My Account >> Market Comment for 01/12/2023 (Closing)


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CORN COMMENTS

ADVICE REMINDER: Corn hedgers should have exited Sep. futures hedges covering 20% of expected 2023 production today.

Corn futures rallied 5 to 15 cents after USDA surprised traders by cutting 200 mil. bu. off its 2022 U.S. crop estimate and lower its 2022-23 carryout slightly when an increase was expected. A sharply lower USDA forecast for U.S. corn exports limited gains along with poor weekly export sales, and bull spreading activity further capped 2023-crop futures strength. Nearby Mar. corn futures rose 15 cents to $6.71, while July futures rose 13 cents to $6.61 1/2 and Dec. 2023 corn rose 6 3/4 cents $5.96.

Today's technical action was clearly strong with futures posting significant bullish outside trading days and finishing near their session highs. Today's rally occurred on the highest futures trading volume since at least Nov. 15, which is also a signal of strength The preliminary volume total was nearly 445,000 contracts.

Nearby Mar. corn bounced off its recent lows and has established significant nearby support at $6.48 1/4-$6.49 1/4. Mar. corn posted its highest close in 8 sessions and will now likely test its late December high at $6.85. A close above that would open further upside potential to the October highs at roughly $7.05-$7.12. A close below $6.49 1/4 is needed to erase today's positive action. Sep. and Dec. corn posted strong bullish reversals off of 4-1/2 month lows charted this morning. Sep corn now has nearby resistance at $6.15 3/4, while resistance from the market's December high is at $6.31 1/4, with the fall high at $6.52 1/4. Sep. corn would have to close below $6.00 1/4 to invalidate today's reversal.

USDA's new U.S. corn carryout forecast is only 15 mil. bu. below the December forecast, but USDA on average was expected to raise the carryout by 57 mil. bushels. USDA's ending stocks/use ratio is at 8.9%, unchanged from December. USDA slashed projected U.S. corn exports for 2022-23 by 150 mil. bu., to 1.925 bil., based on smaller U.S. supplies and the slow pace of export sales to date. USDA also cut feed/residual usage by a modest 25 mil. bushels, based on implied Q1 use. Surprisingly, USDA did not cut projected corn-for-ethanol use further even though U.S. through the first 4 months of the marketing year has been well below the pace needed to meet its forecast.

USDA's world corn balance sheet held no surprises for the market. USDA did lower its world carryout estimate by roughly 2 MMT. World production was cut by nearly 6 MMT and the old-crop carry-in was lowered slightly, but world use was cut by more than 5 MMT. USDA cut its forecast for Argentina's crop by 3 MMT and its forecast for Brazil's crop by 1 MMT but raised China's crop by 3.2 MMT. USDA cut Argentina's projected exports by 3 MMT but raised its forecast of Ukraine's 2022-23 corn exports for the second month in a row, by 3 MMT to 20.5 MMT.

The big cuts in harvested acreage in USDA's crop report were in the western producing states, which were hit hard by drought. USDA lowered harvested corn acreage by 710,000 in Kansas, 480,000 in Nebraska, 240,000 in S. Dakota and 120,000 in Colorado. Smaller cuts were registered in Iowa, Minnesota, Missouri and N. Dakota. In contrast, harvested acreage rose slightly in Illinois, Indiana, Ohio, Wisconsin and Michigan.

Central Illinois processor spot corn bids are steady, ranging from 10 cents under Mar. futures to 28 over, according to USDA. CIF basis bids for delivery of corn to the U.S. Gulf this afternoon are unquoted for the January through March delivery periods.

