Crops Analysis | November 6, 2023
Price action: December corn was unchanged at $4.77 1/4, near the session low.
Fundamental analysis: Corn futures traded narrowly within Friday’s upper range and spent the session pivoting around the 10-day moving average, with spillover gains oozing from soybean and SRW wheat futures. A daily export sale of 289,575 MT to Mexico during 2023-24 provided additional support along with mild corrective buying efforts in crude oil futures. Crude recovered a portion of Friday’s losses as top crude exporters Saudi Arabia and Russia reaffirmed their commitment to extra voluntary oil supply cuts until the end of the year. Meanwhile, varying weather in Brazil continues to support soybean prices as World Weather Inc. forecasts a drier bias to resume across center west and northern center south Brazil during the week to ten days, while southern Brazil will resume a wet biased conditions this weekend into next week. However, Argentina’s weather continues to improve from drought conditions, which will continue into next week.
USDA released weekly export inspection data midmorning, which showed 535,191 MT (21.1 million bu.) were inspected for export during the week ended Nov. 2. While inspections were down 5,594 MT from the previous week, they were well above the pre-report range of 175,000 to 400,000 MT.
Following the close, USDA will update harvest progress estimates, with traders expecting harvest to be 82% complete, according to a Reuters poll.
Technical analysis: December corn spent the session trading within Friday’s upper range, with the 10-day moving average of $4.78 ultimately limiting upside momentum. A push above the area, however, will face additional resistance at the 40- and 20-day moving averages of $4.83 3/4 and $4.85 1/4, again at $4.88 3/4, $4.96 1/4 and the 100-day day moving average of $5.02 1/2. Conversely, initial support will serve at $4.75 1/2, then $4.69 3/4, the Sept. 19 low of $4.67 3/4 and $4.62 1/4.
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: January soybeans rallied 12 1/4 cents before closing at $13.64, the highest close since Sept. 14. December soybean meal dropped $4.60 to $437.50, though deferred contracts pared losses. December bean oil rallied 144 points to 50.80 cents, closing near the midpoint of today’s session.
Fundamental analysis: Soybeans continue to lead the ag complex higher as January futures have rallied over 60 cents in the past five sessions. Brazil remains at the forefront of traders’ minds, as planting for the 2023-24 crop year was 51% complete as of last Thursday, according to AgRural. The pace gained 11% week over week, though remains below 57% last week at this point and the slowest since 2020-21. Pockets of rainfall improved some crop and field conditions in center-west and northern center-south Brazil over the weekend. A drier bias remains across these areas over the coming week to 10 days, though southern Brazil remains wet over the same period.
The soy complex itself remains volatile, evidenced by January crush trading from the Oct. 10 low of $1.17 to the Oct. 27 high of $1.86 1/4 and back down to $1.40 1/4 today. Crush is calculated using all three contracts, soybeans, soybean meal and soybean oil. Prior to 2021, monthly ranges within 10 cents were normal, but the increase in crush and explosion of renewable diesel has left crush traders looking for ways to reduce risk. This has led to a lot of spreading in the soybean oil and soybean meal markets, apparent due to the inverse correlation the products have maintained in recent volatile trade. What the “fair value” of these assets are is up to question and up to traders to try to answer, but volatility is likely to remain as the path forward in renewable diesel remains largely up to question.
This morning, USDA reported weekly export inspections of 2.085 MMT (76.6 million bu.) in week ended Nov. 2, which were up 35,012 MT from the previous week and within the pre-report range of 1.75 to 2.35 MMT. USDA also reported a daily sale of 126,000 MT for delivery to China during 2023-24.
USDA releases the weekly Crop Progress report, which is expected to show harvest at 92% completed according to a Bloomberg poll, which would be down from 94% a year ago.
Technical analysis: January soybean futures surged higher, closing green for five sessions in a row now. Prices traded at the highest level since Sept. 15 and have surged above all moving averages. Bulls are eyeing resistance at the psychological $13.75 level before tackling the downtrend line stemming from the July highs at $13.90. Bears are looking to take out support at $13.52, quickly backed by $13.50, then $13.36 1/2.
Soybean meal continues to flag on the daily bar chart as December futures consolidate the recent $80 rally. Bears are seeking to defend resistance at today’s high of $446.00, quickly backed by the Oct. 27 contract high at $448.40. Further buying has bulls targeting $465.00 resistance. Bulls are seeking to hold initial support at $433.00, which is firmly backed by $425.00.
December bean oil surged on the session but bulls continue to struggle against downtrend resistance, which currently stands at 51.75 cents. This has capped gains since mid-October, a daily close above which would have bulls targeting the 20-day moving average at 52.54 cents. Bears are seeking to take out support at today’s low of 50.68 cents, backed by Friday’s move-low at 48.79 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 closed up 3 1/4 cents to $5.75 3/4. December HRW wheat rose 2 1/4 cents to $6.45 3/4. Prices closed nearer the session highs. Spring wheat futures rallied 7 3/4 cents before closing at $7.28 3/4.
Fundamental analysis: The winter wheat futures markets today saw some tepid short covering amid an uptick in trader and investor risk appetite in the general marketplace—evidenced by the recent solid gains in the U.S. stock market. Good gains in soybean futures today also helped out the wheat futures bulls.
USDA this morning reported weekly U.S. wheat export inspections of 71,608 MT, down 126,690 MT from the previous week and below market expectations. This marked the lowest inspections since at least 1995. U.S. wheat inspections continue to disappoint.
This afternoon’s weekly USDA crop progress reports are expected to show U.S. winter wheat planted at 91% complete as of Sunday. That compares with 84% last week and 92% a year ago at this time. Meantime, U.S. winter wheat condition is seen at 48% good to excellent, compared to 47% last week and 30% last year at this time. Traders are awaiting the latest USDA supply and demand report out Thursday.
HRW wheat bears have the solid overall near-term technical advantage. 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 last week’s high of $6.52 3/4 and then at $6.67 3/4. First support is seen at the October 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 plunged 162 points to 78.00 cents, marking the lowest close since June 28.
Fundamental analysis: December cotton futures extended to a fresh near-term low amid speculative selling as demand woes continue to hover over the natural fiber. The path of least resistance has been to the downside since late October as U.S. production concerns shifted to the wayside from higher-than-expected yield reports in a few growing areas and increasing concerns around the global economy. Meanwhile, technical support and a rebound in crude oil futures from Friday’s selloff somewhat limited bear efforts.
Positioning ahead of USDA’s November production, supply and demand updates will likely persist ahead of the Nov. 9 release. Traders are expecting production to decline to 12.73 million bales, down from 12.82 million from October, according to a Bloomberg survey. However, ending stocks are expected to rise 250,000 bales from October amid an expected drop in exports.
While U.S. harvest weather continues to prove mostly favorable, World Weather Inc. reports center south cotton in Brazil has been establishing poorly due to doo much rain, with drying needed. The forecaster notes center west safrinha cotton acreage could change greatly in the next few weeks depending on the fate of soybean planting and the need for replanting in the region.
Technical analysis: December cotton tumbled to over a four-month low, ending the session below support at 79.05 and 78.47 cents. Initial support will now serve at 77.75 cents and again at the June 27 low of 76.81 cents. Though bears have a firm grasp on the near-term technical advantage, technically oversold conditions could spur corrective buying efforts, which would face resistance at today’s failed support levels, then at 80.35, 81.07 and the 10-day moving average of 81.66 cents. From there, resistance serves at the 20-, 100- and 40-day moving averages of 83.05, 84.33 and 85.19 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.
