CBOT agricultural futures close mixed
Chicago (US), October 2: CBOT agricultural futures closed mixed in the past week as a result of a rapid decline in consumer demand which is piling up inventories, Chicago-based research company AgResource noted.
The odds are growing that the U.S. and world central banks will not be able to orchestrate a soft landing. AgResource sees the outlook for agricultural futures as complex with tight supply/stocks battling a rapidly faltering demand.
CBOT corn ended firm but well below the week's highs. U.S. Department of Agriculture (USDA) stocks data was fundamentally bullish. AgResource bets that U.S. corn production will be lowered 30 to 50 million bushels in USDA's October World Agricultural Supply and Demand Estimate (WASDE) report, which will pull 2022-2023 end stocks down to just 1.1 billion bushels. Near-term upside targets hold at 7.00 to 7.25 dollars for corn futures.
Longer term, the U.S. balance likely shows a steady boost in end stocks beyond October as WASDE reconciles the weak pace of export and industrial consumption. There is no urgency to boost ethanol grind rates amid lofty stocks and declining U.S. gasoline consumption. While the U.S. balance sheet is tight, there is no fear of actual shortages given demand contraction and the slowing world economic growth.
Drought in Argentina will be monitored, but this is unlikely to impact price discovery until December. Rallies are selling opportunities. U.S. corn is expensive in the global market.
World wheat futures scored new three-month highs this week amid renewed concern over Black Sea grain flows and as USDA unexpectedly lowered final 2022 U.S. wheat production by 133 million bushels. The U.S. balance sheet will be exceptionally tight in 2022-2023. Supply risks remain intact as extreme droughts linger across the U.S. plains and in Argentine. A lasting bearish trend is not anticipated prior to spring.
The Black Sea export corridor is unlikely to be extended, but exactly how this will impact grain flow is less certain.
AgResource leans modestly bullish into winter, but will advise new 2022 sales on rallies. Global economic contraction is a massive concern and the world wheat trade in the first quarter was down 19 percent. The rising U.S. dollar makes wheat expensive.
Soybean futures suffered steep losses and ended the week down 0.61 dollars. The combination of building harvest pressure and soaring barge freight send U.S. cash markets sharply lower. The Mississippi River has fallen to the lowest in a year as draft restrictions have sent barge freight rate to historic levels. Unfortunately, weather forecast in the Central U.S. remains dry, good for harvest but bad for recharging river levels.
Weekly losses were extended by a bearish September Grain Stocks report that showed soybean stocks were 34 million bushels larger than expected after USDA raised the 2021-2022 soybean crop size by 30 million bushels. Follow-through technical selling looks to weigh on CBOT trade. Initial support is just below the market at 13.50 dollars. AgResource's market outlook is bearish on CBOT rallies in the coming months. Supply pressures exist with Brazil expected to plant 105 million acres of soybeans and harvest a crop of 150-plus million metric tons.