Crops Analysis | December 4, 2023
Price action: December corn rose 3/4 cent to $4.85 1/2, a mid-range close.
Fundamental analysis: Corn futures turned decidedly higher following USDA’s mid-morning release of weekly inspection data, though a lack of support from outside markets and technically strapped soybean futures ultimately curbed buying efforts. USDA’s pre-open report of daily sales of 267,044 MT for delivery to Mexico, as well as a 440,000 MT SRW wheat sale to China during 2023-24, underpinned the grain complex, though forecasts for rain in Brazil ultimately sidelined the demand optimism along with strength in the U.S. dollar.
Weekly inspection data for week ended Nov. 30 were especially noteworthy at 1.16 MMT (45.6 million bu.), surpassing analysts’ pre-report range of 350,000 to 900,000 MT and the previous week’s total by nearly 750,000 MT.
Technical analysis: December corn notched higher for the fourth straight session, ending just above the 20-day moving average, currently trading at $4.85 1/4, which has served up solid resistance since late October. Initial resistance will now stand at $4.89 3/4, then at the 40-day moving average of $4.92 3/4 and again at $4.95 and the 100- and 200-day moving averages of $5.03 1/4 and $5.29 1/4. Conversely, initial support will now serve at the 20-day moving average, then at the 10-day moving average of $4.82 1/4 and again at $4.79 1/4, $4.73 1/2 and $4.68 1/4.
What to do: Get current with advised sales.
Hedgers: You should be 50% sold in the cash market on 2023-crop.
Cash-only marketers: You should be 35% sold on 2023-crop production.
Price action: January soybean futures saw sustained selling throughout the session, falling 18 3/4 cents to $13.06 1/4. January meal futures dropped $4.40 to $408.30. January bean oil futures slipped 21 points to 51.24 cents.
Fundamental analysis: Soybean futures broke down and experienced heavy technical selling throughout most of the session, unable to garner spillover strength from the wheat market. Soybeans were not helped by inspections, which totaled 1.11 MMT (40.7 million bu.), and were below pre-report expectations of 1.25 to 2.0 MMT. Inspections continue to pace above the seasonally required rate to hit the USDA export estimate, though that surplus has been cut in half over the past month as more attention turns to other products. USDA reporting daily sales of 183,000 MT of soymeal to the Philippines failed to support prices today as well, despite a tight soymeal balance sheet.
Weather over the weekend in Brazil features widely varied rainfall in the driest areas, with most areas struggling to get enough rain to counter evaporation, World Weather Inc says. Temperatures were warmer than normal, which kept drying rates high. The forecaster says Brazil’s monsoon is unlikely to evolve for another ten more days, at least. While showers in the interim will be erratic, completely dry weather is not expected.
Due to damage from irregular rainfall and heat primarily in Mato Grosso, AgRural cut its Brazilian soybean crop estimate y 4.4 MMT to 159.1 MMT. The firm stated if the hot and dry conditions persist, additional cuts would be likely. AgRural estimated soybean planting was 85% complete as of last Thursday, behind 91% on this date last year.
Technical analysis: January soybean futures failed to hold downtrend line support at $13.22 1/2 on early buying efforts this morning, which led to an acceleration in selling pressure. Prices are in a three-week downtrend on the daily bar chart. Resistance is layered between $13.14 and $13.22 1/2, with firmer backing from $13.32. Support lies at today’s intraday low of $13.03 1/2, with backing from the $13.00 mark and $12.98, then $12.89.
January soymeal futures suffered heavy selling for the fifth straight session, negating 50% of the rally that took place in October and November. Bulls are eyeing resistance at $409.30 then the 40-day moving average, currently at $422.00, on a bout of corrective buying. Support lies at $406.30, backed by the 200-day moving average at $401.80, then the psychological $400.00 mark.
January soyoil showed relative strength compared to beans and meal today, though struggled trading to the upside. Bulls are eyeing resistance at 51.76 cents, then the 40-day moving average, currently at 52.52 cents. That is backed by last week’s high of 53.40 cents. Support lies at 51.06 cents, then 50.84 cents, with further backing from the 50.00 cent mark.
What to do: Get current with advised sales.
Hedgers: You should be 55% priced in the cash market on 2023-crop production. You should have 10% of expected 2024-crop production sold for harvest delivery next fall.
Cash-only marketers: You should be 50% priced on 2023-crop production. You should have 10% of expected 2024-crop production sold for harvest delivery next fall.
Advice: We advise wheat hedgers and cash-only marketers to sell another 10% of 2023-crop to get to 60% priced in the cash market. We also advise selling an initial 10% of expected 2024-crop production for harvest delivery next year.
