Crops Analysis | December 5, 2022
Corn
Price action: December corn futures fell 5 3/4 cents to $6.40 1/2, the contract’s lowest close since $6.36 1/4 on Aug. 22.
Fundamental analysis: Corn futures extended last week declines and fell for a fifth straight session to a 2 1/2-month lower on bearish technicals, spillover from slumping wheat and ongoing pressure from weak exports. Speculative funds were heavy sellers, last week, unloading about 20,000 corn futures contracts, based on a Reuter estimate, and were featured sellers again today. Bearish fundamentals include soft export demand. USDA earlier today reported corn inspected for export during the week ended Dec. 1 at 524,313 MT (20.6 million bu.), down from 311,658 MT last week and within trade expectations ranging from 300,000 to 750,000 MT. However, inspections so far in the 2022-23 marketing year are still running 33% behind the same period in 2021-22. Unless export demand improves substantially, futures may remain under pressure, or at minimum struggle to sustain rallies.
Outside markets such as crude oil and the U.S. dollar may influence grain futures this week as trade volumes fades ahead of the holidays. USDA’s monthly Supply and Demand Report Thursday is likely to carry only minor changes. Estimated U.S. corn ending stocks for 2022-23 are expected to be revised higher by about 56 million bu. to 1.238 billion bu., based on a Bloomberg survey.
Technical analysis: Corn futures’ near-term technical posture has turned increasing bearish in light of sharp losses the past few sessions and few apparent major downside levels offering support. March futures may have another 20 cents of downside ahead and could be poised to eventually challenge $6.00. Initial support is seen around $6.83, the Aug. 22 high. The market has reached oversold conditions, which could encourage short-term corrective buying. March corn settled today at 29.4 on the Relative Strength Index, just under the 30 threshold that typically marks oversold territory. Initial resistance is seen at the 10- and 100-day moving averages at $6.61 /12 and $6.62, respectively.
What to do: Get current with advised sales. Wait to make additional 2022-crop sales.
Hedgers: You should have 50% of 2022-crop sold in the cash market.
Cash-only marketers: You should have 50% of 2022-crop sold.
Price action: January soybeans rose 3/4 cent to $14.37 3/4 and nearer the session low. January soymeal surged $8.00 to $432.10, the contract’s highest close since Sept. 20. January soyoil plunged 265 points to 62.57 points, the lowest close since Oct. 3.
Fundamental analysis: Soybeans climbed a second day on further indications of strong export demand and sharp gains in soymeal futures, which surged to 2 1/2-month highs. USDA early today reported a daily sale of 130,000 MT of soybeans for delivery to China during the 2022-23 marketing year. The sale follows recent USDA-announced soybean sales to China on Nov. 23 and 30 totaling 246,000 MT. Also today, USDA reported soybeans inspected for export during the week ended Dec. 1 at 1.722 MMT (63.3 million bu.), down from 2.227 MMT last week and within trade expectations ranging from 1.1 to 2.4 MMT.
Concerns persistent dryness in Argentina may trim yield potential remained price-supportive, though conditions in Brazil or mostly favorable for crops. Short soil moisture in Argentina, along with little rain through the next several days and hot to excessively hot temperatures through Friday “will cause significant stress to crops in much of the country,” World Weather Inc. said today. After some expected rains over the coming weekend, drier weather will return Dec. 13-19 “and stress to crops should steadily increase,” the forecaster said. Much of Brazil and Paraguay will see “a good mix” of rain and sunshine through the next two weeks and enough rain should fall to favorably support crop development, World Weather said.
Technical analysis: Soybean bulls hold a slight near-term technical advantage with a two-month price uptrend is in place on the daily bar chart. The next near-term upside objective for bulls is closing January futures above solid resistance at the November high of $14.78 1/2. The next downside objective for bears is closing prices below solid support at $14.00. First resistance is seen at today’s high of $14.51 and then at $14.75. First support is seen at last week’s low of $14.24 and then at $14.06 3/4.
