Crops Analysis | October 11, 2023
Price action: December corn rose 2 1/2 cents to $4.88, closing near the session high and above the 10-day moving average.
Fundamental analysis: December corn futures spent the session trading a narrow five-cent range, with a general risk-off theme pressuring commodities amid rising geopolitical uncertainties and increased focus on USDA’s October crop data.
USDA estimated harvest had reached 34% complete as of Oct. 9, which was three percentage points ahead of the five-year average. Meanwhile, the “good” to “excellent” rating remained at 53%. However, progress this week could be limited by heavy rains across parts of the Corn Belt. World Weather Inc. reports a large area of moderate to heavy rain will fall today into Friday from eastern South Dakota and eastern Nebraska to Michigan. The forecaster notes interruptions to fieldwork should be temporary in much of the Midwest as dry soils will soak up the rain without becoming excessively muddy, though Michigan could see longer-lasting harvest delays.
Meanwhile, Argentina still needs significant rain to support early corn planting, through rain will be more frequent during the next two weeks, but dry weather will still be most common, and fieldwork should advance well around the occasional rounds of showers.
Technical analysis: December corn futures were able to close above the 10-day moving average of $4.87 3/4, recapturing nearly all of Tuesday’s losses. Initial resistance will now stand at $4.90, then at $4.91 3/4, $4/99 and the 100-day moving average of $5.11 1/4. Conversely, initial support continues to serve at $4.83 3/4, then at $4.82, $4.79 3/4 and at the Sept. 19 low of $4.67 3/4.
What to do: Get current with advised sales.
Hedgers: You should be 100% sold in the cash market on 2022-crop. You should be 50% forward priced for harvest delivery on expected 2023-crop.
Cash-only marketers: You should be 100% sold on 2022-crop. You should be 35% forward priced for harvest delivery on expected 2023-crop production.
Price action: November soybeans fell 19 cents to $12.52 1/2, near the session low and hit a four-month low. December soybean meal lost 40 cents at $377.10 and near mid-range. December bean oil closed down 51 points at 52.72 cents. Prices closed near mid-range and closed at a 3.5-month low close.
Fundamental analysis: Persisting risk aversion in the general marketplace this week is keeping the soybean market bulls squelched. Seasonal commercial hedge pressure is also bearish as soybean harvest is in full swing. USDA Tuesday afternoon reported soybean harvest at 43% done as of Sunday, six percentage points ahead of the five-year average. A drop in crude oil prices today was also a bearish outside market force for the soy complex.
USDA today announced daily U.S. soybean sales of 121,000 MT to China and 213,000 MT to unknown destinations – both for 2023-24.
Traders are awaiting Thursday morning’s monthly USDA supply and demand report that includes fresh U.S. soybean and corn production estimates from the agency.
Technical analysis: The soybean futures bears have the overall near-term technical advantage. Prices are in a six-week-old downtrend on the daily bar chart. The next near-term upside technical objective for the soybean bulls is closing November prices above solid resistance at $13.00. The next downside price objective for the bears is closing prices below solid technical support at $12.00. First resistance is seen at this week’s high of $12.77 1/2 and then at the October high of $12.87 1/4. First support is seen at today’s low of $12.51 and then at $12.35.
The soybean meal bears have the overall near-term technical advantage. Prices are in a six-week-old downtrend on the daily bar chart. A bearish pennant pattern has formed on the daily chart. The next upside price objective for the meal bulls is to produce a close in December futures above solid technical resistance at $397.00. The next downside price objective for the bears is closing prices below solid technical support at the May low of $361.80. First resistance comes in at $379.80 and then at the October high of $382.10. First support is seen at this week’s low of $370.60 and then at the October low of $366.50.
Soybean oil futures bears have the firm overall near-term technical advantage. Prices are in an accelerating six-week-old downtrend on the daily bar chart. The next upside price objective for the bean oil bulls is closing December prices above solid technical resistance at this week’s high of 56.37 cents. Bean oil bears' next downside technical price objective is closing prices below solid technical support at 50.00 cents. First resistance is seen at Tuesday’s high of 54.09 cents and then at 55.00 cents. First support is seen at this week’s low of 52.24 cents and then at 51.00 cents.
What to do: Get current with advised sales.
Hedgers: You should be 100% sold in the cash market on 2022-crop. You should be 45% forward sold for harvest delivery on expected 2023-crop production.
Cash-only marketers: You should be 100% sold on 2022-crop. You should be 40% forward sold for harvest delivery on expected 2023-crop production.
