Crops Analysis | November 2, 2023
Price action: December corn futures fell 5 cents to $4.70, ending near session lows.
Fundamental analysis: Corn futures slipped on the session despite an overwhelming “risk-on” attitude in the marketplace. Risk assets rallied in the wake of yesterday’s Federal Reserve decision to leave rates unchanged and following press conference that led traders to believe the current tightening cycle has come to an end. Soybeans and wheat also saw upside today, most notably in soybeans, further showcasing the relative weakness seen in corn. The downside in corn is especially worrisome given the stout technical support which prices broke on a closing basis.
Mato Grosso and northern Mato Grosso du Sul into wester Goias will see an increase in showers during the next two weeks, but showers through Friday will be light and poorly distributed leaving few areas with enough rain to induce more than brief improvements in soil moisture or conditions for crop development, World Weather Inc says. Additional crops are likely to wither and may need to be replanted unless greater rain falls. This continues to lessen the likely production of Brazil, as the first crop is stressed and second crop corn is likely be to delayed in planting. USDA reacting to these likely production cuts next week could be a catalyst that limits the downside, but USDA is unlikely to make large changes to South American production until there is more certainty.
USDA reported net corn export sales of 748,100 MT during the week ended Oct. 26, down 45% from the previous week and 40% from the four-week average. Sales were near the low end of pre-report expectations from 600,000 MT to 1.2 MMT. China remains a poor purchaser of U.S. corn, as outstanding sales are less than 10% of last year at this time. A large portion of demand is likely to have shifted to Brazil. There is also a notable shift to U.S. sorghum, which has seen total commitments increase nearly 35-fold year over year.
Technical analysis: December corn futures fell for the second straight session, closing below key $4.74 resistance, which has only happened one other time since the level was tested in mid-August. Following the breakdown in mid-September, prices reversed from the move low at $4.67 3/4 before trending higher for five-weeks. This will remain important support, below which remains little support until the $4.50 level. Bulls are seeking to post a false breakdown on the daily bar chart by reversing prices above $4.74 support, turned resistance Friday, though the ongoing bearish seasonal that November holds is likely to keep pressure on prices. Above $4.74, bulls are seeking to capture resistance at $4.78, backed by $4.80, then $4.84.
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: January soybeans rose 13 1/4 cents to $13.28 1/4, marking the highest close since Oct. 19. December meal fell $4.10 to $426.30, the lowest close since Oct. 23. December soyoil closed 42 cents higher at 50.32 cents after marking a five-month low early on.
Fundamental analysis: Soybean futures were able to hold onto gains today despite extended meal weakness. USDA’s weekly export sales data, released this morning, showed a slight decline in soybean exports during the week ended Oct. 26. Although net sales of 1.01 MMT during the week reflected a 27% drop from the previous week and 13% from the four-week average, news that China’s soybean imports will likely remain strong into the fourth quarter lent additional optimism around U.S. exports as the year progresses. Dozens of U.S. agriculture industry representatives are working to ensure just that, as they gathered in Beijing today to meet Chinese counterparts amid growing U.S. efforts to bolster trade between the two countries. The delegates included 11 groups including the U.S. Soybean Export Council, U.S. grains Council and U.S. Wheat Associates, which are visiting the country after Chinese grain buyers signed non-binding agreements to buy billions of dollars’ worth of commodities, mostly soybeans, and is the first such signing since 2017.
Meanwhile, extreme weather continues to affect planting throughout Brazil. World Weather Inc. reported earlier that rains in Brazil’s Mato Grosso and in northeastern portions of the country beginning this weekend into next Wednesday are expected to prove lighter than earlier advertised. The region will then resume its drying trend during the latter part of next week and into the following weekend. The forecaster further notes southern Brazil will get more heavy rain today and Friday with five days of drying before rains resume next week.
Technical analysis: November soybeans were able to improve their technical posture, with a close held above the 10-, 40- and 200-day moving averages of $13.12 3/4, $13.18 1/2 and $13.22 3/4. Initial resistance will now serve at $13.35 3/4 and 100-day moving average of $13.41. Conversely, support will now serve at today’s failed resistance levels, then at the 20-day moving average of $13.07 1/4, again at $12.98 1/2, $12.92 1/4 and the Oct. 11 of $12.70 1/4.
December meal futures spent the session trading mostly between resistance at $434.00 and support at $425.40, pivoting around the 10-day moving average of $429.50. Bears ultimately prevailed in today’s session, evidenced by a close below the 10-day for the first time since Oct. 10. Initial support will continue to serve at $425.40, with additional support serving at $420.4, $416.80and at the 20-, 200- and 100-day moving averages of $410.30, $401.70 and $399.10. A return to the upside, however, will face resistance at the 10-day moving average, again at $434.00, $437.60, $442.60 and last week’s high of $448.40.
