Market Thoughts 10.16.22
Dec corn gained 6’4 last week to close at 689’6. This was the highest weekly close for the Dec contract since June 13th and Monday’s daily high of 706’4 was the highest since June 17th. November soybeans gained 16’6 and ended at 1383’6 after trading as high as 1414, a 64 cent bounce from the prior week’s low. Dec spring wheat lost 13’6 to close at 954’2 after another round of wild trading. Futures touched 1024’2 on Sunday, highest since July 11th, before losing an incredible 70 cents over the next four days to stumble into the worst weekly close in three weeks.
Thursday’s Corn WASDE numbers featured a .6 bu/acre yield decrease to 171.9, aligning very closely with pre-report estimates. Carryout was reduced to 1.172 billion bushel, 50 bu/acre above the average trade estimate and the result of more aggressive demand cuts than traders were expecting. Yield as expected and carryout slightly higher means neutral/slightly bearish in simpler times and fits with our expectation for a short-term correction. However, the 22/23 corn balance sheet is well into demand-rationing levels and some of the demand cuts we’re seeing now seem as though they haven’t actually occurred yet. Soybean yield was reduced another .7 bu/acre to 49.8, landing at the low end of trade expectations. 22/23 carryout remains incredibly tight at the arbitrary 200 million bushel “floor”; definitely a bullish report for beans. Wheat numbers were mostly neutral with stocks slightly above the average trade guess.
Things kicked off interesting Sunday night as earlier that evening Russia started lobbing missiles indiscriminately into Ukrainian cities in response to the partial destruction of the bridge to Crimea. That sent wheat spiraling higher and corn attempting to follow suit. Shortly thereafter, Russia announced it was “done retaliating” and in an unrelated development, announced the intention to have no export quotas on wheat this year due to their massive crop. And with that, wheat began the process of giving back the previous three weeks’ gains . As noted above, Wednesday’s USDA report was supportive to grains. But late week news included Mississippi barge issues persisting and renewed talks of class one railroad strikes with Friday also featuring massive outside market losses.
Our big idea in last week’s commentary; that corn was headed for a 30-40 cent correction, isn’t off to a super great start. Rather, corn traded above 700 and to fresh four month highs earlier in the week and posted its highest weekly close in over four months. We still think corn struggles in the short term. Corn caught a ride on the Ukraine headline news but remove Monday and this week’s trade was uninspiring at best. Corn’s WASDE numbers weren’t helpful and export sales continue to be horrible. It still seems most probable that corn corrects lower in the short term. On the other hand, bullish bean WASDE numbers lend support to the idea that the October 6/7th double bottom at 1350 was the harvest low and that a post-harvest recovery is underway.
Should find out pretty quickly if we’re right about corn’s short term price direction – the Dec chart forming a symmetrical triangle with a breakout due to occur any day now.