Morning report: Recession fears, slow shipping speeds slow any hopes of upward price momentum ahead of USDA reports. (Comments are updated by 7:30 a.m. Central Time.)
Plus – a preview of what to expect from today’s WASDE reports
Corn down 1-2 cents
Soybeans flat to 1-2 cents lower; Soymeal down $1.30/ton; Soyoil down $0.17/lb
Chicago wheat down 7-8 cents; Kansas City wheat down 4-5 cents; Minneapolis wheat down 1-3 cents
*Prices as of 6:55am CDT.
Feedback from the Field updates! How is harvest progressing on your farm this fall?! Click this link to take the survey and share updates about your farm’s harvest progress. I review and upload results daily to the FFTF Google(TM) MyMap, so farmers can see others’ responses from across the country – or even across the county!
Happy WASDE Day! Today’s reports are going to focus exclusively on 2022/23 ending stock and production adjustments. The September 30 report series largely finalized 2021/22 ending stocks and also provided some hints about what can be expected in today’s reports for 2022/23 corn and soybean volumes (Here are a couple E-corn-omics articles about the impacts of the September 30 reports on corn/soybeans and wheat markets to refresh ahead of today’s reports).
Here’s a preview of what items I will be watching in today’s reports. As always, our team will be providing live coverage of the October 2022 WASDE report release as it is released by USDA at 11am CDT. Follow our website (FarmFutures.com) or our social platforms (@FarmFutures) for the latest updates and insights.
Today’s preview will be exclusive to the AM newsletter only. I was out of town for an extended weekend to run the Army 10 Mile race with family and am just now getting back to full speed with the USDA reports. I apologize for any hassle!
Corn & Soybean Production
USDA will be updating yield forecasts based on farmer survey data in the October 2022 Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports. This is the last time USDA will update the figure before taking a final survey for the January 2023 WASDE report.
USDA is not expected to update any acreage forecasts in the October 2022 reports, as it has in previous reports after crop insurance and prevent plant data was finalized from the Farm Service Agency (FSA) and the Risk Management Agency (RMA) in last month’s September 2022 USDA reports.
Pre-report trade estimates are expecting lower corn yields (bullish) and higher soybean yields (bearish) in today’s reports. I am not necessarily surprised by this expectation – that closely mirrors trends we saw in farmer yield reporting in our August 2022 Farm Futures survey.
At any rate, the trade guesses were all reported in a tight range, which limits the amount of variability the markets expect from today’s reports. Translation – the market may already have priced in any potential change that USDA will make in today’s reports.
But that consideration will go out the window if USDA’s corn and soybean yield findings come in outside of the predicted trade range. In that case, expect much more volatile price shifts following USDA’s data release.
And it’s not an irrational worry. Trade guesses largely missed the marks on corn and soybean stock volumes and all U.S. wheat production (except spring wheat) in the September 30 USDA report series. However, this report will provide more clarity for markets going forward and could reduce the amount of market volatility that the January 2023 markets could cause when final yield estimates are reported.
Karen Braun from Reuters points out that USDA’s October corn yield estimates are typically the closest aligned to pre-report trade estimates than in any other Crop Production report (August, September, November, January). “For soybeans, the trade’s October yield guesses are second best after their January ones,” Braun writes.
Domestic Stocks – corn
Ending stocks is the section of today’s USDA reports where demand will be scrutinized. Ending stocks are of course dependent upon supply availability, which has been a prominent adjustment following production revisions in previous WASDE reports this year.
Nearby corn futures are trading just below the $7/bushel benchmark this morning. But as shipping speeds on the Mississippi River grind to a halt due to low river volumes, ethanol production slows to its slowest weekly output volumes in 19 months, and cattle continues to disappear on the Plains, the corn market may be susceptible to bearish headwinds in today’s report if USDA revises 2022/23 corn usage lower.
To be clear, the pre-report trade estimates seem confident that that will not happen. They have good reason not to worry – the September 30 Quarterly Grain Stocks report found higher-than-expected fourth quarter 2021/22 corn usage rates that pared off beginning stock volumes for 2022/23 supplies.
