Crops Analysis | December 13, 2022
Corn
Price action: March corn fell 1/2 cent to $6.53 1/2, nearer the session low, after earlier hitting its highest level since Dec. 2.
Fundamental analysis: Corn ended with slight losses after climbing earlier behind strength in soybean, wheat and crude oil markets and a sharp drop in the U.S. dollar index, which fell to a 5 1/2-month low after lower-than-expected U.S. consumer inflation fostered ideas the Federal Reserve may tap the brakes on its aggressive interest rate hikes. Easing concern over grain shipments from Ukraine also limited buying interest. Shipments from Ukraine’s Odesa region resumed Monday after Russian missile strikes knocked out power for the region.
Dryness in key South American crop areas is price-supportive, but more so for soybeans. Crop consultant Dr. Michael Cordonnier lowered his estimate for the Argentina corn crop by 1 MMT, his third consecutive weekly cut, to 47 MMT. Corn planting and crop development continues to be impeded by hot temperatures and lack of consistent rainfall. Brazil and other parts of South America are still poised for huge crops. Cordonnier left his Brazil corn crop estimate unchanged at 125.5 MMT. The analyst’s figures contrast with Conab, which last week lowered its Brazilian corn estimate 0.57 MMT to 125.82 MMT and warned that potential moisture deficits in much of Brazil through February could negatively impact yields prospects.
Technical analysis: March corn traded a 7-cent range, making a high above the 20-day moving average near $6.58. The level will continue to serve as resistance along with $6.62 and the 40-day moving average near $6.70 3/4 as well as $6.68 3/4. Conversely, efforts to the downside will encounter support at the 10-day moving average near $6.48 1/2, again at $6.47 1/4, and then $6.40 1/2. In order for bulls to gain a bit more momentum a close above the 20-day moving average is likely necessary to spur heavier buying activity.
What to do: Get current with advised sales. Wait to make additional 2022-crop sales.
Hedgers: You should have 50% of 2022-crop sold in the cash market.
Cash-only marketers: You should have 50% of 2022-crop sold.
Price action: January soybeans rose 19 1/4 cents to $14.79 3/4, near a 2 1/2-month high close at $14.92 1/4 posted Dec. 8. January soymeal rose $2.10 to $452.30. January soyoil rose 192 points to 64.12 cents, the contract’s highest close since Dec. 2.
Fundamental analysis: Soybean futures climbed near last week’s highs as fresh export business, concern over dryness in South America and bullish technicals fueled speculative buying. China stepped up buying of U.S. soybeans late last month and appears to continue to be actively seeking supplies. Early today, USDA reported a daily sale of 140,000 MT of soybeans for delivery to “unknown destinations” during the 2023-24 marketing year. With today’s announcement, USDA has reported nine separate daily sales to China or unknown destinations totaling 1.966 MMT since Nov. 23.
Traders continued to closely monitor South American weather. Argentina’s crops are “still at risk” despite recent rain, World Weather Inc. said. “Subsoil moisture is still critically low, and it will not take very many days of sunny weather to deplete topsoil moisture again returning serious crop stress to the driest areas.” Cordonnier lowered his Argentine soybean crop estimate 1 MMT to 47 MMT, his third straight weekly cut. “Yield losses per day accelerate the longer planting is delayed throughout the month of December,” Cordonnier said. “There is also the possibility that not all the intended soybean acreage will get planted.”
But concerns over Argentina are being mitigated by an outlook for record soybean production from Brazil. Cordonnier kept his Brazilian soybean estimate at 151 MMT, and despite weather problems in Argentina and pockets of west-central and far southern Brazil, he expects record South American soybean and corn production. He estimates South American (Brazil, Argentina, Paraguay, Bolivia and Uruguay) soybean production at 214.5 MMT, which would be up 34.4 MMT (19%) from last year
Technical analysis: Soybean futures retain a neutral-to-bullish posture with the January contract closing strong to extending an eight-week uptrend and closing comfortably above most key short- and medium-term moving averages. Key upside objectives for market bulls include last week’s intraday high of $14.92 3/4. A push above that level may trigger buy stops that could help fuel a continued rally above $15.00, with additional targets including the August intraday high of $15.12 1/4 (a break above $15.00 could also unlock a wave of farmer selling). Initial support comes in at the 10-day moving average at $14.61 1/4, followed by the 20- and 200-day moving averages, which converge around $14.49 1/2 to $14.50. Further downside support lies at the 40-day moving average at $14.35 1/4.
