Crops Analysis | January 4, 2023
Corn
Price action: March corn fell 16 3/4 to $6.53 3/4, nearer the session low, marking the lowest close since Dec. 20.
Fundamental analysis: Corn faced an additional day of steep losses after gapping lower to start the overnight session with demand concerns intensifying as rising Covid cases in China sent a negative tone across crude oil futures. A price driver for commodities, crude oil fell sharply to post a 3-week low, falling under pressure on concern the pandemic in China may worsen before it improves, which would depress energy demand as it takes longer for the economy to recover. The spread of infections during China’s week-long Lunar New Year holiday that begins on January 21 may keep the economy from fully reopening and negatively affect energy demand.
Spillover pressure also came from the wheat complex as demand wanes. Talk of poor ethanol margins and a slowdown in US feed demand for the September-through-November quarter also weighed on the corn market.
A forecast for drier weather over the next ten days following weekend rains failed to provide much support. World Weather cites hot temperatures will be returning to Argentina late this week and into early next week, with afternoon readings ranging from the mid-90’s to 106 degrees Fahrenheit most often with a few readings of 106-110, mostly in the northwest. The forecaster further noted that Argentina’s bottom line is not very good for bringing significant relief to the nation’s summer crop production potentials.
Technical Analysis: Corn traded a 19 1/4 cent range, gapping below the 10-day moving average near $6.68 1/4 to start the session and dropping below support at $6.65 1/4, the 40-day moving average near $6.61 ½, and the 20-day moving average near $6.57 3/4, marking a session low at $6.52 1/2. Further support lies at $6.44 along with the early Dec. low of $6.35. Attempts to regain losses will face resistance first at the 20-day moving average, again at the 40-day moving average, then $6.65 ¼ as well as the 10-day moving average near $6.68 1/4 and the 100-day moving average near $6.71 3/4, where the session high was marked.
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.
Soybeans
Price action: March soybeans fell 8 3/4 cents at $14.83 1/2. March soybean meal lost $2.40 at $462.70. March bean oil was down 35 points at 62.85 cents. Prices closed nearer the session lows today.
Fundamental analysis: More profit taking was featured in soybeans and meal after soybean prices hit a six-month high and meal a contract high last Friday. Sharp losses in the corn and wheat futures also spilled over as selling pressure in the soy complex. Risk-off trading attitudes to start the new year, along with sharp losses in the crude oil market this week, have the grain market bulls standing on the sidelines at present.
The bulls got no traction today after USDA this morning reported a daily sale of 124,000 MT of U.S. soybeans to unknown destinations in 2022-23.
World Weather Inc. today reported recent rains in Argentina “were welcome and went a long way in improving topsoil moisture.” However, the improvement is only temporary. “The outlook for Argentina is not very good over the next ten days, with a steady rate of drying expected with the possible exception of a weak frontal system moving through the nation early to mid-week next week. Temperatures in Argentina will be hot late this week into Monday. “Brazil weather remains favorable with well-timed rainfall expected for most crop areas, said the forecaster.
Technical analysis: The soybean futures bulls still have the overall near-term technical advantage but now appear tired. A three-month-old price uptrend is in place on the daily bar chart. Next near-term upside technical objective for the soybean bulls is closing March prices above solid resistance at the December high of $15.37 1/2. The next downside price objective for the bears is closing prices below solid technical support at $14.25. First resistance is seen at $15.00 and then at $15.08. First support is seen at today’s low of $14.80 3/4 and then at $14.68.
The meal futures bulls have the solid overall near-term technical advantage. Prices hit a contract high last Friday. A two-month-old uptrend is in place on the daily bar chart. The next upside price objective for the meal bulls is to produce a close in March futures above solid technical resistance at $500.00. The next downside price objective for the bears is closing prices below solid technical support at $443.40. First resistance comes in at $469.30 and then at the contract high of $476.10. First support is seen at today’s low of $459.60 and then at $455.00.
