Crops Analysis | December 22, 2022
Corn
Price action: March corn fell 1 3/4 cents to $6.60 1/2 after rising to a three-week high overnight.
Fundamental analysis: Corn faded from overnight gains and came under mild pressure after lackluster USDA weekly export sales. Outside markets were generally unsupportive as the U.S. dollar index rose and crude oil futures turned lower. Reports the European Commission cut its forecast for this year’s corn harvest to 52.1 MMT, down from 53.3 MMT, due to drought conditions provided some support.
Early today, USDA reported net U.S. corn sales of 636,800 MT for 2022-23 during the week ended Dec. 15, down from 958,900 MT the previous week and at the low end of trade expectations between 625,000 to 900,000 MT. While exports showed modest improvement recently, the overall export picture for corn remains bearish and likely will limit price upside. U.S. corn export commitments so far in 2022-23 are now 47.7% behind a year-ago compared to 48.0% behind last week. USDA projects exports in 2022-23 at 2.075 billion bu., 16% below the previous marketing year.
Technical analysis: Corn futures traded a narrow 6-cent range and mustered additional strength overnight to reach the 40-day moving average near $6.64 3/4, which ultimately held as resistance into the end of the session. Attempts higher, however, will encounter further resistance at $6.66 1/2, again at the 100-day moving average near $6.68, then at $6.70 3/4 and $6.78 1/2. A turn lower will face support $6.54 ½, with solid support standing where the 10 and 20-day moving averages have nearly converged around $6.53, although additional support stands at $6.46 3/4 and $6.42 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 fell 12 1/2 cents to $14.72, around the middle of the past two weeks’ trading range. March soymeal fell $4.40 to $448.30. March soyoil fell 82 points to 64.01 cents.
Fundamental analysis: The soy complex ended broadly lower after soybeans generated little followthrough buying from Wednesday’s gains. A sharp drop in weekly exports and prospects for rain in areas of South America weighed on prices. Argentina’s rainfall will be greatest Thursday into Sunday morning, bringing temporary relief from dryness is likely in nearly all areas, World Weather Inc. said. Drier weather is expected to return next week, with an erratic rainfall pattern is expected through the end of the month, which “will likely fail to generate enough rain for a serious improvement in soil moisture or crop conditions,” the forecaster said. “A general soaking rain is needed immediately to improve the long-term prospects for crops.”
In Brazil, timely rainfall is expected in most major production regions the next two weeks, World Weather said. Some net drying is possible in the far south and parts of Paraguay through the weekend, but timely rain will resume next week. “Crop conditions elsewhere should be good for normal development,” the forecaster said. “Pockets of dryness in the south and west should not be great enough to seriously impact nationwide production potentials and relief is probable in the second week of the outlook.”
Argentina’s weather remains price-supportive for soybeans, but the prospect record production from Brazil is undercutting the bullish impact and limiting rally efforts. Signs of slower exports may also cap rallies in coming days. USDA early today reported net weekly U.S. soybean sales of 736,000 MT, down from 2.943 MMT the previous week and below trade expectations ranging from 800,000 MT to 1.25 MMT. Top buyers included China at 550,700 MT, including 252,000 MT switched from “unknown destinations.” Export commitments so far in 2022-23 still are running 4.1% ahead of a year-ago, versus 4.4% ahead last week.
Technical analysis: Soybeans retain a neutral to slightly bullish technical posture, with March futures still in a two-month uptrend but showing signs of waning moment with holding a choppy-sideways pattern the past two weeks. March soybeans’ failure to challenge and take out this week’s high at $14.90 3/4 likely discouraged bulls, as did the contract’s close below the 10-day moving average of $14.78 1/4. However, March futures could still 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. However, fresh farmer selling could limit near-term buying power. Initial support is seen at the 20-day moving average of $14.69 1/4 and this week’s low of $14.62 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 5 1/2 cents to $7.62 1/4 after rising near a three-week high earlier. March HRW wheat rose 2 cents to $8.66, the contract’s highest close since Dec. 2. March spring wheat fell 5 1/2 cents to $9.22 1/4.
Fundamental analysis: SRW wheat futures were pressured by a big “risk-off” day in global financial markets today as the U.S. stock market tumbled after a stronger-than-expected third-quarter GDP report stoked fresh worries about the Federal Reserve remaining hawkish longer with its monetary policy. HRW futures were supported by frigid cold and high winds in the U.S. midsection that could damage the dormant wheat crops.
Temperatures fell into the negative single digits in much of HRW wheat country in the Central Plains overnight. The cold outbreak is expected to continue into the weekend, “raising the potential for unprotected wheat to be vulnerable to some damage and possibly some winterkill,” World Weather said. “There is potential for favorable late winter and early spring weather conditions to evolve with La Nina diminishing, but only time will tell how much crop was damaged and how well it will recover,” the forecaster said.
Net weekly U.S. wheat sales totaled 334,200 MT, down from 469,000 MT the previous week and within trade expectations ranging from 200,000 to 500,000 MT.
Technical analysis: While winter wheat bears still have a near-term technical advantage, a two-month-old downtrend on the daily bar chart has been negated in March SRW futures, suggesting a market bottom is in place. 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 the December low of $7.23 1/2. First resistance is seen at today’s high of $7.77 and then at $7.85. First support is seen at $7.50 and then at this week’s low of $7.38 3/4.
In HRW futures, a two-month-old downtrend on the daily bar chart has stalled. 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 $8.73 and then at $8.79 1/4. First support is seen at $8.50 and then at this week’s low of $8.30 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 futures dropped the 400-point daily limit to 84.30 cents. May cotton fell 378 points to 83.85 cents.
Fundamental analysis: Cotton was pressured by heavy profit-taking after March futures hit a five-week high Wednesday and by disappointing weekly exports. Pressure also stemmed from a sell-off in the U.S. stock market following a stronger-than-expected U.S. GDP report that fueled concerns over the Federal Reserve continuing aggressively tight monetary policy. Other outside markets were also bearish today as the U.S. dollar index rallied and crude oil prices dropped. Rising Covid infections in China have cotton market bulls pensive late this week. Bloomberg reported China is experiencing 1 million new infections and 5,000 virus deaths each day, following the Chinese government’s relaxation of Covid restrictions.
USDA reported net weekly U.S. cotton sales reductions of 87,800 running bales (RB) for 2022-23, compared to sales of 18,600 RB the previous week. Reductions were primarily for China (144,400 RB).
Technical analysis: Cotton bears have regained a slight near-term technical advantage. The next upside objective for bulls is to close in March futures above resistance at the November high of 89.92 cents. The next downside objective for bears is to close prices below solid support at the December low of 78.80 cents. First resistance is seen at 85.00 cents, then 86.00 cents. First support is seen at 83.00 cents then 82.00 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.
