Crops Analysis | January 10, 2023
Corn
Price action: March corn rose 2 1/4 cents to $6.55 after reaching the lowest level since Dec. 20.
Fundamental analysis: Corn reversed early losses on corrective buying ahead of USDA’s final updates to supply, demand and production data on Thursday. Firming crude oil futures underpinned gains along with persisting forecasts for dry weather in Argentina. World Weather Inc. cites that the country will not experience a drought-busting rain for a while, though some welcome rain will fall in the north, benefiting minor grain and oilseeds crops late Wednesday and especially Thursday. Pro Farmer South American crop consultant Cordonnier cut his Argentina corn crop estimate 1 MMT, to 45 MMT “due mostly to expected low yields of early-planted corn.” He maintains a lower bias going forward but kept his Brazilian crop estimate at 125 MMT. Brazil’s AgRural reported first-crop corn harvest at 2.3% complete through Jan. 5 compared to 3.1% at the same point last year.
Brazilian corn exports are expected to reach 5.024 MMT in January versus 4.326 MMT previously forecasted.
President Biden met with leaders of Canada and Mexico in Mexico City today in an attempt to strengthen trade relations with an environmental focus to create a bloc to take on China and Russia.
Technical analysis: March corn traded a 15 3/4-cent range, briefly trading through resistance at $6.60 where the 20- and 40-day moving averages have nearly converged and marking a session high just below the 10-day moving average near $6.65 1/2. Further resistance stands at the technically significant 100-day moving average of $6.72 3/4. Conversely, a dip below support at $6.50 occurred early in the session, making a low just above second support at $6.47 1/4. An extension lower will find additional support at the early Dec. low of $6.35.
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 3 1/2 cents at $14.85 and near mid-range. March soybean meal dipped $1.40 at $468.9 and near mid-range. March bean oil closed down 78 points at 62.57 cents and nearer the session low.
Fundamental analysis: The soybean complex futures saw mild selling pressure today amid a rebound in the U.S. dollar index from its solid losses seen Monday, and on position squaring ahead of Thursday’s USDA reports. The keen resilience seen in the soybean meal futures market recently continues to provide underlying support for soybeans.
USDA today reported a daily U.S. export sale of 174,181 MT of soybeans to Mexico for the 2022-23 marketing year.
Thursday’s USDA supply and demand report is expected to see the agency not make any significant changes in soybean production or stocks compared to last month’s report. The past four years have seen USDA slightly increase U.S. soybean stockpiles as of Dec. 1, when compared to the pre-report trade estimates, for the January report.
World Weather Inc. today reported weather over Brazil’s soybean regions will improve over the coming week in the west and south, but Argentina will continue to struggle with drought. “The situation in South America is not changing and that should leave the market without much new influence from the situation,” said the forecaster. Some rain in Argentina late this week and next week will be welcome, but probably not enough to change drought status, said World Weather.
Technical analysis: The soybean futures bulls have the overall near-term technical advantage. A three-month-old price uptrend on the daily bar chart is still alive. 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 $14.40. First resistance is seen at this week’s high of $15.01 3/4 and then at $15.08. First support is seen at today’s low of $14.74 and then at the January low of $14.65.
The soybean meal futures bulls have the solid overall near-term technical advantage. A three-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 contract the high of $479.00 and then at $485.00. First support is seen at today’s low of $466.10 and then at $460.00.
Soybean oil bulls and bears are on a level overall near-term technical playing field. The next upside price objective for the bean oil bulls is closing March prices above solid technical resistance at 66.97 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 this week’s high of 64.43 cents and then at 65.00 cents. First support is seen at the January low of 62.07 cents and then at 61.00 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 fell 10 1/2 cents to $7.31 after reaching the lowest level since Sept. 30, 2021, while March HRW fell 16 3/4 cents to $8.11 3/4 and March SRW fell 7 1/2 cents to $8.94 1/2.
Fundamental analysis: Wheat futures succumbed to additional price pressure as the U.S. dollar index turned higher today, increasing worries about demand for U.S. wheat abroad. Also, the prospect for India’s wheat crop to reach record production was bearish today. A rebound in the corn market at mid-session helped pull wheat off its lows, in addition to reports of bitter cold conditions in areas of Russia.
Reuters outlines that wheat exporters in the U.S., formerly the world’s breadbasket, ended 2022 on the lowest note in over four decades as short supplies and cheaper overseas competition put U.S. wheat on the back burner. Recent shipments have been limited by poor export sales, which are at more than 20-year lows for the date, with plentiful, cheaper wheat in rivals like Russia, Canada and Australia commanding market share, according to the report.
High wheat prices have incentivized producers around the world to plant wheat, which has pushed number-two wheat producer India to a possible record crop. The country is considering lifting a ban on wheat exports to help ease concerns over persistently high inflation in food prices. India, also the second-largest consumer of wheat, banned exports in May 2022 after a sharp, sudden rise in temperatures dampened production even as exports jumped to meet the global shortfall triggered by Russia’s invasion of Ukraine.
Technical analysis: March SRW traded a 22-cent range, breaching support at $7.35 and making a low at $7.20 1/2. Further downside support stands at the Sept 30, 2021 low of $7.16 1/2, along with $7.00. Conversely, a turn higher will encounter resistance at former support of $7.35, then at $7.41 1/2, $7.52 3/4, with solid resistance near $7.60 where the 10-and 20-day moving averages nearly intersect. Look for sideways to lower price action to continue into Thursday’s USDA report.
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 146 points at 84.76 cents and nearer the session low.
Fundamental analysis: The cotton futures market was pressured today by a rebound in the U.S. dollar index and by talk in the marketplace that China may harvest a larger-than-expected cotton crop this year. Also, Fed Chairman Jerome Powell today said in a speech in Sweden that the U.S. central bank will remain vigilant in its inflation fight. Powell’s remarks today and other Fed officials’ comments recently suggest a “higher for longer” Fed stance on its interest rate policy. That may mean slower U.S. economic growth in 2023, which would likely also include reduced consumer demand for apparel.
Thursday’s USDA monthly supply and demand report is expected to show the agency forecasting U.S. cotton production at 14.14 million bales, according to the average from a Bloomberg survey of analysts. That compares with the December USDA production estimate of 14.24 million bales. A particular focus will be on export demand, with U.S. exports seen by the analysts at 12.12 million bales, on average, versus the December report at 12.25 million bales.
Technical analysis: Cotton futures bulls and bears are on a level overall near-term technical playing field amid choppy trading. 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 January low of 80.37 cents. First resistance is seen at this week’s high of 87.97 cents and then at the December high of 89.65 cents. First support is seen at 85.00 cents and then at 83.50 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.
