Crops Analysis | November 3, 2022
Corn
Price action: December corn fell 8 1/4 cents to $6.79 1/4, the contract’s lowest closing price since Oct. 19.
Fundamental analysis: Corn fell a second consecutive day and ended at a two-week low as Russia’s decision to resume participation in a deal allowing grain exports from Ukraine eased supply concerns. Grain futures were also pressured by a continuing soft export pace as well as weakness in crude oil and U.S. equities, which slumped after the Federal Reserve hiked benchmark interest rates another 75 basis points and signaled more monetary tightening is coming.
Corn export sales improved last week but remained tepid overall. USDA early today reported net U.S. corn sales for the week ended Oct. 27 of 372,200 MT, up from 263,999 MT a week earlier and within trade expectations ranging from 250,000 to 600,000 MT. Export commitments so far in the 2022-23 marketing year are running 53.3% behind year-ago levels, compared to 52.7% behind last week. A strong dollar and shipping snags from low river levels have weighed on exports recently, and longer-term developments could pose further hurdles. China on Wednesday added more Brazilian corn traders to its list of approved imports, a sign that trade could begin imminently. The U.S was once responsible for more than three-quarters of world corn exports. However, that share has slipped to around 30% as Brazil and Ukraine have grabbed market share.
Technical analysis: December futures traded a narrow 8-cent range, falling below the 10-, 20-, and 40-day moving averages and marking a session low at $6.78 1/2. Support at $6.79 1/4 was also tested and marked the session close. Further attempts to the downside will be met with additional support at $6.71 and $6.62. Conversely, resistance stands at former support at the 40-day moving average near $6.83 1/2, as well as the 10-day at $6.85 1/2 and 20-day near $6.86 3/4, with $7.00 standing as strong psychological resistance.
What to do: Get current with advised sales. Wait to make additional 2022-crop sales.
Hedgers: You should have 50% of 2022-crop sold for harvest delivery.
Cash-only marketers: You should have 50% of 2022-crop sold for harvest delivery.
Price action: January soybeans fell 17 cents to $14.37. December soymeal fell $10.20 to $414.30, the contract’s lowest close since Oct. 26. December soyoil fell 32 points to 75.29 cents, after rising earlier to 78.18 cents, near a five-month high.
Fundamental analysis: Soybeans fell for the first time in eight sessions as profit-taking emerged following Wednesday’s climb to six-week highs and weekly exports were at the low end of expectations. Weakness in crude oil also weighed on the soy complex. USDA reported net weekly soybean sales of 830,200 MT, down from 1.026 MMT the previous week. Expectations ranged from 700,000 MT to 1.6 MMT. China was the top buyer at 745,000 MT, including 404,300 MT switched from unknown destinations and decreases of 211,300 MT. Soybean export commitments so far in the 2022-23 marketing year are running 0.1% ahead of a year-ago levels, versus 4.7% ahead last week. While the soy complex may be subject to further corrective pressure, declines likely will be limited due to strength in global vegoil markets and a tight supply outlook for 2023.
Dry conditions in Argentina and parts of Brazil could also lend support to prices. World Weather said La Nina will keep precipitation in eastern Argentina, Uruguay and Brazil’s Rio Grande do Sul state below normal for a few more weeks. “Soil moisture is not rated as poorly as one might imagine after two months of below normal rainfall, but a boost in rainfall will be needed soon,” the forecaster said. In Brazil, net drying is expected the next week except in the far northeast, where rain will occur over the next couple of days ending Saturday.
Technical analysis: Bulls retain a technical advantage in January soybeans with the market in a sharp weeklong uptrend that pushed prices above last month’s range. January futures dropped back under the 200-day moving average, currently $14.43, but remains above other key moving averages, including the 40-, 50- and 100-day moving averages, which converge at $14.17 to $14.18. A push above initial resistance at Wednesday’s six-week high of $14.57 3/4 may have bulls targeting other key upside targets, including $14.80 to $14.82, $15.00 and the September high of $15.12 1/4. Soyoil also holds a bullish bias, with the December contract in a sharp, five-week uptrend and nearing the contract high of 79.29 cents, posted June 8.