Soybean oil bulls have lost their slight overall near-term technical advantage. A fledgling uptrend on the daily bar chart has been negated. The next upside price objective for the bean oil bulls is closing March prices above solid technical resistance at 67.00 cents. Bean oil bears' next downside technical price objective is closing prices below solid technical support at the December low of 58.50 cents. First resistance is seen at 64.00 cents and then at 65.00 cents. First support is seen at today’s low of 62.50 cents and then at 62.00 cents.
What to do: Get current with advised cash sales. Be prepared to advance 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.
Wheat
Price action: March SRW wheat fell 30 cents at $7.45 1/2. March HRW wheat lost 28 1/2 cents at $8.40 3/4. Prices closed near the session lows and hit two-week lows. March spring wheat futures slid 15 3/4 cents to $9.03 1/2.
Fundamental analysis: Wheat futures markets today saw heavy selling pressure due to solid losses in the corn market and a major sell off in the crude oil futures market this week. “Risk-off” attitudes in the general marketplace this week are also squelching the grain market bulls. Stock markets are proving wobbly amid worries about slowing global economic growth in 2023.
Continued flow of Black Sea grain exports and persistently poor U.S. wheat export activity remain bearish underlying fundamentals for the wheat markets.
The wheat market bears ignored news that individual state crop condition ratings, released Tuesday afternoon, showed further deterioration of the HRW wheat crop during December, with the exceptions of Oklahoma and Colorado. The “good” to “excellent” ratings for HRW wheat dropped 2 points in Kansas (to 19%), 22 points in Montana (22%), 2 points in Nebraska (18%) and 11 points in South Dakota (16%) during December. The “good” to “excellent” ratings for HRW wheat improved 7 points in Oklahoma (38%) and 20 points in Colorado (50%). Texas did not release updated crop condition ratings.
Technical analysis: Winter wheat futures bears have the solid overall near-term technical advantage and have gained fresh power this week. Fledgling price uptrends on the daily bar charts have been negated. SRW bulls' next upside price objective is closing March prices above solid chart resistance at $8.00. The bears' next downside objective is closing prices below solid technical support at the December low of $7.23 1/2. First resistance is seen at $7.60 and then at $7.70. First support is seen at $7.40 and then at $7.30. The HRW bulls' next upside price objective is closing March prices above solid technical resistance at $9.00. The bears' next downside objective is closing prices below solid technical support at the August low of $8.11 3/4. First resistance is seen at $8.50 and then at $8.60. First support is seen at $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.
Cotton
Price action: March cotton fell 270 points to 80.44 cents, nearer the session low, marking the lowest close since Dec. 12.
Fundamental analysis: Cotton futures turned lower for the second straight session amid spillover pressure from crude oil futures which marked a 3-week low on persisting news of rising Covid cases in China. A weaker U.S. dollar failed to provide support for the natural fiber. According to a cotton broker, “Producers that held cotton over the New Year will likely be selling supply, which will keep pressure on the market, along with uncertainty over whether China can overcome Covid and return to buying cotton and running textile mills.”
Acreage in 2023 continues to be a hot topic, with some sellers being discouraged by the Cotton Grower’s annual survey, which provides the first look of new-crop acreage intentions until the National Cotton Council Convention that is set to take place the second week of February. The survey predicts plantings of 11.57 million acres, a 2.2 million acre, or 16% reduction, with some suggesting more. The survey calls for a 9% drop in the southeast, 19% in the southwest and 9% in the Mid-South. Both Arkansas and Mississippi project slight increases.
Volatility throughout 2022 may lure caution around 2023 plantings as the cotton market saw its biggest annual price drop since 2014, and the most volatile trading conditions in over a decade.
Technical analysis: March cotton traded a 388-point range after gapping higher to start the overnight session. The contract fell below the 10-day moving average of 84.30, the 40-day moving average of 83.39 as well as the 20-day moving average near 83.03 cents and support at 82.01, 80.88. Attempts lower will face additional support at 80.00, 78.96 and 77.50. Conversely, a turn higher will encounter resistance first at former support of 80.88, then at 82.01 and the 20, 40 and 10-day moving averages.
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.
