Crops Analysis | December 11, 2023
Price action: March corn fell 4 cents to $4.81 1/2, the lowest close since Nov. 29.
Fundamental analysis: Corn futures extended Friday’s weakness, notching mild losses amid a lack of supportive news. While followthrough selling in SRW wheat pressured prices, a continued corrective soybean rally helped limit corn losses as South American weather remains iffy.
Corn demand was at the center of today’s trade as Reuters reported bulk shippers hauling grain from the U.S. Gulf to Asia are facing continued struggles given longer routes and higher freight costs to avoid vessel congestion and record- high transit fees in the drought-hit Panama Canal. This comes at the peak season for U.S. exports, with higher costs further threatening demand for U.S. crops. Ships have reportedly met wait times of up to three weeks to pass through the canal as container vessels, which sail on more regular schedules, are using up the few transit slots available. USDA’s weekly corn export inspections also proved somewhat disappointing at 711,733 MT (28.0 million bu.). Inspections were down 463,719 MT from the previous week and just above the expected pre-report range of 700,000 MT to 1.175 MMT. Persisting U.S. dollar strength following Friday’s stronger-than-expected November payrolls and unemployment data further compounded today’s demand woes along with persisting deflationary news from China.
Meanwhile, the National Bureau of Statistics noted earlier today China produced a record corn crop, 4% larger than last year, despite widespread damage from summer typhoons. The surge in production stemmed from an increase in areas under cultivation as the government has been steadily reclaiming uncultivated land in several provinces.
Technical analysis: March corn surrendered to technical pressure from the 40-day moving average, currently trading at $4.90 1/4, and spent much of the session trading below the 20- and 10-day moving averages of $4.85 1/4 and $4.83 1/4, though support at $4.79 1/4 pared losses. Extended selling tomorrow would face initial support around $4.80, then at $4.74 and the Nov. 29 low of $4.70 1/2. Buying efforts will face initial resistance at the 10-, 20- and 40-day moving averages, and then at $4.95 1/4, $4.98 1/4 and the 100-day moving average of $5.00 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: Soy complex futures posted strong gains to start the week, with January soybeans up 32 cents to $13.36, January meal futures $8.50 higher to $413.20 and January soyoil up 91 points to 51.11 cents.
Fundamental analysis: Soybeans were supported by Brazilian weather concerns as weekend rainfall was less than desired across many of the dry areas of central and northeastern Brazil during the weekend. Forecasts suggest erratic rains will continue for the next week to 10 days, meaning more crop stress is likely for the driest areas. As a result, traders are anticipating more reductions to Brazil’s soybean crop by private crop forecasters.
Additional support came from daily soybean export sales totaling 132,000 MT to unknown destinations for 2023-24, which traders expect was China. With the Brazilian crop shrinking amid drought stress, foreign buyers are purchasing U.S. soybeans, which at a minimum serves as insurance in case of additional Brazilian crop losses.
USDA reported weekly soybean export inspections of 984,410 MT (36.2 million bu.), which were down 188,847 MT from the previous week but within the pre-report range of 700,000 MT to 1.6 MMT. China took shipment of 503,684 MT of U.S. soybeans for the week, or 51.2% of the total.
Technical analysis: January soybeans closed above the 5-, 10-, 40-, 50- and 200-day moving averages today. Near-term resistance is the convergence of the 20- and 100-day moving averages near $13.42, followed by a 50% retracement of the drop from the mid-November high to last week’s low, which is near $13.45 1/2. Near-term support extends from $13.30 3/4 to last week’s low at $12.92.
January meal futures posted corrective gains today but remain in the steep downtrend from the mid-November high. January soyoil futures remain in the broad month-long sideways range outlined by the November low at 48.53 cents and last month’s high at 53.70 cents.
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.
Price action: March SRW wheat fell 22 1/4 cents to $6.09 1/2. March HRW wheat closed down 28 3/4 cents to $6.32 1/4. March HRS futures dropped 17 3/4 cents to $7.11 3/4. Wheat futures closed near their session lows.
Fundamental analysis: The winter wheat markets saw followthrough technical selling pressure from last Friday’s losses. The two down days in a row begin to suggest wheat futures prices will now languish in sideways trading ranges at lower levels for at least the near term. Lower corn prices and the recent rebound in the U.S. dollar index were also negative elements for wheat today.
USDA reported U.S. wheat export inspections of 281,697 MT (10.4 million bu.), up 93,742 MT from the previous week and within market expectations. Wheat inspections were close to normal levels for this time of year.
World Weather Inc. today said rain coming to U.S. hard red winter wheat areas this week “will be welcome and could set the stage for greatly improving spring crop development potential. Most crops in the Midwest are favorably rated with little change likely.” Dry weather in the Northern Plains and Canada “is of some interest, but it is a long time before spring planting begins, which leaves ample time for change,” said the forecaster.
What to do: Get current with advised sales.
Hedgers: You should be 60% priced in the cash market for 2023-crop. You should also have 10% of expected 2024-crop production sold for harvest delivery next year.
Cash-only marketers: You should be 60% priced for 2023-crop. You should also have 10% of expected 2024-crop production sold for harvest delivery next year.
Price action: March cotton rose 56 points to 82.00 cents, a near mid-range close.
Fundamental analysis: Cotton futures etched narrow short-covering gains to start the week, driven largely by technical forces. Meanwhile, a strengthening U.S. dollar ahead of tomorrow’s Consumer Price Index (CPI) Report and a two-day FOMC meeting, set to begin tomorrow, dampened upside potential for the natural fiber. Demand woes also resurfaced amid economic news from China, which reported a 0.5% annual drop in the country’s consumer price index, indicating rising deflationary tension and concerns around an economic recovery. The drop in CPI marked the 14th straight month of producer price deflation and the steepest figure since August. An earlier report from Bloomberg Economics also cast a dour tone for demand, estimating the global economy will grow 2.7% in 2024, versus 3.1% this year. That would be the third-worst year since the burst of the dotcom bubble, only after 2009 and 2020.
World Weather Inc. reports planting and development is continuing in a challenging environment for South Africa and Australia where drier weather is expected for a while, though recent rain in Australia did benefit some dryland cotton. Argentina crop conditions are improving, though there is still some concern over cotton development potential in Brazil during 2024. The forecaster indicates rain in West Texas this week will be ideal in bolstering topsoil moisture for improved cotton planting prospects in spring 2024.
Technical analysis: March cotton spent most of the session hovering around the 40-day moving average, currently trading at 81.97 cents, in consolidative trade. Providing initial support was Friday’s low of 81.12 cents, while initial resistance served at 82.67 cents. While today’s trade indicates continued sideways consolidation, a breakout above initial resistance will face an additional battle at 83.91 cents, 84.68 cents and then the 100-day moving average of 84.81 cents. Conversely, additional support serves first at 80.66 cents, then at the 20- and 10-day moving averages of 80.51 and 80.32 cents and again at 79.89 and 78.65 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.