What to do: Get current with advised cash sales. Wait to make additional sales.
Hedgers: You should be 60% sold for harvest delivery on 2022-crop production.
Cash-only marketers: You should be 60% sold for harvest delivery on 2022-crop production.
Fundamental analysis: SRW wheat dropped a second day and hit a low for the week as Russia’s reversal of a decision to leave the Ukraine export agreement eased supply worries. Traders will continue to closely monitor the developments surrounding the deal, and uncertainty whether it will be extended beyond the Nov. 19 expiration will keep grain markets on edge and potentially generate more volatility. Poor conditions in U.S. wheat country could limit price downside. U.S. HRW areas will receive some precipitation over the next week as a storm system moves through the eastern half of the region. “The thunderstorms will help promote locally meaningful rain amounts,” World Weather said. “However, a larger, more widespread rain event is needed.”
Earlier today, USDA reported net weekly U.S. wheat sales of 348,100 MT, down from 533,200 MT the previous week and at the lower end of trade expectations. U.S. wheat exports will have to pick up significantly for futures to sustain current levels. The surge in the U.S. dollar this week has only made U.S. wheat less price-competitive on world markets.
Technical analysis: Winter wheat bears have a near-term technical advantage. SRW bulls' next upside objective is closing December futures above solid resistance at this week’s high of $9.04. Bears' next downside objective is closing prices below solid support at $8.00. First resistance is seen at $8.50, then $8.75. First support is seen at the October low of $8.22 1/2, then $8.10.
HRW bulls' next upside objective is closing December prices above solid resistance at $10.00. Bears' next downside objective is closing prices below solid support at $9.00. First resistance is seen at $9.50 and then at $9.75. First support is seen at today’s low of $9.25 1/4, then the October low of $9.15 1/4.
What to do: Wait on an extended price rally to increase cash sales.
Hedgers: December SRW futures hit our buy stop at $8.50 to exit the 15% 2022-crop hedge. We registered a 67-cent loss on the position. You should be 85% sold in the cash market on 2022-crop. You should be 30% forward-priced on expected 2023-crop for harvest delivery next year.
Cash-only marketers: You should be 85% sold on 2022-crop. You should also be 30% forward-priced on expected 2023-crop production for harvest delivery next year.
Price action: December cotton rose the expanded 400-point limit to 83.00 cents, the contract’s highest close since Oct. 17.
Fundamental analysis: Cotton rose sharply a third straight day on continued short covering and bargain hunting after prices fell near two-year lows early this week. It’s likely speculative shorts continue to get squeezed out and with today’s limit-up close in December futures, followthrough buying may develop Friday. Traders ignored bearish outside market forces, including a surge in the U.S. dollar and weakness in U.S. equities and crude oil.
Signs of improvement in overseas demand also supported prices. USDA today reported net weekly U.S. cotton sales of 191,800 running bales (RB), nearly triple the previous week’s 68,400 MT in sales. Top buyers included China (122,000 RB), Pakistan (23,200 RB), and Turkey (15,800 RB). Net sales of 11,200 RB for 2023-24 were reported for Indonesia (10,600 RB) and Japan (600 RB). Exports of 119,000 RB were primarily to China (43,400 RB), Bangladesh (17,000 RB) and Mexico (15,700 RB).
Technical analysis: Cotton bears still hold a near-term technical advantage but this week’s strong rebound suggests a market bottom is in place. A 2 1/2-month-old downtrend on the daily bar chart in December futures has been at least temporarily negated. The next upside objective for bulls is to close December futures above resistance at 90.00 cents. The next downside objective for bears is to close prices below solid support at 75.00 cents. First resistance is seen at today’s high of 83.00 cents, then 84.00 cents. First support is seen at 81.00 cents, then 80.00 cents.
What to do: Wait on an extended corrective rebound to get current with advised 2022-crop sales.
Hedgers: You should be 70% forward-priced for harvest delivery on expected 2022-crop production.
Cash-only marketers: You should be 70% forward-priced for harvest delivery on expected 2022-crop production.