Soymeal bulls have a solid near-term technical advantage with prices in a two-month uptrend on the daily bar chart. The next upside objective for meal bulls is to close March futures above solid resistance at $450.00. The next downside objective for bears is closing prices below solid support at $410.00. First resistance comes in at today’s contract high of $431.80 and then at $435.00. First support is seen at $425.00 and then at today’s low of $421.70.
Soyoil bears have the overall near-term technical advantage. The next upside price objective for bulls is closing March futures above solid resistance at 67.50 cents. Bears' next downside price objective is closing futures below solid support at the September low of 59.37 cents. First resistance is seen at 64.00 cents, then 65.00 cents. First support is seen at 62.00 cents, then 61.00 cents.
What to do: Get current with advised cash sales. Wait to make additional sales.
Hedgers: You should be 60% sold in the cash market on 2022-crop production.
Cash-only marketers: You should be 60% sold on 2022-crop production.
Price action: March SRW wheat fell 22 cents to $7.39, the contract’s lowest close since October 2021. March HRW fell 29 cents to $8.41 3/4, the lowest close since Aug. 18. March spring wheat fell 19 1/4 cents to $9.02, the lowest since Sept. 6.
Fundamental analysis: Wheat futures extended last week’s losses as a record Russian wheat harvest and continued exports from the Black Sea supplies weighed on prices. U.S. exports remain tepid. While Ukraine wheat shipments declines in November, Russia continued to export wheat relatively quickly, with 1 MMT of grain exported last week, according to Sovecon data. Stronger than expected U.S. economic readings also raised speculation the Federal Reserve to maintain aggressive monetary policy, increasing recession and demand concerns. The U.S. dollar surged today while crude oil futures dropped sharply back under $80.
USDA reported wheat inspected for export during the week ended Dec. 1 at 334,653 MT (12.3 million bu.), up from 284,476 MT last week and above trade expectations ranging from 175,000 to 300,000 MT. Wheat inspections are currently running 2.2% behind a year-ago.
Technical analysis: SRW wheat futures traded a 34-cent range, plunging below support near $7.50 and marking a low at $7.34, below second support of $7.39 1/4. Further attempts to the downside will see support at $7.22 3/4. A turn higher, will find bulls experiencing resistance at former support of $7.29 1/4 and $7.50, with additional resistance standing at $7.77 1/4, the 10-day moving average at $7.88, and at $7.93 3/4.
What to do: Wait on an extended price rally to increase cash sales.
Hedgers: 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: March cotton rose 66 points to 83.86 cents, around the middle of today’s range.
Fundamental analysis: Cotton futures posted moderate gains as expectations China will relax Covid restrictions fueled optimism over demand. China is set to announce a further easing of some of the world's toughest COVID curbs as early as Wednesday, Reuters reported. Protests last week stirred concern over slowed demand for commodities from China, a major cotton importer. Cotton gains were limited by a rebound in the U.S. dollar index as traders awaited USDA’s Dec. 9 Supply and Demand Report, which may bring adjustments to the U.S. crop. In November, USDA boosted its U.S. crop estimate to 14.03 million bales to 13.91 million bales.
USDA will update cotton harvest progress later today. Unfavorable weather across many states of the Southern led to slow harvest. The Delta and a large part of the Southeast will see regular rounds of precipitation through next Monday and late-season fieldwork will be slowed while breaks between rounds of rain may not be long enough to prevent some quality declines to unharvested cotton, World Weather said today. The U.S. crop was 84% harvested as of Nov. 27, up from the 79% average for that date the previous five years.
Technical analysis: Cotton futures retain a neutral to sideways bias, with prices likely to hold within the past month’s high of 89.92 cents and the past month’s low of 77.50 cents. The market’s sideways-firm recent action reinforces beliefs March futures established at least a near-bottom with the two-year low of 70.10 cents posted Oct. 31. Initial support comes in at Friday’s low of 82.40 cents and the 200-day moving average at 82.07 cents. Initial resistance is seen at Friday’s high and last week’s high at 85.80 cents and 87.23 cents, respectively.
What to do: Wait on an extended corrective rebound to get current with advised 2022-crop sales.
Hedgers: You should be 70% sold in the cash market on 2022-crop production.
Cash-only marketers: You should be 70% sold on 2022-crop production.
