Market Thoughts 10.02.22
Dec corn gained just ¾ cent last week to close at 677’4, though once again took a bizarre path to that outcome. Futures had been trending lower all week, then spiked 27 cents higher following Friday’s bullish Stocks report, only to give back 19 cents by end of Friday’s session. That’s now three straight weeks where corn has a weekly high near 700 only to fall back and close the week within a cent of 677. Soybeans lost 61’0 to finish at 1364’6, their worst weekly performance since early June and the lowest weekly close for beans since July 18th that coincided with our Buy Signal and subsequent $2.00 rally. Dec spring wheat gained 32’6 to finish at 982’0. This makes four straight weekly gains for that contract with Dec futures touching 10.00 on Friday for the first time since early July.
Once again, the USDA delivered on their tendency to surprise the market with September 30th Quarterly Stocks numbers. 9/1 corn stocks came in 135 million bushels below the average pre-report estimate and 43 million bushels below the lowest trade guess. This would be bullish in any S&D environment but remove another 135 million bushels from a 22/23 corn balance sheet that is already at demand-rationing levels and it should catalyze a substantial move higher. Soybean stocks however were reported 30 million bushels above the average estimate and 8 million bushels above the highest guess. That is certainly bearish and would suggest of course lower prices. Our immediate conclusion though was with these two outcomes at such odds, the bullish corn number matters way more than the bearish bean number as potentially running out of corn is a bigger problem than having a few more beans sitting around. The market seemed to agree with us initially only to have prices completely collapse by end of session.
If our business consisted only of looking useful in weekly comments, we’d be inclined to take a victory lap here. Wheat continued its breakout higher last week, building on an expectation we made four weeks ago while beans lost 61 cents following last Sunday’s detailed case for a price collapse. Unfortunately, we still have to figure out what happens next and despite how nicely these outcomes fit with our prior comments we have plenty of confusion following Friday. All of the bearish factors from last week’s update certainly still apply, but the news flow this week was decidedly more bullish. Wheat certainly so as the whole ‘sham election/defend our territory by any means necessary’ thing suggests hostilities continue in Ukraine while Argentina lowered its crop estimate and U.S. winter wheat production numbers were lower than trade was expecting. The US Dollar did make new highs again on Wednesday but proceeded to drop nearly 270 basis points into Friday’s close. And again, that stocks number for corn makes the already bullish corn S&D much tighter than a week ago.
So what happens next? Beans likely keep stuff under pressure to start this week and perhaps fill the 1350 gap but would guess after this week corn/wheat bullish news becomes the focus. It’s worth noting that 2021, 2012, 2011 and 2008 (the only years that are in any way analogous to 2022) all saw beans make seasonal lows between October 7th and October 15th and go on to post sizable recoveries.