Crops Analysis | December 21, 2023
Price action: March corn futures rallied 2 3/4 cents before settling at $4.72 1/2.
Fundamental analysis: Corn futures saw corrective buying today, bringing prices off Wednesday’s fresh contract low. Gains in corn were capped by continued weakness in the soy complex and a weaker crude oil market, which is facing selling pressure from Angola, the second largest oil producer in Africa, leaving OPEC to likely increase production. Volatility seen in grains and outside markets is quieting into the holiday as traders are getting an early start to the long weekend, which is likely to continue tomorrow.
Argentina is forecast to see a healthy mix of rain and sunshine in the first week of the outlook, with areas forecast to see the least amount of moisture already rather soggy, World Weather Inc. says. Temperatures are expected to remain moderate, providing healthy conditions for crop development.
USDA reported net weekly corn sales of 1.013 MMT, down 29% from the previous week and 33% from the four-week average. Sales were within expectations from 800,000 MT to 1.5 MMT.
Technical analysis: March corn futures saw corrective buying, though that did little to negate the downtrend seen over the past several months. After posting a fresh contract low on Wednesday, bulls made up most of the prior session loss in steady buying throughout the session. Resistance lies at $4.73 1/2, with backing from the 10-day moving average at $4.77 1/4, then $4.80 1/2. Meanwhile, bulls are looking to hold support at $4.70 1/2 then the contract low of $4.68 1/2 on a reversal lower. A drop below that point would have bears ultimately targeting $4.50 support.
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: March soybean futures fell 14 cents to $13.01 3/4, while nearby January futures dropped 11 cents to $12.97 1/4. Both settled nearer session lows. March soy meal futures dropped $2.30 to $386.4. March soyoil saw heavy selling before closing 143 points lower at 49.33 cents.
Fundamental analysis: Soybeans continue to fall under extensive weakness as the weather forecast turns more favorable for the Brazilian crop. Soybeans fell under pressure despite corrective buying in corn and wheat futures. The U.S. dollar index falling near recent lows also did little to spur futures buying on Thursday. Despite soybeans becoming relatively cheaper with the weaker dollar, importers have tapered buying compared to the string of daily sales last week, which likely contributes to soy weakness.
Brazil rainfall Wednesday and early today was greatest in the north from Bahia and northern Minas Gerais to northern Mato Grosso. World Weather Inc. says that “rain will shift south over the next few days, bringing some relief to dryness in parts of Mato Grosso, Goias, Minas Gerais, and a few other areas to the south.”
USDA reported net weekly soybean sales of 1.989 MMT for 2023-24, up 84% from the previous week and 51% from the four-week average. Increases were primarily for unknown destinations (785,500 MT) and China (700,400 MT). Sales were within the expected range from 1.5 to 2.5 MMT. Today’s sales were the largest in five weeks.
Technical analysis: March soybean futures fell for the third consecutive session, making a fresh two-month low. Bears continue to hold the near-term technical advantage as prices are in a six-week downtrend on the daily bar chart. Bulls are seeking to overcome resistance at $13.11 3/4, $13.20 3/4, then the 10-day moving average at $13.26. Prices are quickly nearing oversold and are over 25 cents from the 10-day moving average, leaving room for potential corrective buying to end the week. On continued pressure, bulls are seeking to hold support at $12.99 1/4 with little backing until $12.85.
March meal futures continue to face heavy selling pressure, closing at the lowest level in over two months. Bears continue to maintain the near-term technical advantage. Bulls are eyeing resistance at $390.0 with backing from the 10-day moving average at $395.4 then the psychological $400.0 mark. Support stands at today’s low of $384.7, $382.3, then firmer backing from $370.0
March bean oil futures faced heavy selling pressure, though maintain a more neutral bias than soybeans and meal. While prices have put in a series of lower highs since mid-November on the daily bar chart, the downside has been protected by 49.00 cent support. A break below that mark targets the Nov. 8 low at 48.56 cents. Resistance stands at the psychological 50.00 cent level, with backing from converged 10-day and 20-day moving average resistance at 50.34 cents and 50.60 cents, respectively. Further buying targets the 40-day moving average at 51.29 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.
Fundamental analysis: The winter wheat futures markets today saw mild corrective rebounds and tepid short covering following recent selling pressure. A lower U.S. dollar index and better risk appetite in the general marketplace also supported some buying interest in wheat.
Gains in the winter wheat markets were limited by weather in U.S. wheat country that still leans bearish. World Weather Inc. today said that in hard red winter wheat country “some more needed precipitation is expected in the first week of the outlook. Some of this will occur today in eastern areas. However, most of the moisture is expected Saturday into Sunday. The precipitation will be greatest in eastern areas. Shower activity in the west will be welcome but will leave a need for more.” A prolonged period of drier weather is likely after this storm system ends but some increase in precipitation could start to occur again near the end of the second week of the outlook, said the forecaster. In the Northern Plains a storm system is still expected to promote rain and snow in part of the region late Saturday into early Monday. This will be in the southeastern part of the region, leaving northwestern areas dry.
USDA estimated 32% of U.S. winter wheat areas were in drought as of Dec. 19. That’s unchanged from the previous week and well below 71% at this time last year.
USDA also this morning reported net weekly U.S. wheat export sales of 322,700 MT for 2023-24, down 78% from the previous week and 51% from the four-week average. There were no wheat sales to China this week after its recent buying. Today’s wheat sales fell within market expectations.
Technical analysis: Bears have the overall near-term technical advantage. However, recent price gains suggest a near-term market bottom is in place. SRW bulls' next upside price objective is closing March prices above solid chart resistance at the December high of $6.49 1/2. 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 Wednesday’s high of $6.25 1/4 and then at this week’s high of $6.32. First support is seen at $6.00 and then at $5.85.
Bears have the firm overall near-term technical advantage. However, recent price gains begin to suggest a market bottom is in place. 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 this week’s high of $6.44 3/4 and then at $6.50. First support is seen at today’s low of $6.19 1/4 and then at $6.10.
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: Concerns about export demand strength still seem to be worrying the cotton market, with the nearby March contract dipping 8 points to 79.13 cents per pound.
Fundamental analysis: The weekly USDA Export Sales report apparently disappointed cotton traders this morning, as indicated by the subsequent price slippage. Last week’s net sales figure at 146,700 bales easily topped the week-prior figure, but it fell 18% below the four-week average. Conversely, the weekly export total surged to a marketing-year high at 222,300 bales, which jumped 50% above last week’s published figure and topped the four-week average by 96%. This was impressive, but it’s also essentially “water under the bridge” due to the business already having been done.
Longer-term factors, particularly the likely strength or weakness of Chinese buying in the coming weeks, will continue affecting the market. Traders are probably being encouraged by recent equity market strength due to the underlying implication of U.S. economic activity, as well as U.S. dollar weakness being amplified by talk of Fed interest rate cuts next year. Traders seem unlikely to take very aggressive futures positions on either side of the market prior to the release of the USDA’s January 12 Crop Production report and its “final” say on the size of the 2023 U.S. cotton crop.
Technical analysis: Bears still hold the short-term technical advantage in March cotton futures after the contract rebounded back above technical support stemming from the Nov. 7 low of 79.16 cents/pound. It settled right on the downtrend line drawn across its October 9 and October 27 highs. Today’s low suggests added support at 78.31. Stronger support persists at the Nov. 8 low of 77.66. Initial resistance at today’s high of 79.85 cents is closely backed by the psychological 80.00 cent level, then by the 40-day moving average near 80.83.
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.