SOYBEAN COMMENTS

NO NEW RECOMMENDATIONS

Old-crop soybean futures ran up gains ranging from 9 1/4 to 25 1/2 cents on the back of USDA's lower-than-expected estimates of 2022 U.S. production and 2022-23 ending stocks. A smaller estimate of Argentina's crop was also supportive for prices, while gains were capped by continued strong expectations for Brazil's crop and a lower U.S. export forecast from USDA. Soy product prices rallied with soybeans. Most-active Mar. soybean futures rose 25 1/2 cents to $15.18 1/2, while Nov. futures rose 9 1/4 cents to $13.96 1/4. Most-active Mar. soyoil futures rose 114 points to 63.19 cents, while Mar. soymeal futures rose $6.70 to $481.30.

The soybean price charts are looking friendly again after today's positive action, with nearby Mar. futures posting their highest close in 8 sessions. The market will need to take out resistance at its late December higher of $15.37 1/2, though, to set up a possible test of the contract high at $15.72 1/4. Mar. beans now have nearby chart support at $14.93 1/4. Nov. soybeans charted an outside day up and posted their highest close in 4 sessions, but their inability to hold above $14.00 is disappointing. Nearby resistance for Nov. is at $14.05-$14.06, with the market's December high at $14.27 3/4, while nearby support is now at $13.78 1/2-$13.82 3/4 and a close below $13.80 would look bearish.

While USDA cut its estimate of 2022 U.S. soybean production by 70 MMT lowering both the estimated yield and harvested acreage, that cut was largely offset by a 55-mil. bu. cut to projected 2022-23 exports, which are now seen running 1.990 bil. bu., down 7.8% from last year. This estimate implies very low net U.S. export sales over the remainder of the marketing year. U.S. export sales as of Jan. 5 totaled nearly 1.632 bil. bu. or 82% of USDA's export forecast. On avg. over the prior 5 yrs., sales were just 75% of final exports at the same point. USDA now projects a U.S. ending stocks/use ratio of 4.8%, down from 5.0% in December.

Yield cuts in USDA's Crop Production report were spread out over a number of producing states. Among major producing states, the biggest cut was 2.5 bu. per acre in Missouri. The Indiana yield was lowered 1.5 bu. to 57.5 bu., while the Illinois yield was lowered 1 bu. to 63 and the Iowa yield was lowered 0.5 bu. to 58.5 bushels. The Kansas yield was lowered another 0.5 bu., while Nebraska, N. Dakota and S. Dakota each saw a 1 bu. cut. Michigan and Ohio were the only major producing states where the yield went up from November.

As expected, USDA lowered its estimate of Argentina's production, pegging it at 45.5 MMT, down 4.0 MMT for December due to the ongoing drought there. That may not be a big enough cut though. The Buenos Aires Grains Exchange today slashed its crop forecast to 41.0 MMT from the previous level of 48.0 MMT. As we noted yesterday, the Exchange has estimated that in a “worst-case” scenario, production could fall to just 35.5 MMT.

USDA, meanwhile, raised its forecast for Brazil's crop by 1 MMT to 153 MMT and hiked its forecast for Brazil's 2022-23 exports by 1.5 MMT to 91.0 MMT, offsetting most of a 2-MMT cut to Argentina's projected exports. Meanwhile, USDA cut its forecast for China's imports by 2.0 MMT to 96.0 MMT, raising its estimate of China's domestic crop to 20.33 MMT from 18.4 MMT. USDA raised its world soybean ending stocks estimate by 790,000 MT to 103.52 MMT. That indicates a healthy world ending stocks/use ratio of 27.3%.

Net U.S. soybean export sales for the week ended Jan. 5 are expected to run 22.0-44.0 mil. bu. compared with the previous week's 32.0 mil. bu., of which 26.5 mil. were for 2022-23 delivery. Weekly export shipments may be little changed from the previous week's 54.3 mil. bu. based on weekly export inspections.

Central Illinois processor spot soybean basis bids are steady, ranging from par with Mar. futures to 10 over, according to USDA. CIF basis bids for delivery of soybeans to the U.S. Gulf are steady to slightly stronger vs. Wednesday afternoon. The CIF bid for January delivery is steady at 110 over Mar. futures, with the bid for February delivery steady at 103 over and the bid for March delivery 1 cent stronger at 96 over.

