Crops Analysis | October 18, 2023
Price action: December corn rose 3 cents to $4.92, a high-range close.
Fundamental analysis: Corn futures were able to make a move back above the 10-day moving average amid spillover strength from increasing gains in SRW wheat and soybean futures. Meanwhile, a rally in crude lent additional support as oil stocks declined during the week ended Oct. 13. The Energy Information Administration (EIA) reported earlier today crude inventories fell by 4.5 million barrels to 419.7 million barrels, compared to expectations of a 300,000-barrel drop. The EIA also reported ethanol production averaged 1.035 million barrels per day (bpd) during the week, which rose 31,000 bpd from the previous week and 1.9% from the same week last year. Though ethanol stocks dropped 414,000 barrels to 21.112 million barrels and the lowest level since Dec. 24, 2021.
Persisting dry conditions in Argentina continue to plague growing crops and planting efforts, however, World Weather Inc. predicts two rounds of nearly widespread rain will occur Saturday into Thursday of next week, with the improvements in soil moisture proving beneficial for planting and establishment of summer crops. The forecaster notes additional rain is likely Oct. 25-26 in southern parts of the country.
USDA will release its weekly export sales data for the week ended Oct. 12 early Thursday morning. Traders are expecting sales to range from 500,000 MT to 1.0 MMT for the week. Last week, net sales of 910,411 MT were reported for the previous week, which were down 50% from the previous week and 9% from the four-week average.
Technical analysis: Today’s session featured December corn futures bulls grinding higher and ultimately notched a close above the 10-day moving average of $4.91 and resistance at $4.91 3/4. Initial resistance will now stand at $4.94 3/4, then at $4.96 3/4, with psychological resistance serving at $5.00. Bulls need to hold a close above the area in order to gather greater upside momentum, with success above the area then facing resistance at the 100- day moving average of $5.09 3/4, then the 200-day moving average of $5.36 3/4. Conversely, solid support at 20- and 40-day moving averages of $4.86 3/4 and $4.84 3/4 should limit selling efforts, though a turn below the area could see extended selling to 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 rose 14 1/4 cents at $13.11, near the session high and hit a three-week high. December soybean meal gained $14.00 at $413.80, near the session high and hit a six-week high. December bean oil fell 49 points to 54.86 cents and nearer the session low.
Fundamental analysis: The soybean market was pulled higher today by a strong soybean meal futures market that is presently on fire. USDA this morning reported a daily U.S. soybean sale of 132,000 MT to China for 2023-24. China is short-bought on soybeans and crush margins are robust, a China watcher told Pro Farmer. Logistical problems in both Brazil and the U.S. have limited recent purchases.
World Weather Inc. today reported weather in South American soybean regions sees rain expected in some areas of Argentina this weekend with more likely Oct. 25-26 in the south. Center-west Brazil will be dry and very warm for another week and then experience some showers. Concern about early planted crops and delays in additional planting will be on the rise. Harvest weather in the U.S., Europe and the western CIS has advanced favorably, said the forecaster.
Thursday morning’s weekly USDA export sales report is expected to show U.S. soybean sales of 950,000 to 1.625 million MT in the 2023-24 marketing year, and sales of zero to 125,000 MT in the 2024-25 marketing year.
Technical analysis: The soybean futures bulls and bears are on a level overall near-term technical playing field. A six-week-old downtrend on the daily bar chart has been negated. The next near-term upside technical objective for the soybean bulls is closing November prices above solid resistance at $13.50. The next downside price objective for the bears is closing prices below solid technical support at the October low of $12.50 1/2. First resistance is seen at $13.17 and then at $13.25. First support is seen at Tuesday’s low of $12.85 1/2 and then at $12.73 1/2.
The soybean meal bulls have the firm overall near-term technical advantage. Prices are in a steep uptrend on the daily bar chart. The next upside price objective for the meal bulls is to produce a close in December futures above solid technical resistance at $425.00. The next downside price objective for the bears is closing prices below solid technical support at this week’s low of $386.90. First resistance comes in at today’s high of $410.60 and then at $415.00. First support is seen at $405.00 and then at $400.00.