Price action: March SRW wheat rose 17 3/4 cents at $6.20 1/2 and nearer the session high. Prices hit a six-week high. March HRW wheat gained 11 cents to $6.57 3/4, near the session high and hit a three-week high. Spring wheat futures rose 6 cents to $7.36 1/4.
Fundamental analysis: The wheat futures markets saw more short covering and perceived bargain hunting today as the technical postures for winter wheat markets are improving. The wheat markets posted good gains today despite solid daily gains in the U.S. dollar index.
Fundamentally, USDA today reported a large daily U.S. wheat sale. China purchased 440,000 MT of U.S. SRW for the 2023-24 marketing year. U.S. wheat weekly export inspections totaled 187,955 MT, which were down 100,503 MT from the previous week and below market expectations. Weekly U.S. wheat inspections continue to disappoint.
Also friendly for wheat was news Ukraine’s grain exports totaled around 13.4 MMT so far in the 2023-24 marketing year. That’s down from 18.3 MMT through Dec. 5 of last year.
World Weather Inc. today reported that in HRW country, precipitation in the next seven days will occur mainly late Friday and Saturday as rain with a little rain changing to snow. Only light amounts are expected, leaving an ongoing need for greater precipitation in the southwest. Well above average temperatures in the coming days “could promote some new wheat development or at least some loss in winter hardiness especially in the south,” said the forecaster. Meantime, in the northern Plains, pockets of snow in the next seven days will lead to at least a little increase in snow cover, especially in northern areas. However, “the snow cover will still be lacking compared to what is often on the ground at this time of year. Also, temperatures in the second week of the outlook may become warm enough to melt the snow again,” said World Weather.
Technical analysis: Winter wheat futures bears still have the overall near-term technical advantage. However, recent price gains suggest near-term market bottoms are in place. SRW bulls' next upside price objective is closing March prices above solid chart resistance at $6.70. The bears' next downside objective is closing prices below solid technical support at the contract low of $5.56 1/4. First resistance is seen at the October high of $6.31 and then at $6.40. First support is seen at $6.00 and then at Friday’s low of $5.89. The HRW bulls' next upside price objective is closing March prices above solid technical resistance at $7.00. The bears' next downside objective is closing prices below solid technical support at the contract low of $5.95. First resistance is seen at the November high of $6.70 1/2 and then at $6.80. First support is seen at today’s low of $6.42 and then at $6.29.
What to do: Get current with advised sales.
Hedgers: NEW ADVICE -- Sell another 10% of 2023-crop to get to 60% priced in the cash market. Also sell an initial 10% of expected 2024-crop production for harvest delivery next year.
Cash-only marketers: NEW ADVICE -- Sell another 10% of 2023-crop to get to 60% priced. Also sell an initial 10% of expected 2024-crop production for harvest delivery next year.
Price action: March cotton fell 74 points to 78.68 cents, ending near the session low and the lowest close since Nov. 8.
Fundamental analysis: Trade in March cotton futures continued to feature technical headwinds to start the week, with outside market pressure concurrently hovering over the natural fiber. A general risk-off tone also cast a shadow over commodities amid rising tensions in the Middle East. Equities were tethered ahead of this week’s economic data set for release, including jobless and employment data, which will likely test ideas of the Federal Reserve cutting interest rates early next year.
USDA will update its harvest estimate through Sunday following the close. Last week, 83% of the U.S. cotton crop was harvested, up four percentage-points from the five-year average. Weather should continue to cooperate as cotton harvest winds down over the next couple of weeks. World Weather Inc. reports dry weather and good harvest progress will continue through much of the next two weeks in western Texas and southwestern Oklahoma and harvesting should soon be completed in much of the region with brief descriptions to fieldwork from light precip in the Panhandle Saturday.
Technical analysis: March cotton bears increased the camp’s technical posture, with a close held below support at 79.07 and 78.73 cents. Initial support will now serve at 78.19 cents, then at the Nov. 8 low of 77.66 cents. However, recent selling has pressed the nearby contract into an area of notable support, which could ignite buying efforts. Meanwhile, the month of December historically tends to favor cotton bulls, which could increase confidence in a move higher. In the event earnest buying efforts transpire, today’s failed support levels will serve as the first levels of resistance, then at 79.61 cents and the 10- and 20-day moving averages, currently trading around 80.05 cents. A push above this area will then face a battle at 80.49 cents and 80.83 cents. From there, the next areas of major resistance stand at the 40- and 100-day moving averages of 82.75 and 84.89 cents.
What to do: Get current with advised sales.
Hedgers: You should have 60% of 2023-crop production forward sold in the cash market.
Cash-only marketers: You should have 60% of 2023-crop production sold.
