Crops Analysis | January 23, 2023
Corn
Price action: March corn fell 10 cents to $6.66 1/4, ending the session below the 10- and 20-day moving averages and marking the lowest close since Jan. 11.
Fundamental analysis: Corn futures took a tumble along with the soy and wheat complex as beneficial rains fell across Argentina over the weekend. Crude oil futures were able to extend gains to two and a half month highs, though strength in the U.S. dollar index largely negated any outside market price support. USDA’s weekly export inspections proved uninspiring as well, with 727,643 MT (28.6 million bu.) reported for the week ended Jan. 12. The data was on the lower-end of the expected range of 550,000 MT and 1.025 MMT and reflected a 52,145-MT drop from the previous week.
World Weather Inc. notes regular rain is expected through the next two weeks across Argentina, with further improvements in crop and soil conditions resulting, though a full restoration of yield potentials will not occur as some crops were permanently damaged by hot and dry weather earlier in the season. While conditions in Argentina will remain a near-term focus, weather in Brazil will become increasingly important in order for timely soybean harvest and planting of the country’s safrinha (second corn) crop, which is currently delayed due to persistent rains.
Technical analysis: March corn traded a 13 1/2 cent range, dipping below support at the 100-, 10- and 20-day moving averages and making a low at the 40-day moving average of $6.61 1/4 where support will remain. Bears hold the near-term technical advantage but will encounter additional support at $6.49 1/4 and $6.35. Conversely, attempts higher will encounter resistance at former support at the 20-day moving average near $6.68 1/2 and the 10-day moving average of $6.69 1/2, with solid resistance at the 100-day moving average near $6.74 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.
Soybeans
Advice: We advise soybean hedgers and cash-only marketers to sell another 10% of 2022-crop in the cash market to get to 70% sold.
Price action: March soybean futures fell 16 1/4 cents to $14.90 1/4, though that was 10 1/2 cents off the session low. March soymeal dropped $1.80 to $461.90. March soyoil firmed 70 points to 62.04 cents.
Fundamental analysis: Soybeans and soymeal were pressured by rains late last week and during the weekend across Argentina. Forecasts indicate more rains will be seen across the country over the next two weeks. While it’s too early to say the rains will greatly benefit parched crops, it was enough to encourage active long liquidation, with funds being active sellers on the day. Where the market goes from here will largely be dependent on whether funds view the recent selloff as a buying opportunity or continue to liquidate long positions.
Demand remains supportive, with USDA announcing a daily soybean sale to unknown destinations. Weekly export inspections totaled 1.806 MMT (66.3 million bu.), with China taking shipment of nearly 1.2 MMT or two-thirds of the total. The lack of trade response to supportive demand news signals traders anticipate the strong export pace will soon wind down as Brazilian supplies are expected to hit the world market by the middle of February.
Technical analysis: March soybeans gapped lower and violated the 20-day moving average around $15.01 1/2 but the late rebound allowed the contract to close above the 40-day moving average at $14.84 1/2. That will serve as initial support, followed by today’s low at $14.79 3/4 and the 50-day average just under $14.76. Initial resistance is at the 20-day average, the psychological $15.00 mark and the overnight gap from $15.03 to $15.04.
What to do: Get current with advised cash sales. Be prepared to advance sales.
Hedgers: NEW ADVICE -- Sell another 10% of 2022-crop in the cash market to get to 70% sold.
Cash-only marketers: NEW ADVICE -- Sell another 10% of 2022-crop to get to 70% sold.
Wheat
Price action: March SRW wheat dropped 21 1/2 cents to $7.20 after falling to $7.12 1/2 earlier in the session. March HRW plunged 29 cents to $8.19, while March spring wheat fell 25 cents to $8.87 3/4.
Fundamental analysis: The wheat complex plummeted to begin the last full week in January, with HRW futures leading the complex lower as Black Sea export competition remains steady and shipments from Russia increase. Earlier today, Russian Foreign Minister Sergei Lavrov said the terms of the Black Sea grain initiative, which facilitates the export of Ukrainian grain from its southern Black Sea ports were “more or less being fulfilled,” though Russia still faces problems exporting its own agricultural products. However, analysts from SovEcon said Russia is exporting wheat relatively quickly this month, as the country exported 800,000 MT of wheat last week, compared with 670,000 MT a week earlier. The consultancy estimates Russia could export up to 3.7 MMT of wheat in total this month, up from the average of 2.7 MMT seen in recent years.
Traders are also anticipating another snow event that will be beneficial for increasing topsoil moisture in southern HRW production areas tonight through Tuesday. World Weather Inc. notes after the storm moves through, conditions will be drier-biased in the region for several days, with a significant surge of cold air likely over the weekend and a close monitoring of snow cover will be warranted. The forecaster further stated there will be plenty of snowcover this week, but some melting will occur ahead of the surge.
Technical analysis: March SRW futures traded in a 28-cent range, dipping below support at $7.39 as well as $7.31 3/4, $7.22 1/4 and $7.16 3/4. With bears maintaining a firm grasp on the near-term technical advantage, an attempt to breach $7.00 is likely the next downside target, though firm support exists in this area. Conversely, an about-face attempt will encounter resistance at former support at $7.22 1/4, $7.31 3/4 and at the 10-day moving average of $7.38 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: Cotton futures posted slight gains on the day, with the March contract firming 69 points to 87.39 cents.
Fundamental analysis: On the surface, today’s gains in the cotton market may not seem overly impressive. But given underlying factors, they were stronger than they would appear. While crude oil gave the market a boost, the strength in the face of the selloff in the grain and soy markets and the late firming of the U.S. dollar index was noteworthy.
Support for cotton continues to come from hopes China’s reopening of its economy from Covid restrictions will lead to stronger demand for U.S. cotton. Those thoughts were augmented last Friday via weekly export sales that were the strongest since early July. China accounted for more than one-quarter of the business.
Technical analysis: March cotton futures pushed to the highest price in a month. Today’s high at 86.68 cents is initial resistance, followed by the December high at 89.65 cents and the November high at 89.92 cents. A close above the latter level would signal an upside breakout from the nearly four-month sideways range. Near-term support is layered in the 86.00-cent to 82.00-cent range.
What to do: Be prepared to extend 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.
