Market Thoughts 10.09.22
Dec corn gained 5’6 this week to close at 683’2. It was an inside week as both the high and the low fell within the range from the week prior while also becoming the third straight week corn did not make a new high for the move. The December contract continues to consolidate near recent highs with the past four weekly closes all between 676 and 688. November soybeans ended the week up 2’2 at 1367’0. Beans dipped all the way to 1350, nearly filling the July 25th gap in the process before recovering into Friday. December spring wheat lost 14’0 to close at 968’0, ending a streak of four straight weekly gains.
Soybeans continued their losses early last week as expected and nearly filled the gap we discussed last edition. We also noted the “high price going into harvest” years of 2008, 2011, 2012 and 2021 featured harvest lows by October 15th, or by the end of this week if 2022 follows the same pattern. Alongside harvest pressure, beans have had to deal with other unexpected bearish news recently as ~200 million bushels of Argentine beans traded to China in late September (equivalent of North Dakota’s entire bean crop) and now low Mississippi river levels are drastically reducing barge traffic. Add to it the U.S. dollar surging to fresh two-decade highs and it’s not surprising to see significant losses. With those stories now priced in and harvest likely past the midway point by Monday, it still looks probable to us that beans make a harvest low this week and begin a recovery.
On the other hand, corn looks poised for a (possibly steep) correction. Fundamentally, export sales continue to be abysmal and U.S. corn is considerably overpriced in world markets. The USDA’s October WASDE report drops on Wednesday and ahead of it plenty of analyst and general chatter pointing to a yield increase. Only 2012 featured corn in October at prices higher than today and our price signals have been suggesting sell for a while. It’s becoming probable that corn declines in the near term, with a 30-40 cent correction seeming likely.
Soy/Corn ratio slid to its lowest point since May 12th this week (meaning soybean price relative to corn at its lowest level since then). This supports the idea of lower corn/higher beans in the short term. For example, corn falling to 6.50 futures and a return to the September 19th soy/corn ration of 2.15 would equate to 14.00 bean futures. Both of those outcomes seem somewhat reasonable today.