Crops Analysis | January 18, 2023
Corn
Price action: March corn futures fell 4 cents at $6.81 1/4 and nearer the session low. Prices hit a nine-week high early on today.
Fundamental analysis: Routine profit taking from the shorter-term speculators was featured in corn futures today. A sell-off in the U.S. stock market, the U.S. dollar index rebounding well off its daily low and weaker crude oil prices after solid early gains were all bearish daily outside market forces working against the corn market bulls at mid-week.
And yet, corn market bulls remain confident that they can achieve more price gains following last week’s bullish USDA supply and demand report and ideas of better global economic growth in 2023—especially from China—that would translate into better worldwide demand for U.S. corn.
World Weather Inc. today reported Argentina corn region weather “is a little wetter over the next two weeks with all crop areas getting rain at one time or another. The precipitation should improve topsoil moisture and crop conditions in time, although most of that improvement is expected next week.” Brazil weather will remain most favorably rated with timely rain and seasonably mild-to-warm temperatures prevailing to support crops in most areas, said the forecaster.
The weekly USDA export sales report is due out on Friday morning—delayed one day by the Martin Luther King Jr. holiday on Monday.
Technical analysis: Corn futures bulls still have the overall near-term technical advantage. The next upside price objective for the bulls is to close March prices above solid chart resistance at $7.00. The next downside target for the bears is closing prices below chart support at the January low of $6.48 1/4. First resistance is seen at today’s high of $6.88 3/4 and then at $6.95. First support is at $6.75 and then at this week’s low of $6.68 3/4.
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.
Soybeans
Price action: March soybeans fell 15 1/4 cents after reaching a seven-month overnight high, while March meal futures fell $3.10 to $478.10 and March soyoil rose 28 points to 64.12 cents.
Fundamental analysis: Soybeans faced corrective selling after reaching over a seven-month high overnight, pulled lower by pressure in the meal market as weather in Argentina is expected to turn a bit more favorable for the next week. Prospects of increased meal exports from India in the wake of Argentina’s extended drought as buyers seek cheaper supplies also cast a shadow over the complex.
World Weather Inc. cites today’s ECMWF forecast model has increased precipitation across Argentina for next week and the GFS is also producing rain for most of the nation, but not quite as aggressively. The forecaster notes that if the models are correct there will be at least some rain for all crops in Argentina at one time or another in the next ten days and while drought busting rains may not occur, improvements to crops are likely, though frequent follow-up rain will be very important. Weather in Brazil has seen improvement from wet conditions which have slowed harvest, with the forecast suggesting less frequent and less significant rain for much of the nation’s summer crop areas.
Headlines of India increasing meal exports 223% since the beginning of the 2022-23 marketing year which began on Oct. 1 added a negative tone to the soy complex. Buyers were prompted to find cheaper rates after Argentine prices rose as supplies were forecasted to fall to 41 million MT in 2022-23 due to drought, down from original estimates of 48 million MT.
Technical analysis: March soybeans traded a 37 1/4-cent range, dipping below support at $15.21 1/2 after trading as high as $15.48 1/2, just below near-term resistance at $15.49 1/2. Additional resistance will stand at $15.59 1/2 and $15.78 1/2. An extended attempt by bears to regain control will face support at the 10-day moving average of $15.01 3/4, then the 20-day moving average near $14.96 3/4, with solid resistance at the 40-day moving average of $14.79 1/2.
March meal futures traded a $14.70 range, breaching resistance at $485.70 early in the session. Additional resistance stands at $490.30 and $498.90. Initial support lies at the 10-day moving average of $473.40, then at $463.90 and $459.30.
March soyoil traded a 115-point range, dipping below the 20-day moving average of 63.86. Additional support lies at 61.91 and 61.34. Conversely, attempts higher will face resistance at the 40-day moving of 64.63 and the 100-day moving average of 65.03 cents.
What to do: Get current with advised cash sales. Be prepared to advance 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.
Wheat
Price action: March SRW wheat fell 9 1/4 cents to $7.42 1/2. March HRW wheat closed down 14 1/4 cents at $8.41 1/2. Prices closed nearer the session lows today. March spring wheat futures tumbled 15 cents to $9.01.
Fundamental analysis: Wheat futures markets are presently in a follower’s mode, and they sold off today when price weakness surfaced in the corn and soybean futures markets. Look for wheat to continue to take price direction from corn and soybeans.
A sell off in the U.S. stock market, a rebound in the U.S. dollar index from lower levels seen earlier today and crude oil prices losing solid early gains were bearish outside market elements for wheat futures today.
World Weather Inc. today reported rain and snow in the central U.S. Plains today into the weekend will offer some short-term relief from dryness, “but the greatest precipitation will be in Nebraska where the greatest change in topsoil moisture conditions will be possible. The southwestern Plains are not likely to get much relief from dryness.” Concern will continue in the snow-free areas of Montana and South Dakota as well as the southwestern Canada Prairies due to impending cold weather that should arrive late this month and in the first week of February, said the forecaster.
Grain traders will have to wait an extra day for the weekly USDA export sales report, due out Friday morning; it is delayed by the Martin Luther King holiday on Monday.
Technical analysis: Winter wheat futures bears have the solid overall near-term technical advantage. SRW bulls' next upside price objective is closing March prices above solid chart resistance at $7.80. The bears' next downside objective is closing prices below solid technical support at $7.00. First resistance is seen at today’s high of $7.60 1/4 and then at $7.70. First support is seen at this week’s low of $7.28 3/4 and then at the January low of $7.20 1/2. The HRW bulls' next upside price objective is closing March prices above solid technical resistance at $9.00. The bears' next downside objective is closing prices below solid technical support at $8.00. First resistance is seen at today’s high of $8.66 1/4 and then at $8.75. First support is seen at this week’s low of $8.28 and then at $8.20.
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.
Cotton
Price action: March cotton rose 199 points to 84.81 cents to mark the highest close since Jan. 9.
Fundamental analysis: Cotton continued higher for the third straight session as crude oil futures continued to run to a 6 1/2 week high and the U.S. dollar index dropped early in the session. Weaker-than-expected economic data released earlier seemed to have little bearing, even as U.S. December retail sales fell 1.1% from November, which was slightly lower than the market was expecting and reflected the biggest decline in a year. The U.S. producer price index rose 6.2% year-over-year, which was also less than the expected 6.8% rise and was the smallest gain in nearly two years. December U.S. manufacturing production was reported to have fallen 1.3% from November and was much weaker than expectations of a mild 0.2% decline. This was also the biggest drop in nearly two years.
Some traders are anticipating increased demand from China as the country’s reopening may be going slightly better, ultimately suggesting USDA has prematurely cut exports in its January WASDE. This is largely based on data which suggest travel within China has already recovered to 2019 levels after the travel ban was lifted on Jan. 8 as a part of Beijing’s dismantling of its zero-Covid policy after three years of lockdowns.
Technical analysis: March cotton traded a 344-point range, making a session high at 86.30, just below the 100-day moving average of 86.42, which serves as solid resistance. A breach of the level would find bulls targeting the Jan. 9 high of 87.97, then the Dec. 21 high of 89.65. A turn lower, however, would find bears encountering support at 81.42, then 80.87 and the Jan. 4 low of 80.37 cents.
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.