WHEAT COMMENTS

WHEAT HEDGE REMINDER: Our order to buy July wheat futures against 10% of expected 2023 production was triggered at today's close. We are out of the short hedge position in SRW and HRW futures.

Wheat futures ended higher, with most contracts in Kansas City and Minneapolis gaining more than a dime while Chicago wheat was just slightly higher. Chicago wheat was up 1 to 2 cents, settling at 47.42 ¾ in the March, $7.50 ¾ in the May and 7.54 1/5 in the July. Kansas City wheat was up 11 to 13 cents, settling at $8.35 in the March, $8.31 ½ in the May and $8.27 ½ in the July. Minneapolis wheat rose 8 ½ to 13 cents, settling at $9.12 ¼ in the March, $9.07 in the May and $9.01 ¼ in the July.

The market rallied in reaction to the USDA reports along with corn and soybean futures, even though USDA pegged U.S. winter wheat seedings for 2023 harvest solidly above the range of trade expectations. USDA's Dec. 1 wheat stocks estimate and a slightly lower U.S. carryout estimate for 2022-23 were supportive for wheat prices. HRW wheat futures led the rally, gaining significantly on a spread basis against SRW wheat contracts.

USDA pegged U.S. all-winter wheat seedings for 2023 at 36.95 million acres, up 3.68 million acres or 11.1% from last year's final seedings estimate of 33.271 million and above trade estimates that ranged from 33.380-36.200 million acres. The seedings estimate has likely not had a strong negative impact on prices because potential for acreage abandonment is high due to current drought conditions in the Plains, alt-hough there has been some improvement in moisture conditions recently.

Dec. 1 U.S. wheat stocks were pegged by USDA at 1.280 billion bushels, below the range of trade esti-mates and 88 million bushels or 6.4% below a year earlier. The lower stocks estimate led USDA to raise its estimate of 2022-23 feed/residual use by 30 million bushels to 80 million, USDA also raised estimated seed use by 3 million bushels, but revised up the old-crop wheat carry-in by 29 mil. bu. to 698 mil. bu., offsetting most of the increase in this year's usage.

Earlier in the day, weekly U.S. wheat export sales came in at only 3.4 million bushels, below trade expectations that ran 4.5-19.0 million and the previous week's sales of 5.3 million bushels, of which only 1.7 million were for 2022-23 delivery.

COTTON AND RICE COMMENTS

NO NEW RECOMMENDATIONS

Cotton futures ended lower, sinking amid a bearish crop estimate for 2022 and ongoing weak demand. March cotton settled down 2.22 cents to 82.04, after trading a range of 81.85 to 84.87. May cotton ended down 2.12 cents to 82.27, and July cotton was down 2.01 cents to 82.35.

USDA lowered its harvested acreage estimate for 2022 to 7.44 million, from 7.88 million previously, but that decrease was more than offset by a hike in yield to 947 pounds per acre, up from 868 pounds previously, and the prior year's yield of 819 pounds. The result was a crop estimate of 14.68 million bales, up from 14.24 million previously, though still down from 17.52 million in 2021. While USDA lowered exports only slightly, to 12.0 million bales from 12.25 million previously, the carryout was raised substantially, to 4.2 million bales from last month's estimate of 3.5 million. The projected price for the year was lowered to 83 cents, from 85 cents last month.

Weekly export sales reported Thursday, while still far from impressive, were an improvement from the recent trend at a net 72,600 bales. This included 16,000 to China. Cotton export shipments came in at 150,500 bales, up 24% from the prior four-week average.

Rice futures were higher with support from USDA and the broader strength in the grains complex. January rice settled up 31 cents to $17.78. March gained 28 ½ cents to $18.05 ½, after trading a range of $17.60 to $18.07. May was up 27 ½ cents to $18.34.