Corn’s stocks-to-use ratio (STU), which measures year-end supply tightness for a commodity, shrunk from USDA’s latest estimate of 10.27% for the 2021/22 to 9.21% following the September 30 reports. That is the ninth tightest corn supply on record.
And if USDA holds 2022/23 corn usage steady in the October 2022 WASDE report, U.S. corn supplies are likely to shrink even further over the next year. My redneck math puts 2022/23’s STU ratio for corn at 7.5%, which equates to the third tightest supply in U.S. history and suggests bullish price opportunities ahead.
So for corn, supplies are already tight and markets are largely trading on that bullish dynamic. But $7/corn could present a lot of challenges for end users, especially if demand is truly showing signs of fading. That leads me to believe that any downward usage revisions could be met with increased price sensitivity going forward.
Domestic Stocks – Soybeans
Conversely, USDA’s September 30 reports saw soybean supplies balloon in the Q4 2021/22 following a record-breaking third quarter usage rate. That report was a double economic hit for the soybean market, as it suggested a double bearish omen of both higher supplies and lower usage rates.
The 2021/22 ending stocks-to-use ratio of 5.4% prior to the September 30 reports indicated U.S. soybean stocks were at the twelfth tightest on record – a metric that kept bullish price pressure alive for soybean markets. But my redneck math estimates that the new 2021/22 stocks to use ratio for soybeans will likely be closer to 6.1% in the October 2022 WASDE report, reflecting more ample supplies.
That would be the 15th tightest U.S. soybean crop. But it would also give 2022/23 soybean stocks more breathing room. USDA currently has a 4.5% stocks-to-use ratio forecasted for 2022/23 soybean supplies – the fifth tightest on record.
Pre-report trade estimates have largely accounted for larger soybean stocks, so more bearish prospects are forecasted for soybean markets in today’s reports.
Domestic Stocks – Wheat
Wheat supplies are primed for bullish price opportunities today thanks to smaller wheat production forecasts in the September 30 USDA reports, which found both smaller yields and total acres harvested for the 2022 growing season.
But you may recall that wheat usage for the first quarter of the 2022/23 marketing year calculated out to the smallest rate (33.6%) as a percentage of total projected usage since the 2010/11 marketing year in the September 30 reports – a bearish omen. For perspective, over the past seven years, Q1 wheat usage has averaged 39.3% of total marketing year wheat consumption.
The lower usage increased 2021/22 wheat ending stocks and mitigated a fraction of the 2022 short crop’s losses. Two consecutive years of drought-riddled production shortfalls have tightened U.S. stocks considerably.
My calculations find that current marketing year stocks-to-use ratios will shrink from 31.4% to 25.0% in USDA’s October 2022 WASDE report. That means 2022/23 wheat supplies will likely shrink to the tightest level since 2013/14.
But despite some demand headwinds in the September 30 report, the surprisingly smaller 2023 wheat harvest overpowered any potential bearish price movement that could have crept into the wheat market on September 30.
But will it last? A strong dollar and high wheat prices are limiting export potential. Russia’s massive crop (as well as captured supplies from Ukraine) is a major – and economically speaking, likely a better – competitor to U.S. wheat export markets.
Wheat is in a bull market, but it will need more fodder if prices are to continue moving higher. The Russian-Ukrainian conflict and any ensuing supply availability hiccups presents the best opportunity for bullish price action in the short term for the wheat market.
Global Stocks
Any revisions to U.S. corn, soybean, and wheat supplies today are likely to have corresponding impacts to global supplies. And as I just mentioned above, massive Russian exportable supplies are likely to keep a lid on any bullish runs in the wheat market.
Planting season is underway in South America. While USDA is not expected to make any significant revisions to Brazilian and Argentine corn and soybean production today, it will still be an item closely watched by markets.
Erratic weather continues to plague farmers in South America, with some dodging excessive rain (Brazil) while others continue to battle persistent dryness (Argentina). A recent USDA attach? report expects Argentine soybean production to fall to 1.8 billion bushels (49MMT) from USDA’s current forecasts of 1.9 billion bushels (51MMT).
