic concern and risk aversion in global financial markets. However, bullish near-term technicals may limit selling pressure early next week. Key for the grains will be how the stock, financial and crude oil markets behave next week. Winter wheat planting progress will also be closely watched. Light rain in U.S. HRW areas over the past day was “welcome and good for crops, but more rain will be needed to ensure the best winter crop emergence and establishment.”
30-day outlook: Increasing tensions with Russia and the prospect of grain supply disruptions in the Black Sea region could underpin wheat prices over the near-term. Russian President Putin said earlier this week he may not continue an agreement that allows Ukraine grain shipments out of Black Sea ports beyond the deal’s expiration in November.
90-day outlook: Escalating prospects for a global recession may weigh on grain prices the rest of the year. Crude oil and other commodity markets tumbled this week and may have further downside. Soft U.S. exports and an outlook for stronger Russian production also rank as bearish long-term factors. The International Grains Council (IGC) on Thursday said it raised its forecast for 2022-23 global wheat production by 14 MMT, to 792 MMT, reflecting an upward revision for the Russian wheat crop. SovEcon also raised its outlook for Russia’s 2022 wheat crop, to 100 MMT from 94.7 MMT.
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 futures fell the limit, 400 points, to 92.54 cents, down 675 points for the week.
5-day outlook: Cotton futures will continue to follow outside markets, such as crude oil and the U.S. dollar, as concern over inflation and global demand hang over commodities. The U.S. dollar index today soared to a fresh 20-year high in the wake of the Federal Reserve’s latest rate hike, raising concern over demand for dollar-denominated commodities. USDA will update harvest progress Monday. As of Sept. 18, the U.S. cotton crop was 11% harvested, even with the five-year average.
30-day outlook: Accelerating harvest may add price pressure, though persistent drought during the U.S. planting and growing season has lowered yield prospects. USDA’s next Crop Production update Oct. 12 will be one key to price direction. Potential hurricanes in the Gulf of Mexico, along with crop quality concerns, could also influence the market. World Weather said it expected no damage in the Southeast if the developing tropical cyclone moves across Florida’s peninsula. However, if the storm turns more to the north, the impact on cotton could be substantial. The forecaster estimates that landfall of the tropical cyclone is most likely to occur during the early to middle part of next week.
90-day outlook: The global economy and export demand will be key to long-term cotton market direction. Economic updates from China will be closely watched for indications on demand from the world’s largest cotton importer. Economic numbers and final U.S. crop production will drive supply and demand, and a higher dollar could curb U.S. exports. However, reduced production could ultimately limit the amount of product available for export.
What to do: Get current with advised 2022-crop sales and hedges.
Hedgers: You should be 70% forward-priced for harvest delivery on expected 2022-crop production. You should also have 30% of 2022-crop hedged in December futures at 99.58 cents.
Cash-only marketers: You should be 70% forward-priced for harvest delivery on expected 2022-crop production.