In contrast to cotton, USDA had bullish revisions on the rice balance sheet. For long-grain specifically, USDA cut the 2022 crop estimate to 128.2 million hundredweight, down from 131.7 million cwt. previously and 144.6 last year. That more than-offset a cut in exports of 2 million cwt. to 49.0 million cwt. USDA slashed the carryout to 21.8 million cwt., down from 27.3 million last month and 24.6 million a year earlier. For all rice, the carryout was cut to 32.1 million cwt., from 38.1 million last month.

LIVESTOCK COMMENTS

FEEDER CATTLE BUYERS today were advised to sell March 2023 feeder cattle futures at the market against 25% of 1st qtr. purchase needs to exit the current long hedge position.

Live cattle futures ended lower, pressured by weaker wholesale beef prices and a lack of Plains cash market activity. Nearby months lost 20 to 40 cents, with February settling at $157.55, April at $160.925, and June at $156.925. The afternoon Boxed Beef report showed Choice down $3.24 and Select down $1.09.

USDA did report some light trade this afternoon in Nebraska at $157, steady with last week. Otherwise, no significant trade has been reported in the southern Plains this week. There are more packer bids being posted, but packers and feedlots appear to be several dollars apart on prices. Packer bids of $154-$155 are reported in Kansas, vs. last week's $157 trade, while feedlots are asking $158-$159. USDA today raised its forecast for 2023 U.S. beef production by 170 mil. lbs. or 0.6%, but still sees production falling by 6.5% from last year.

Feeder cattle futures were lower, losing a dollar or more under pressure from strong corn prices. January feeders lost $1.00 to $182.125, and March was down $1.275 to $184.275. April lost $1.175 to $188.40. The CME Feeder Cattle Index for Thursday was up 4 cents to $182.36.

Lean hog futures were pressured from technically-driven selling and weak cash market fundamentals. Losses were limited in summer-month contracts by prospects for hog supplies to be tighter than last year through mid-year. February lean hogs lost 55 cents to $78.75. April hogs were under the most pressure, falling to a three-month low and settling down $1.225 to $87.175. June hogs lost 38 cents to $103.875. The afternoon pork carcass cutout value was down $1.35.

The cash hog market tone was mixed. The national avg. negotiated cash carcass price was a modest 39 cents stronger at midmorning but the weighted avg. price for hogs sold under swine/pork agreements was $73.97, down from $74.56 on Wednesday. The lagging CME cash lean hog index is 48 cents lower at $75.96. USDA in its monthly supply/demand report raised projected U.S. pork production by 135 million lbs. or 0.5%, but also raised projected exports by 70 mil. lbs. or 1.1%.

BROCK MARKET POSITIONS:

CORN: Cash-only Marketers: 2022 CROP: 75% sold on hedge-to-arrive and regular forward contracts (11-30-21, 1-6-22, 2-3-22, 3-16-22, 5-4-22, 6-1-22, 8-24-22, 9-22-22, 10-17-22, 11-10-22, 1-4-23). 2023 CROP: 25% sold on regular forward contracts and hedge-to-arrive contracts. (5-5-22, 9-29-22, 1-4-23, 1-10-23)

Hedgers: 2022 CROP: 75% cash sold on hedge-to-arrive contract and regular forward contracts (11-30-21, 2-3-22, 3-16-22, 3-28-22, 5-4-22, 6-1-22, 8-24-22, 9-22-22, 10-17-22, 11-10-22, 12-14-22); aside futures. 2023 CROP: 15% sold on regular forward contracts and hedge-to-arrive contracts (5-5-22, 9-29-22, 1-10-23); aside futures, long 1 $6.00 Sep. 2023 put option/short 2 Sep. $7.00 call options on 10% (12-2-22).