Soybean oil bears have the overall near-term technical advantage. However, a six-week-old downtrend on the daily bar chart is in jeopardy. The next upside price objective for the bean oil bulls is closing December prices above solid technical resistance at the October high of 58.07 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 this week’s high of 56.17 cents and then at 57.00 cents. First support is seen at this week’s low of 54.45 cents and then at 53.15 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 rallied 9 3/4 cents before closing at $5.80 1/4. December HRW rose 3 3/4 cents before settling at $6.70 1/2, nearer the session low, while December spring wheat rose 5 3/4 cents to $7.33 1/2.
Fundamental analysis: Wheat futures surged on the session but remained below Monday’s peak, though recent price action has favored the bulls and indicates an interim low is in place. The 10-year Treasury note made a new for-the-move high yield today as last week’s “flight to safety” into the Treasury complex has wholly reversed. The 10-year posted its highest yield in over 16 years, sinking the U.S. stock market. Outside markets proved supportive as gold futures traded to the highest level since early September. The yellow metal has surged nearly $150/ounce over the past two weeks.
Global production concerns are entering the forefront of traders’ minds as dryness remains a concern in several growing regions. Argentina wheat production continues to struggle due to dryness, though some alleviation is expected this weekend and again next week, World Weather Inc says. More precipitation will be needed to make a substantial impact on soil moisture, though. Australia continues to need additional moisture, with very little precipitation forecast in the next ten days, World Weather Inc says. Paired with temperatures in the 90s and up to 102 degrees Fahrenheit, the wheat crop has endured great stress.
USDA is set to release the weekly export sales report tomorrow morning, as traders expect net sales between 350,000 and 800,000 MT following last week’s 651,964 MT, which was a marketing year high.
Technical analysis: December SRW futures tested downtrend line support on Tuesday, testing last week’s breakout. Today’s subsequent rally confirmed that breakout, marking $5.70 as line in the sand support. Bulls have turned the near-term technical advantage slightly more in their favor, though bears continue to hold the long-term edge. Bulls are targeting resistance of $5.88 1/2, quickly backed by $5.91 3/4, then the psychological $6.00 level. Bears are targeting a break below $5.70, then support at $5.56.
December HRW futures have traded sideways compared to their SRW counterpart, with prices trading around the $6.70 mark seven sessions in a row. Bulls are seeking to hold $6.65 on a closing basis. A break below that would have bears targeting the contract low of $6.55 ¼ and then the psychological $6.50 level. Bulls are targeting resistance at $6.75, backed by $6.85, ultimately targeting a close above the $7.00 mark.
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 rose 101 points to 84.24 cents and near the session high.
Fundamental analysis: The cotton futures market today saw a good corrective bounce from recent selling pressure that saw prices earlier today hit a 2.5-month low. Decent gains in the crude oil market today also aided the cotton market bulls. It will be important for the cotton bulls to show good follow-through buying strength on Thursday, which would then better suggest a near-term market bottom is in place. However, risk aversion in the general marketplace is still elevated due to the Middle East violence. That could make it tough for the cotton market bulls to sustain their strength.
World Weather Inc. today reported good cotton-harvest weather is expected in China and U.S. cotton regions over the next week. Australia’s irrigated crop planting has begun and will continue to advance well. Brazil is expected to remain too wet for center-south planting. India’s harvest in the north may have been disrupted by rain Monday and some showers will linger over the next few days, said the forecaster.
Traders are awaiting Thursday morning’s weekly USDA export sales report, especially to see how much demand for the U.S. fiber is coming from major importer China.
Technical analysis: Today’s high-range close in December cotton futures suggests the bears are near-term exhausted. The bears still have the slight overall near-term technical advantage. A three-week-old downtrend is in place on the daily bar chart. The next upside price objective for the cotton bulls is to produce a close in December futures above technical resistance at 86.00 cents. The next downside price objective for the cotton bears is to close prices below solid technical support at 80.00 cents. First resistance is seen at 84.50 cents and then at 85.00 cents. First support is seen at 83.00 cents and then at today’s low of 82.01 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.