But many farmers have had to change rotations from corn to soybeans as drought continues to plague the Pampas Grains Belt in Argentina. “Farmers may still make changes if dry weather persists,” the USDA attach? in Buenos Aires noted.
USDA’s attach? in Beijing is forecasting a lower corn crop “due to lower planting area and yield losses caused by excessive rains in the northeast.” USDA currently forecasts that China will produce 10.8 billion bushels (274MMT) of corn, but the post suggests that volume could trend closer to 10.6 billion bushels (270MMT), which could increase China’s corn import volumes during the 2022/23 marketing year.
“Brazil will be eligible to ship corn to China before the end of the calendar year, earlier than previously rumored, following the signing of a phytosanitary protocol,” the attach? noted. This means that if China is to increase export demand for U.S. corn this fall, farmers will need to race against a very narrow window to ship freshly harvested corn supplies out to West Coast ports as Mississippi River export volumes continue to plague U.S. export prospects.
Corn
Corn prices dropped $0.01-$0.02/bushel overnight in anticipation of today’s USDA reports and amid ongoing harvest progress across the Midwest. Increasing focus is turning to South American weather and production forecasts as North American supply shortfalls are likely to disrupt trading patterns in the coming year.
“The Northern Hemisphere harvest will not eliminate the global feed supply deficit. Southern Hemisphere weather will be key for relieving prices,” Rabobank analysts said in a note, as reported by Reuters.
Yesterday’s Crop Progress report from USDA found only 31% of the U.S. corn crop had been harvested during a week of favorable harvesting weather. The trade had expected that 34% of the crop would’ve have been harvested as of last Sunday.
But that bullish price prospect was not enough to keep the bears away from corn prices this morning. USDA’s reports today will need to keep corn yield adjustments down and demand revisions to a minimum if we are hoping for a revival of $7/bushel corn.
Soybeans
Soybean prices were largely flat to $0.01-$0.02/bushel lower this morning as markets braced for larger soybean stocks in today’s USDA reports and fast harvesting paces across the country. Slow shipping speeds on the Mississippi River due to low river volumes continues to present bearish headwinds to the soybean complex as peak soybean export season ramps up.
Soybean harvest progress was reported as 44% complete as of October 9, according to USDA’s Crop Progress report yesterday. The trade was expecting a 41% completion rate, so the faster-than-expected pace exposed the soybean market to slightly bearish price prospects in the early morning trading session.
Wheat
Wheat prices edged $0.01-$0.07/bushel this morning as the dollar strengthened and as worries about tensions in Russia and Ukraine somewhat faded from peak fears earlier in the week. The growing Russian wheat crop also is creating bearish headwinds for U.S. wheat.
“Worries over war disruption to Black Sea supplies were tempered by expectations among some traders that a U.N.-backed shipping corridor for Ukrainian grain would be maintained and also by Russia’s comments that it could abolish an export quota for the second half of the season,” Gus Trompiz and Naveen Thukral reported for Reuters earlier this morning.
In the U.S., winter wheat planting progress was 55% complete as of Sunday, according to yesterday’s Crop Progress report. That value was in line with the average analyst guess ahead of the report’s release. But crop development remains slightly stunted amid persistently dry weather in the Plains.
Weather
Cooler temperatures are settling into the Upper Midwest and Central Plains today, according to NOAA’s short-term forecasts. Temperatures are likely to remain hot in the Southern Plains, which is likely to continue stressing drought-plagued winter wheat crops that have been recently planted in the region.
Rains to the east of the Mississippi River over the next 24 hours could slow harvest progress in the region over the next couple days. Up to an inch of rain is expected in the far Eastern Corn Belt over the next 24 hours, though regions closer to the Mississippi River could see no more than half an inch during that time span.
Cooler temperatures are finally expected to settle into the Midwest through the end of the month. NOAA’s 6-10-day outlook is showing cooler temperature probabilities for continental region to the east of the Mississippi River, though chances for perception continue to hover below average for much of the Upper Midwest during that time. The 8-14-day outlook is trending similarly cooler though precipitation probabilities are forecast near normal levels across much of the Heartland except the Upper Midwest, which is expected to remain slightly drier during that time.