SOYBEANS: Cash-only marketers: 2022 CROP: 80% sold (10-1-21, 1-6-22, 2-25-22, 4-25-22, 5-4-22, 6-22-22, 8-24-22, 11-8-22, 12-1-22, 12-19-22). 2023 CROP: 20% sold on hedge-to-arrive contracts and regular forward contracts (5-4-22, 11-15-22, 12-1-22, 1-4-23).

Hedgers: 2022 CROP: 80% sold in the cash market (10-1-21, 1-6-22, 2-25-22, 4-25-22, 5-4-22, 6-22-22, 8-24-22, 11-8-22, 12-1-22, 12-19-22), aside futures. 2023 CROP: 15% cash sold on hedge-to-arrive contracts (5-4-22, 11-15-22, 1-4-23), short Nov. 2023 soybean futures on 20% (1-5-23).

SRW WHEAT: Cash-only Marketers: 2022 Crop: 100% sold (8-5-21, 12-28-21, 2-25-22, 3-7-22, 3-16-22, 4-20-22, 6-1-22, 9-16-22, 9-21-22, 10-18-22, 11-9-22). 2023 CROP: 25% sold on regular forward contracts and hedge-to-arrive contracts (11-5-21,4-29-22, 10-18-22, 1-10-23).

Hedgers: 2022 Crop:100% cash sold (8-5-21, 12-28-21, 2-25-22, 3-7-22, 3-16-22, 4-20-22,6-1-22, 9-16-22, 9-21-22, 10-18-22, 11-9-22). 2023 CROP: 25% sold on regular forward contracts and hedge-to-arrive contracts (11-5-21, 4-29-22, 10-18-22, 1-10-23), aside futures.

HRW WHEAT: Cash-only Marketers: 2022 Crop: 100% sold (8-5-21, 12-28-21, 2-25-22, 3-7-22, 3-16-2022, 4-20-22, 6-1-22, 9-16-22, 9-21-22, 10-18-22, 11-9-22). 2023 CROP: 25% sold on regular forward contracts and hedge-to-arrive contracts (11-5-21, 4-29-22, 10-18-22, 1-10-23)

Hedgers: 2022 Crop:100% cash sold (8-5-21, 12-28-21, 2-25-22, 3-7-22, 3-16-22,5-20-22, 6-1-22, 9-16-22, 9-21-22, 10-18-22, 11-9-22). 2023 CROP: 25% sold on regular forward contracts and hedge-to-arrive contracts (11-5-21, 4-29-22, 10-18-22, 1-10-23), aside futures.

LEAN HOGS: Short June 2023 lean hog futures on 25% of 2nd qtr. marketings (1-4-23); short April 2023 lean hog futures on 25% of Q1 marketings (1-10-23), short Aug. 2023 lean hog futures on 25% of 3rd qtr. marketings.

LIVE CATTLE: Aside futures.

FEEDER CATTLE: Buyers are aside futures. Sellers also remain aside futures.

MILK: Aside futures. No cash forward contracts advised.

FEED BUYERS: CORN: No forward coverage in place. SOYMEAL: No forward coverage in place.

COTTON: Cash-only Marketers: 2022 CROP: 50% forward contracted (9-27-21, 11-19-21, 2-14-22, 4-14-22, 11-18-22). 2023 CROP: No sales recommended.
Hedgers: 2022 CROP: 50% forward contracted (9-27-21, 11-19-21, 2-14-22, 4-14-22, 11-18-22); Aside futures. 2023 CROP: No cash sales recommended. Short Dec. 2023 cotton futures on 10% (1-4-23).

RICE: 2022 CROP: 80% cash forward contracted (3-2-22, 3-8-22, 4-20-22, 6-1-22, 8-18-22, 11-14-22, 11-16-22, 1-4-23). 2023 CROP: No sales recommended.


NOTE: Along with the potential for profit, there is always a risk of losing money when trading futures and options contracts.
Copyright 2019 by Richard A. Brock & Associates, Inc.
Any unauthorized redistribution or reproduction of this commentary is strictly forbidden.