NAPERVILLE — Since late July, speculators have been preparing for a scenario where the U.S. corn harvest falls short of original expectations, potentially to a significant degree.
In the four-session week ended Sept. 6, money managers were net buyers of Chicago corn futures and options for a sixth consecutive week, increasing their net long by about 5,000 to 226,479 contracts.
Over the latest six weeks, the managed money corn net long expanded by 105,691 contracts, equivalent to 528 million bushels, and most-active CBOT futures jumped 13%. They drifted more than 1% higher in the latest three sessions ahead of the U.S. Department of Agriculture’s Monday report.
That report is expected to show a historically large drop in U.S. corn yield from the previous forecast after hot and dry weather affected crops in the Plains. Analysts also expect 2022-23 U.S. corn ending stocks to be at 10-year lows following the crop reduction.
Most-active corn futures ended at $6.85 per bushel Friday, their highest settle since June. The recent strength leaves price vulnerable to a large downward correction if USDA’s outlook does not match market expectations.
Grain prices have also faced headwinds from the resumption of shipments out of Ukraine, but CBOT wheat futures surged more than 7% in the last four sessions as Russian President Vladimir Putin made multiple disparaging remarks about the export deal, saying the “unfair” deal has been implemented “badly.”
Money managers’ views on soybeans have stayed nearly constant in the latest several weeks with a net long around 100,000 futures and options contracts, including light selling in the latest week.
Most-active soybean futures ended at $14.12-1/4 per bushel Friday, slightly weaker than the recent month’s average but below the late August high of $14.84-1/2.
A record U.S. soybean harvest has been expected this year, and predictions for Monday’s report still call for a record result even with a slightly smaller yield. U.S. ending stocks for 2022-23 are expected to rise marginally from last year’s somewhat tight levels.
However, lower demand for the U.S. oilseed could potentially more than offset a smaller soybean crop, increasing domestic stockpiles. USDA’s Beijing attache reduced its 2022-23 Chinese soy import outlook last week citing lighter feed demand and the slow economy.
Farmers in Argentina sold significant volumes of soybeans last week as the government incentivized sales to increase export revenues, which may curb near-term U.S. export business.
I posted a Twitter poll Friday asking which is the most likely U.S. yield surprise for Monday’s report: corn yield above or below the trade range of guesses or soybeans above or below.
As of Friday evening, the voters most heavily favored corn yield falling below the trade range. Corn above the range was next followed by above in beans, and bean yield falling below the trade range was viewed as the least likely scenario. Karen Braun is a market analyst for Reuters. Views expressed above are her own.
(Writing by Karen Braun; Editing by Josie Kao)