Crops Analysis | December 20, 2022
Corn
Price action: March corn rose 4 3/4 cents to $6.52, around the middle of the past week’s range.
Fundamental analysis: Corn futures gained as strength in the soy complex and a weakening U.S. dollar prompted corrective buying amid light volume ahead of the Christmas holiday. Concerns of dryness in Argentina and southern Brazil linger, increasing the likelihood of acreage and/or yield reductions as supplies remain snug. South American crop consultant, Dr. Michael Cordonnier left Brazil’s corn crop unchanged at an estimated 125.5 MMT, but notes developing dryness in southern Brazil is opening downside risk for Brazilian corn production, which accounts for approximately 21% of Brazil’s 2022-23 total corn production. The consultant also left Argentina’s corn production unchanged at 47 MMT, citing a neutral-to-lower bias going forward as weather continues to prove problematic.
World Weather is predicting timely rainfall in most of Brazil’s production areas during the next two weeks. However, some net drying is possible in the far south and parts of Paraguay, but crop conditions overall should be good for normal crop development. The forecaster notes a reduction in advertised rainfall in Argentina. However, most areas are expected to receive rain over the next two weeks, with the greatest coverage of rain occurring Thursday into Sunday. A general soaking rain is still needed and not likely for a while which leaves pressure on for greater rainfall to improve production potential.
Technical analysis: March corn traded a 7 1/2-cent range, breaching the 20-day moving average, currently trading at $6.54, and holding a close back above the 10-day moving average near $6.49 1/4. The 20-day moving average will continue to serve as resistance, with a close above the level likely providing bulls the leverage to gain heavier upside momentum. Other areas of resistance include $6.57 1/2, as well as the 40-day moving average near $6.66 1/4 and the 100-day near $6.67 1/4. However, a turn lower will find bears encountering support at the 10-day moving average near $6.49 1/4, along with $6.43 3/4, $6.40 1/2, and $6.37 1/2.
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: March soybeans rose 16 1/4 cents to $14.79 3/4, slightly above the mid-point of the past week’s trading range. March soymeal gained $3.20 to $449.30. March soyoil rose 140 points to 64.81 cents, the contract’s highest close since Dec. 1.
Fundamental analysis: Soybean futures rose near last week’s highs behind technical strength, gains in soymeal and optimism over demand. Signs of improvement rainfall prospects in dry areas of South America limited buying interest. While Argentina’s rainfall outlook for the next two weeks was reduced, rain is still expected in most areas, World Weather Inc. said. The greatest raid coverage is expected Thursday into Sunday, which should bring temporary relief from dryness. In Brazil, timely rainfall is expected in most of the nation’s production region during the next two weeks, World Weather said. “Some net drying is possible in the far south and parts of Paraguay, but crop conditions elsewhere should be good for normal crop development,” the forecaster said.
Argentina’s weather remains price-supportive for soybean futures, but bullish impact likely will continue to be muted by an outlook for a much-larger and potentially record crop in Brazil. Cordonnier cut his Argentine soybean crop estimate for a fourth consecutive week, this time by 2 MMT to 45 MMT, amid “problematic” weather, but he kept his Brazilian soybean estimate at 151 MMT. USDA sees an even bigger crop, at 152 MMT. Soybeans still hold short-term rally potential, but faces increasing challenges breaking above the $14.92 to $15.00 level, especially with U.S. exports poised to erode with fresh South American supplies coming available soon
Technical analysis: Soybeans retain a neutral to slightly friendly technical posture, with March futures still in a two-month uptrend but showing signs of fatigue, with prices shifting into a choppy-sideways trend the past week. A push under initial support at the 20-day moving average of $14.65 1/4 and today’s low of $14.62 1/4 (the contract’s lowest intraday price since Dec. 7), could have bears targeting the 40-day moving average at $14.51 1/2. Initial resistance is seen at last week’s high of $14.92 and $15.00.
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 rose 2 cents to $7.50 1/2. March HRW wheat gained 3 1/2 cents to $8.47. Prices closed nearer the session lows. March spring wheat futures rose 7 3/4 cents to $9.16.
Fundamental analysis: Wheat futures markets were supported by weakness in the dollar index, though buying interest was limited by a “risk-off” market mentality in following an unexpected monetary-policy-tightening move by the Bank of Japan that rattled the stock and financial markets. Wheat prices were also supported by concern over a major Arctic blast and blizzard conditions that will hit much of the central U.S. in the coming days. Extremely cold temperatures and blizzards will hit central parts of North America mid- to late-week and “will bring all kinds of problems,” World Weather Inc. said. Extreme lows in the -30s and -20s Fahrenheit are likely in the Northern Plains, and subzero lows will occur southward to the Texas Panhandle and central Oklahoma.
Traders await USDA’s weekly export sales report Thursday morning. Better-than-expected sales numbers last week suggested U.S. wheat prices may have dropped far enough to prompt some better foreign demand.
Technical analysis: Winter wheat bears hold a solid near-term technical advantage with prices are in two-month downtrends on daily bar charts. SRW bulls' next upside objective is closing March futures above solid resistance at $8.00. Bears' next downside objective is closing prices below solid support at $7.00. First resistance is seen at today’s high of $7.71 1/2 and then at last week’s high of $7.69 1/4. First support is seen at this week’s low of $7.38 3/4 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 $8.66 3/4 and then at $8.79 1/4. First support is seen at this week’s low of $8.30 3/4 and then at the December low of $8.21 3/4.
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 gained 376 points to 87.84 cents, the highest closing price since Sept. 23.
Fundamental analysis: Cotton futures gains as strengthening technicals and dollar weakness encouraged short covering and bargain buying. Recent moves by the Chinese government to ease Covid restrictions as well as a pledge to reinvigorate the Chinese economy have given the cotton bulls new life. Followthrough buying in cotton futures may be limited in the near term, however, amid weakness in U.S. equities, as the S&P 500 index sank near a six-week low before rebounding. Recession concerns continue to weigh on financial markets. Cotton market gains may also be limited by concern over global demand. U.S. cotton exports are behind last year’s levels, with commitments so far in 2022-23 down 12.6% from the same period in 2021-22. USDA’s latest supply and demand report lowered U.S. exports to 12.25 million bales, down 16% from the previous year.
Technical analysis: Cotton futures bulls and bears are now back on a level overall near-term technical playing field but the bulls have momentum. A five-week-old downtrend on the daily bar chart has been negated. The next upside price objective for the cotton bulls is to produce a close in March futures above technical resistance at the November high of 89.92 cents. The next downside price objective for the cotton bears is to close prices below solid technical support at the December low of 78.80 cents. First resistance is seen at the December high of 87.23 cents and then at 88.00 cents. First support is seen at 85.00 cents and then at today’s low of 83.63 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.
