NAPERVILLE — Chicago corn and soybean futures have had a rough start to the year after ending 2022 at multi-month highs, both shedding close to 4% so far this week, causing market-watchers to wonder if this will be the tone for 2023.
January has been a supportive month for corn and soybeans in six of the last seven years, with strong gains in the last two years and 2020 marking the only losses.
But with futures at multi-year highs, record crops in Brazil and questionable U.S. demand, the typical January futures uptrend could run into trouble. It becomes the probable scenario if next Thursday’s data dump from the U.S. Department of Agriculture produces a decidedly bearish market reaction.
Most-active corn futures’ worst recent January performance came in 2010 with a plunge of 14%, and most-active soybeans suffered the same fate that year, falling 13% during the month. Bearish numbers from USDA that January were the primary cause.
Futures are so strong now that even a 2010-like fall this month would still leave prices reasonably elevated by Jan. 31, resulting in corn and soybeans at $5.83-1/2 per bushel and $13.29, respectively.
Most-active wheat futures finished 2022 down 42% from their all-time highs set in March, and they have fallen another 6% this week, averaging $7.56 per bushel. That is slightly lower than in the first three sessions of 2022, when futures averaged $7.63.
Wheat finished January 2022 down 1.2%, its worst January since 2015, when the contract tumbled nearly 15%. Applying that loss would render $6.75 per bushel by the end of this month.
Wheat has been above $7 since September 2021, though large speculators recently built their most bearish wheat view since early 2019, leaving them well-prepared for potential declines this month.
However, additional corn or soy losses in the coming weeks would catch funds leaning the wrong way, especially after adding to net longs at the end of last year. That happened in January 2010, when decently bullish speculators heavily sold corn and soy futures in the weeks after the USDA report.
The January trend in CBOT corn and soybean futures usually mimics price action on the month’s U.S. Department of Agriculture report day, so long as futures move by at least 1% on that day. Usually, such moves are a decent bet.
But corn and soy futures have been uncharacteristically quiet on January report days in the last few years, making it harder to anticipate the trend going forward. Corn futures shifted less than 1% on this day in five of the last six years, and the same stat is true for soybeans in three of the last four years.
The only standout is the January 2021 report, when corn jumped 5% as the 2020 U.S. crop came in much smaller than expected. Soybeans rose more than 3% as USDA cut U.S. supplies to seven-year lows on a smaller crop and robust Chinese buying.
Soybeans have not ended lower on the January report day since 2015.
Reuters plans to publish analyst polls for USDA’s Jan. 12 reports on Friday, the top focus being 2022 U.S. corn and soybean crops. But traders will also juggle a slew of other numbers including South American production, U.S. winter wheat seedings, and U.S. quarterly stocks.
Aside from unexpected report content, the high prices themselves may be the biggest risk to futures both next Thursday and this month, especially for soybeans.
Most-active soybean futures have averaged $14.82 per bushel the last three sessions despite three consecutive lower closes. That compares with $13.80 over the same periods in 2022, 2013 and 2011, and $13.30 in 2021.
Most-active corn has closed lower for five straight sessions, averaging $6.59 per bushel in the last three, above $6.00 a year ago. That is the second-highest start to January after $6.85 in 2013.
January 2021 was the last time most-active corn futures spent more than one day below $5. Prior to January 2021, the $5-mark had been elusive since May 2014. Karen Braun is a market analyst for Reuters. Views expressed above are her own.
(Writing by Karen Braun Editing by Matthew Lewis)