What to do: Get current with advised cash sales. Wait to make additional sales.
Hedgers: You should be 60% sold in the cash market on 2022-crop production.
Cash-only marketers: You should be 60% sold on 2022-crop production.
Price action: March SRW wheat fell 4 cents to $7.50 3/4, after earlier rising to the highest level in over a week. March HRW wheat rose 3 cents at $8.65 1/4. March spring wheat rose 6 1/2 cents to $9.22 3/4.
Fundamental analysis: Wheat futures ended mixed, with SRW failing to hold early gains despite dollar weakness and strength in crude oil. A pullback in U.S. equities following an opening rally may have contributed to selling in some grains, and poor export demand continues to limit buying interest in wheat markets. A big snowstorm hitting the northern Plains states leans a bit bearish for wheat, as it will likely provide needed moisture for the wheat crop come next spring. World Weather today reported blizzard conditions will occur today in western Nebraska and northeastern Colorado. The next weather disturbance will be likely in southeastern production areas Sunday into Monday with some rain and snow. Greater snow cover will be needed to protect crops in the second week of the outlook due to an expected arctic air mass which could promote temperatures dropping below zero in central and northern areas, said the forecaster.
Ukraine remains a wild card. While grain supplies have been moving out of Black Sea ports for weeks, war-related disruptions could happen at any time to halt the shipments. Reports said shelling by Russia has increased the past few days.
Technical analysis: Winter wheat bears have the solid overall near-term technical advantage. Prices are in two-month-old downtrends on the daily bar charts. SRW bulls' next upside objective is closing March futures above solid resistance at $8.00. B next downside objective is closing prices below solid support at $7.00. First resistance is seen at today’s high of $7.69 1/4 and then at $7.80. First support is seen at this week’s low of $7.38 1/4 and then at the December low of $7.23 1/2.
HRW bulls' next upside objective is closing March futures above solid resistance at $9.50. Bears' next downside objective is closing prices below solid support at the August low of $8.11 3/4. First resistance is seen at today’s high of $8.79 1/4, then $8.90. First support is seen at $8.50,then at this week’s low of $8.37 1/2.
What to do: Wait on an extended price rally to increase cash sales.
Hedgers: You should be 85% sold in the cash market on 2022-crop. You should be 30% forward-priced on expected 2023-crop for harvest delivery next year.
Cash-only marketers: You should be 85% sold on 2022-crop. You should also be 30% forward-priced on expected 2023-crop production for harvest delivery next year.
Price action: March cotton rose 224 points to 81.63 cents, nearer the session high after hitting a two-week low early on.
Fundamental analysis: Cotton rebounded from initial declines behind short covering and corrective buying spurred in part gains in crude oil and U.S. equities and sharp weakness in the dollar. China’s easing Covid restrictions recently has encouraged buyers in cotton amid hopes the country’s economy will improve and it will continue to buy large volumes of raw commodities such as cotton. China’s Covid-easing measures will be closely monitored over the next few weeks as the effects of pulling back restrictions may see infections surge in the near-term. China’s fragile healthcare system and low vaccination rates have country ill-prepared for a big wave of infections.
Technical analysis: Cotton bears have a near-term technical advantage, with prices in a four-week downtrend on the daily bar chart. The next upside objective for bulls is to close March futures above resistance at the November high of 89.92 cents. The next downside objective for bears is closing prices below solid support at 75.00 cents. First resistance is seen at today’s high of 82.39 cents, then at 83.75 cents. First support is seen at 80.00 cents and then at today’s low of 78.80 cents.
What to do: Wait on an extended corrective rebound to get current with advised 2022-crop sales.
Hedgers: You should be 70% sold in the cash market on 2022-crop production.
Cash-only marketers: You should be 70% sold on 2022-crop production.