After reaching a five-month low, December soyoil rebounded to close on the session high, though resistance at 50.52 cents limited gains and will continue to serve as resistance. Extended buying efforts will face additional resistance at 51.26 cents, then at the 10- and 20-day moving averages of 51.73 cents and 52.97 cents, then at 53.36 cents and the 40- and 200-day moving averages of 55.92 and 56.29 cents. A move lower, will continue to face support at 49.16 cents , then at 48.42, and 47.06 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 wheat rose 3 3/4 cents to $5.65 1/2 and nearer the session high. December HRW wheat gained 1 1/2 cents at $6.41 1/2 and nearer the session low. December spring wheat futures closed 1 3/4 cents higher at $7.10 3/4.
Fundamental analysis: The winter wheat futures markets today saw mild short-covering bounces, with buying interest also supported by a drop in the U.S. dollar index and a rally in crude oil prices. Some better risk appetite in the general marketplace today also prompted just a bit of speculator buying interest in wheat futures. Lower corn futures prices today did limit the upside in wheat.
Weaker U.S. wheat export sales numbers that were below market expectations also squelched the bulls today. USDA this morning reported U.S. wheat sales of 275,600 MT during week ended Oct. 26, which were down 24% from the previous week and off 43% from the four-week average.
World Weather Inc. today said recent moisture in the U.S. Plains, Midwest and Pacific Northwest will be good for winter crop establishment. Warming is needed to stimulate new crop development in the northwestern Plains. Warming in the Pacific Northwest and central U.S. Plains should translate into better winter crop establishment. Meantime, rain in previously dry areas of Western Europe, Ukraine and southern Russia over the next couple of weeks should improve winter crop establishment. Planting in China should be mostly done with warm weather favoring better establishment. Australia wheat is still struggling in the west and a part of south Australia, where poor moisture has cut into yield potentials. Brazil’s southern wheat continues to fall in quality. Argentina rain recently has improved production potentials in the south, but it comes too late in the central and north.
Technical analysis: Winter wheat futures bears have the solid overall near-term technical advantage. SRW bulls' next upside price objective is closing December prices above solid chart resistance at the October high of $6.04 1/2. The bears' next downside objective is closing prices below solid technical support at the contract low of $5.40 1/2. First resistance is seen at this week’s high of $5.77 and then at $5.85. First support is seen at this week’s low of $5.54 1/2 and then at $5.50. December HRW sees a 2.5-month-old downtrend is in place on the daily bar chart. The HRW bulls' next upside price objective is closing December prices above solid technical resistance at $6.87 3/4. The bears' next downside objective is closing prices below solid technical support at $6.00. First resistance is seen at this week’s high of $6.52 3/4 and then at $6.67 3/4. First support is seen at this week’s low of $6.25 1/2 and then at $6.15.
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 36 cents to 79.80 cents, a low-range close after marking an intraday high of 80.82 cents.
Fundamental analysis: December cotton futures marked mild gains despite notable support from solid U.S. export sales data combined with strong outside markets. Earlier today, USDA reported weekly U.S. cotton sales of 457,100 RB during week ended Oct. 26, a marketing-year high. China was the top purchaser for the week at 324,000 RB, including decreases of 100 RB. This comes amid recent demand concerns from the top importer as economic woes have cast doubt on U.S. export sales as the marketing-year progresses. Meanwhile, traders’ risk appetite returned to the market following the Fed’s decision to keep rates unchanged, which bolstered crude oil futures and equities, while the U.S. dollar lost gains from the previous two sessions.
Good harvest weather and better-than-expected yields in certain U.S. growing areas are likely keeping a lid on prices in the near-term. World Weather Inc. reports Texas harvest weather will be good through the coming week, while drought in the southeastern U.S. should be helping to preserve and protect fiber quality. The forecaster notes that while recent rains in the northern Delta briefly slowed fieldwork, dry conditions have returned and will prevail for another week, supporting harvest progress.
Technical analysis: December cotton ended the session higher but failed an earlier test of resistance at 80.78 cents. Increased buying above the area, however, would face additional resistance at 82.12 cents, then at the 10-day moving average of 82.52 cents, again at 82.86 cents and the 20-,100- and 40-day moving averages of 83.89 cents, 84.37 cents, and 85.60 cents. Conversely, initial support will serve at Wednesday’s low of 79.30 cents, then at 78.70 cents, 77.96 cents and 76.62 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.
