Crops Analysis | December 21, 2022
Corn
Price action: March corn rose 10 1/4 cents to $6.62 1/4, the contract’s highest close since $6.67 on Nov. 30.
Fundamental analysis: Corn rose a second straight session behind short-covering and spillover strength from the winter wheat markets, which were supported by an outlook for extreme cold and blizzard conditions in much of the central U.S. the next few days. Stronger crude oil futures also supported grains. Arctic air is expected to surge into the U.S., bringing very strong winds and heavy snow Thursday through Friday, with snow falling as far south as the Tennessee River Basin, World Weather Inc. said.
Weather in South America remained somewhat price supportive, with eastern Argentina, Paraguay and western and southern Rio Grande do Sul in Brazil gripped by persistent dryness. Expected rains in Argentina Thursday into Sunday will be crucial in offering some relief. However, Southern Brazil will remain dry through the weekend, with rain evolving next week which should bring enough to bring relief back to much of the region’s driest areas.
The Energy Information Administration reported a 32,000-barrel-per-day (bpd) drop in ethanol production from the previous week to 1.029 million bpd, with ethanol stocks also falling 300,000 barrels. On Thursday, USDA is expected to report net weekly U.S. corn sales for week ended Dec. 15 ranging from 625,000 to 900,000 MT, compared to 958,900 MT for the week ended Dec. 8.
Technical analysis: Corn traded a 12-cent range, edging above the 20-day moving average near $6.54 1/2 as well as resistance at $6.55 1/4, and $6.58 1/2, negating a near-term price downtrend and suggesting a market bottom is in place and sideways to higher price action. The session high of $6.63, made only minutes before the session end, was also a breach of resistance at $6.62 3/4, but the level held into the close and will continue to serve as resistance.
Continued upside efforts will meet further resistance at the 40-day moving average near $6.65 1/2, and the 100-day near $6.67 3/4. A turn lower, however, will find support at former resistance at $6.58 1/2 and $6.55 1/4 and at the 10-day moving average at $6.51 3/4.
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 4 3/4 cents to $14.84 1/2, the contract’s highest close since Dec. 14. March soymeal rose $3.40 to $452.70. March soyoil fell 2 points to 64.83 cents.
Fundamental analysis: Soybean futures rose to the highest levels in a week behind ongoing optimism over demand, concerns over dryness in Argentina and strength in crude oil. Front-month crude oil futures jumped over $2 a barrel to a two-week high following a larger than expected drop in U.S. supplies. In South America, rains expected in Argentina Thursday through Sunday may provide temporary relief from dryness is likely in nearly all areas. Beyond that period, the outlook is a little drier in the south and east-central crop areas. “A general soaking rain is still needed and not likely for a while, which leaves pressure on for greater rainfall to improve production potential,” World Weather said.
In Brazil, “timely rainfall is expected in most of the nation’s production region during the next two weeks. Some net drying is possible in the far southern Brazil and parts of Paraguay through the weekend, but timely rain will resume next week. Crop conditions elsewhere should be good for normal development.” Argentina’s weather remains price-supportive for soybeans, but the potential for a record crop in Brazil is limiting bullish momentum. Brazil produces about three times as many soybeans as Argentina, and traders so far appear to believe any major longer-term threats or production shortfalls are likely.
Technical analysis: Soybeans retain a neutral to slightly bullish technical posture, with March futures still in a two-month uptrend but showing signs of fatigue as prices shifted into a choppy-sideways trend the past two weeks. However, March futures appears poised to test some key near-term resistance levels, including last week’s intraday high of $14.92 and the high so far in December at $14.97 1/4. A push above those levels could catalyze a move above $15.00, which could trigger sell-stops that fuel additional buying but also likely unleash a fresh farmer selling.
Initial support in March soybeans lies at the 10-day moving average at $14.80, the 20-day moving average at $14.67 3/4 and last week’s low at $14.62 1/2, and those levels are backed by the 40-day moving average at $14.53 3/4.
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 rose 17 1/4 cents to $7.67 3/4, the contract’s highest close since Dec. 2. December HRW wheat rose 17 cents to $8.64. March spring wheat rose 11 3/4 cents to $9.27 3/4, a three-week high.
Fundamental analysis: SRW wheat futures climbed to the highest levels in nearly three weeks and HRW futures also posted sharp gains on short covering and technically inspired buying amid growing beliefs the market has established a near-term bottom.
Concern that frigid U.S. Plains temperatures this week may damage crops also supported prices. Extreme low temperatures in the -30s and -20s Fahrenheit are likely in the Northern Plains, with subzero low temperatures southward to the Texas Panhandle, central Oklahoma, central Illinois and northern Indiana, World Weather said today.
“Winterkill remains a concern this week in the southern half of the (HRW) region,” World Weather said. “The most at-risk part of the region will still be the Texas and Oklahoma Panhandles, southwestern Kansas, and western Oklahoma. Snow cover is expected across the northern half of the region, which will protect crops. Strong wind speeds combined with the Arctic air will lead to extreme wind chill values which could still seriously threaten unprotected livestock.” While wheat futures have gained some support from weather concerns this week, the extent of any damage won’t be known until spring, and poor export demand likely will limit price rallies.
USDA’s weekly export sales report Thursday is expected to show net U.S. wheat sales of 200,000 to 500,000 MT for the week ended Dec. 15, compared to 469,000 the previous week.
Technical analysis: SRW wheat’s technical posture has taken a bullish turn with prices sustaining a modest two-week uptrend and closing above the 40-day moving average, currently $7.62, for the first time since Nov. 1. Initial resistance is seen at $7.80 and at the Nov. 28 low of $7.73 1/4 – a break above the latter price may have bulls targeting stiffer resistance at the Aug. 26 low of $7.98 3/4 and at $8.00. Initial resistance is placed at the 20-day moving average of $7.51 1/4 and today’s low of $7.48 3/4, followed by last week’s low of $7.37 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 rose 46 points to 88.30 cents, the highest close since Sept. 23.
Fundamental analysis: Cotton was lifted by short covering, bargain hunting and technical buying, as well as strength in crude oil. Reports that Chinese government authorities will focus on domestic economic growth in 2023 also boosted trader hopes potentially bullish for demand prospects for cotton. Cotton traders await weekly USDA export sales numbers Thursday, with China of particular interest.
Technical analysis: Cotton bulls and bears are 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 89.92 cents and then at 91.00 cents. First support is seen at 87.00 cents and then at 86.00 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.