Financials
Markets remain jittery as the U.K. attempts to salvage its debt program. Oil prices are on track for a 1.5% weekly loss as recession fears crept back into the energy complex. S&P 500 futures traded 0.66% higher this morning to $3,623.00 at last glance.
What else I’m reading this morning on our website, FarmFutures.com:
Water Street Solution’s Darren Frye asks farmers – what is your definition of a successful farm?
Bryce Knorr explains why harvest lows could already be at play in the markets.
Roger Wright encourages growers to consider multiple marketing strategies for unpriced soybeans.
Matthew Kruse evaluates recent big rains in Brazil and the effects of the Brazilian election on the country’s soybean prices.
USDA urges guaranteed lenders to hold off on foreclosures while the agency awaits final details on distress loan assistance.
Morning Ag Commodity Prices – 10/12/2022
Contract
Units
High
Low
Last
Net Change
% Change
DEC ’22 CORN
$ / BSH
6.9425
6.9025
6.915
-0.015
-0.22%
MAR ’23 CORN
$ / BSH
7.01
6.975
6.985
-0.0175
-0.25%
MAY ’23 CORN
$ / BSH
7.0225
6.985
6.9975
-0.0175
-0.25%
JUL ’23 CORN
$ / BSH
6.96
6.925
6.9375
-0.015
-0.22%
SEP ’23 CORN
$ / BSH
6.47
6.4525
6.455
-0.0075
-0.12%
DEC ’23 CORN
$ / BSH
6.3225
6.2925
6.3025
-0.015
-0.24%
AR2 ’24 CORN
$ / BSH
6.3825
#N/A
6.38
0
0.00%
AY2 ’24 CORN
$ / BSH
6.4
#N/A
6.4
0
0.00%
JUL ’24 CORN
$ / BSH
6.3525
#N/A
6.3525
0
0.00%
NOV ’22 SOYBEANS
$ / BSH
13.825
13.675
13.765
0.0025
0.02%
JAN ’23 SOYBEANS
$ / BSH
13.94
13.795
13.88
0
0.00%
MAR ’23 SOYBEANS
$ / BSH
14.0275
13.89
13.965
-0.005
-0.04%
MAY ’23 SOYBEANS
$ / BSH
14.1075
13.975
14.05
-0.0025
-0.02%
JUL ’23 SOYBEANS
$ / BSH
14.14
14.01
14.075
-0.015
-0.11%
AUG ’23 SOYBEANS
$ / BSH
14.005
13.9175
13.9525
-0.0125
-0.09%
SEP ’23 SOYBEANS
$ / BSH
13.74
13.7025
13.7025
0
0.00%
NOV ’23 SOYBEANS
$ / BSH
13.655
13.5225
13.61
0.01
0.07%
AN2 ’24 SOYBEANS
$ / BSH
13.655
#N/A
13.635
0
0.00%
AR2 ’24 SOYBEANS
$ / BSH
0
#N/A
13.58
0
0.00%
AY2 ’24 SOYBEANS
$ / BSH
0
#N/A
13.565
0
0.00%
OCT ’22 SOYBEAN OIL
$ / LB
0
#N/A
68.98
0
0.00%
DEC ’22 SOYBEAN OIL
$ / LB
65.78
64.9
65.29
-0.18
-0.27%
OCT ’22 SOY MEAL
$ / TON
410.4
410.4
410.4
0
0.00%
DEC ’22 SOY MEAL
$ / TON
406.1
403.7
404.8
-1.2
-0.30%
JAN ’23 SOY MEAL
$ / TON
402.9
400.6
401.5
-1.2