Price action: December SRW futures fell 2 1/2 cents on the session to $5.56, settling near the session’s midpoint. December HRW futures dropped 4 cents before closing at $6.67 1/4. December spring wheat fell 5 1/4 cents to $7.18 1/4.
Fundamental analysis: Wheat futures saw followthrough selling overnight and into this morning’s open, though pared losses as the session went on and tensions are seemingly escalating in the Middle East. Markets have shrugged off the conflict, opening the door to increased volatility if tensions escalate and investors and traders flee risk all at once. The Treasury market has rallied this week in the wake of the conflict, evidenced by the 10-year U.S. Treasury yield falling from 4.81% to 4.62%.
USDA releases its October World Agricultural Supply and Demand estimates and Crop Production reports tomorrow at 11 a.m. CT. While this is historically not a significant report for wheat, it will likely have a lasting impact on both corn and soybeans, with volatility there ultimately spilling over into wheat futures. A Bloomberg survey of analysts shows estimated ending stocks of 649 million bu., up from 615 million bu. in the September report. Much of this increase is tied to increased production laid out in the September Small Grains Report. Analysts are seemingly expecting increased use to offset some of the higher production, likely coming from the Feed and Residual category. World wheat ending stocks are expected to fall 300,000 MT from last month to 258.3 MMT.
Argentina is expected to receive some relief from the ongoing drought, with additional precipitation likely coming in the latter half of October. This will help the development of their winter crops, World Weather Inc says. Meanwhile, winter wheat crops in southern Brazil are too wet, as the crop is experiencing head sprouting and wet weather disease, which are likely to lead to production cuts, the forecaster says.
The USDA weekly export sales report is being pushed back to Friday because of this week’s government holiday on Monday.
Technical analysis: December SRW futures found support at the $5.50 level in intraday trading, leaving that level as initial support. Tomorrow’s reports are likely to dictate the majority of the price action the rest of the week. Bears remain in full control of the technical advantage, targeting the $5.50 level, which is backed by the contract low of $5.40. Bulls are targeting resistance of $5.67, backed by the 20-day moving average, currently at $5.76. December SRW futures have not closed above the 20-day moving average since its breakdown in July.
December HRW futures succumbed to selling pressure as well today, though prices were supported by the Sept. 29 low of $6.62. This will remain support into the end of the week, a breakdown below that point would lead to a likely test of the $6.50 level. Bulls are seeking a daily close above $7.25 with additional resistance at $6.81 and $6.95 1/4 on the way.
What to do: Get current with advised sales.
Hedgers: You should be 50% sold in the cash market on 2023-crop production.
Cash-only marketers: You should be 50% sold on 2023-crop production.
Price action: December cotton closed down 40 points at 85.05 cents and hit a six-week low early on.
Fundamental analysis: The cotton market bulls are fading this week amid chart-based selling pressure. Risk aversion in the general marketplace is also elevated at mid-week, which is keeping the speculative cotton market bulls standing on the sidelines. Lower crude oil prices today were also a bearish outside market for the natural fiber, as were weaker grain futures prices today.
World Weather Inc. today said limited rain in cotton maturation and harvest areas of Texas and the Delta “will be great for protecting fiber quality.” Some rain in the southeastern U.S. will slow harvesting and could discolor some of the cotton fiber, but the rain should not last long enough or be heavy enough to cause a serious threat to the crop. Windy conditions are expected in West Texas and Oklahoma later this week that may raise the potential for some cotton blow out, although production loss should be minimal, said the forecaster.
USDA’s monthly supply and demand report on Thursday morning will be closely scrutinized by cotton traders. The marketplace is looking for the agency to forecast U.S. cotton production at right around 13 million bales. USDA’s updated U.S. cotton export forecast will also be market-sensitive.
Technical analysis: The cotton futures bulls have the slight overall near-term technical advantage but are fading. A 2.5-month-old uptrend on the daily bar chart has been negated. The next upside price objective for the cotton bulls is to produce a close in December futures above technical resistance at the September high of 90.00 cents. The next downside price objective for the cotton bears is to close prices below solid technical support at the August low of 83.25 cents. First resistance is seen at today’s high of 86.15 cents and then at Tuesday’s high of 87.37 cents. First support is seen at today’s low of 84.38 cents and then at 83.25 cents.
What to do: Get current with advised sales.
Hedgers: You should be 100% priced on 2022-crop in the cash market. You should have 60% of expected 2023-crop production forward sold for harvest delivery.
Cash-only marketers: You should be 100% priced on 2022-crop. You should have 60% of expected 2023-crop production forward sold for harvest delivery.