-0.30%
MAR ’23 SOY MEAL
$ / TON
398.6
395.9
396.9
-1.3
-0.33%
MAY ’23 SOY MEAL
$ / TON
396.7
394.2
394.7
-1.7
-0.43%
DEC ’22 Chicago SRW
$ / BSH
9.0375
8.9
8.9375
-0.0725
-0.80%
MAR ’23 Chicago SRW
$ / BSH
9.1975
9.06
9.095
-0.075
-0.82%
MAY ’23 Chicago SRW
$ / BSH
9.265
9.1325
9.165
-0.075
-0.81%
JUL ’23 Chicago SRW
$ / BSH
9.11
9.0075
9.035
-0.0775
-0.85%
SEP ’23 Chicago SRW
$ / BSH
8.99
8.9625
8.99
-0.08
-0.88%
DEC ’23 Chicago SRW
$ / BSH
9.0425
8.97
9.0075
-0.07
-0.77%
AR2 ’24 Chicago SRW
$ / BSH
8.99
8.9325
8.955
-0.07
-0.78%
DEC ’22 Kansas City HRW
$ / BSH
9.9375
9.83
9.855
-0.0525
-0.53%
MAR ’23 Kansas City HRW
$ / BSH
9.91
9.8025
9.83
-0.0525
-0.53%
MAY ’23 Kansas City HRW
$ / BSH
9.85
9.775
9.81
-0.04
-0.41%
JUL ’23 Kansas City HRW
$ / BSH
9.6675
9.61
9.645
-0.045
-0.46%
SEP ’23 Kansas City HRW
$ / BSH
9.5825
#N/A
9.595
0
0.00%
DEC ’23 Kansas City HRW
$ / BSH
9.5675
#N/A
9.585
0
0.00%
AR2 ’24 Kansas City HRW
$ / BSH
0
#N/A
9.505
0
0.00%
DEC ’22 MLPS Spring Wheat
$ / BSH
9.89
9.8
9.815
-0.0375
-0.38%
MAR ’23 MLPS Spring Wheat
$ / BSH
9.9375
9.8525
9.8825
-0.0275
-0.28%
MAY ’23 MLPS Spring Wheat
$ / BSH
9.965
9.95
9.95
-0.005
-0.05%
JUL ’23 MLPS Spring Wheat
$ / BSH
9.94
9.94
9.94
-0.0075
-0.08%
SEP ’23 MLPS Spring Wheat
$ / BSH
9.535
#N/A
9.54
0
0.00%
DEC ’23 MLPS Spring Wheat
$ / BSH
9.475
#N/A
9.4925
0
0.00%
AR2 ’24 MLPS Spring Wheat
$ / BSH
0
#N/A
0
0
0.00%
DEC ’21 ICE Dollar Index
$
113.495
112.91
113.095
-0.033
-0.03%
NO ’21 Light Crude
$ / BBL
89.93
88.27
89.59
0.24
0.27%
DE ’21 Light Crude
$ / BBL
88.56
86.91
88.26
0.29
0.33%
NOV ’22 ULS Diesel
$ /U GAL
4.0217
3.8601
3.9926
0.0618
1.57%
DEC ’22 ULS Diesel
$ /U GAL
3.6718
3.55
3.6511
0.0281
0.78%
NOV ’22 Gasoline
$ /U GAL
2.6581
2.5838
2.6455
0.0182
0.69%
DEC ’22 Gasoline
$ /U GAL
2.5058
2.4407
2.4967
0.0162
0.65%
OCT ’22 Feeder Cattle
$ / CWT
0
#N/A
175.075
0
0.00%
NOV ’22 Feeder Cattle
$ / CWT
0
#N/A
176.2
0
0.00%
CT2 ’21 Live Cattle
$ / CWT
0
#N/A
145.8
0
0.00%
DE ’21 Live Cattle
$ / CWT
0
#N/A
148.575
0
0.00%
OCT ’22 Live Hogs
$ / CWT
0
#N/A
93.025
0
0.00%
DEC ’22 Live Hogs
$ / CWT
0
#N/A
79.525
0
0.00%
OCT ’22 Class III Milk
$ / CWT
21.79
#N/A
21.79
0
0.00%
NOV ’22 Class III Milk
$ / CWT
21.03
#N/A
21.13
0
0.00%
DEC ’22 Class III Milk
$ / CWT
20.63
20.62
20.63
-0.09
-0.43%
