Crops Analysis | October 19, 2023
Price action: December corn futures jumped 13 cents to $5.05, marking the highest close since Aug. 1.
Fundamental analysis: Corn futures showed sustained strength throughout the session, especially in nearby contracts as December futures surged above $5.00. It is worth noting that calendar spreads showed excessive volatility today, which started in overnight trade and continued into daytime trade, as the Dec-July spread surged to the narrowest level in nearly two months. Part of this rally could be a delayed reaction to the increase in basis seen over the last couple of weeks, but the large increase in volume seen in the spread points to potential short covering. Barge rates have come sharply lower week- over-week as well, further increasing the demand for nearby corn.
Rain in Argentina is set to fall frequently over the next ten days, bolstering soil moisture in 75% of the nation, World Weather Inc says. This significantly improves planting conditions. The rain across most of the nation is welcome, though could cause some local flooding in northeastern Argentina.
Some harvest interruptions are likely in the U.S. next week as precip from hurricane Norma will spread into the southern and eastern Plains and parts of the western Midwest late this weekend and early next week, according to World Weather Inc. Snow is likely to fall next week as well in the northern Plains and the upper Midwest, causing additional likelihood of harvest delays.
This morning, USDA reported export corn sales of 881,300 MT for week ended Oct. 12, which were down 3% from the previous week and 15% from the four-week average. Sales were near the middle of the pre-report range from 500,000 MT to 1.1 MMT.
Technical analysis: December corn futures surged higher on the session, breaking and closing above $4.99 resistance that capped all gains the last two weeks. This will mark key resistance, with failure below $4.99 resistance-turned-support in the next few days indicating a false breakout reversal that would have bears targeting $4.95 then $4.90 support. Bears are seeking to defend resistance at the 100-day moving average, lining up with today’s high at $5.05 1/2, with further backing from $5.09.
What to do: Get current with advised sales.
Hedgers: You should be 100% sold in the cash market on 2022-crop. You should be 50% forward priced for harvest delivery on expected 2023-crop.
Cash-only marketers: You should be 100% sold on 2022-crop. You should be 35% forward priced for harvest delivery on expected 2023-crop production.
Price action: November soybeans rose 4 1/2 cents to $13.15 1/2, the highest close since Sept. 20. December meal rose $9.20 to a near four-month high close $423.00, bringing total gains this week to $33.40. December soyoil fell 175 points to 53.11 cents, notching a low-range close.
Fundamental analysis: Soybean futures spent much of the morning session favoring the downside in sympathy with losses in soyoil, though solid follow through strength in meal dampened the downside. While bulls were able to test the 100-day moving average, solid technical resistance will continue to serve around the area, with the 200-day moving average standing just above it. An extended rally in meal futures could provide the needed boost above the key technical levels, but three days of strong gains could lure profit-taking as the weekend approaches.
Traders are increasingly focusing on South American weather as excessive rains have plagued southern portions of Brazil, while dry conditions have been the more common theme in center west Brazil. World Weather Inc. reports southern Brazil will continue much wetter than center west or northern parts of center south Brazil during the next ten days and northeastern states should be left mostly dry. The forecaster notes significant rain will fall over time from Rio Grande do Sul and southern Paraguay into So Paulo, with fieldwork expected to be delayed in much of the region since the ground is already too wet and additional rain will fall frequently. Meanwhile, dry and hot weather will continue in center west Brazil and in much of central and northern Paraguay through early next week, though shower activity will increase mid- to late-week next week and into the following weekend.
This morning, USDA reported weekly export sales data for the week ended Oct. 12, which showed net sales of 1.372 MMT during the week, up 30% from the previous week and 92% from the four-week average. Net sales were near the top of the pre-report range of 950,000 MT and 1.625 MMT.
Technical analysis: November soybeans were able to extend gains, though resistance at the 100-, 200- and 40-day moving averages of $13.17 1/4, $13.18 1/4 and $13.21 3/4 continues to prove tough bulls. However, success above the area will find additional resistance at $13.25 1/2 and again at $13.38. Conversely, initial support will now serve around $13.00, with additional resistance at the 20- and 10-day moving averages of $12.85 1/2 and $12.83 1/2, then at $12.78 3/4 and the Oct. 12 low of $12.50 1/2.
December meal futures rallied to a near four-month high close, with bulls gaining an increased technical posture with a close held above resistance at $419.60. Initial resistance will now stand at $425.50 and $435.80. However, corrective selling efforts will find support at today’s failed resistance level, then at $409.30, $403.40, then at the 200-, 40- and 100-day moving averages of $400.70, $393.80 and $392.90.
December soyoil extended below support at 54.43 cents, the 10-day moving average of 54.22 cents, as well as support at 53.99 and 53.26 cents. Initial support will now serve at last week’s low of 52.08 cents, then 50.00 cents. Initial resistance will stand at today’s failed support levels, then the 20-day moving average of 54.22 cents again at 56.33 cents and the 20-day moving average of 55.69 cents.
What to do: Get current with advised sales.
Hedgers: You should be 100% sold in the cash market on 2022-crop. You should be 45% forward sold for harvest delivery on expected 2023-crop production.
Cash-only marketers: You should be 100% sold on 2022-crop. You should be 40% forward sold for harvest delivery on expected 2023-crop production.
Price action: December SRW wheat rose 13 3/4 cents to $5.94 and hit a three-week high. December HRW wheat gained 5 3/4 cents to $6.76 1/4. December spring wheat rose 5 1/2 cents to $7.39. Prices closed near their session highs.
Fundamental analysis: The wheat futures markets today saw short covering and were also supported by a late spurt in corn futures prices to a two-month high above $5.00 in December futures. A weaker U.S. dollar index today was also a friendly outside market element for the wheat markets.
USDA this morning reported weekly U.S. wheat sales of 632,800 MT, which were down 3% from the previous week, but up 42% from the four-week average. Sales were within market expectations.
World Weather Inc. today said U.S. hard red winter wheat areas will experience dry weather through the weekend and then the region will get some needed rain next week. Winter wheat planting and establishment in the lower U.S. Midwest should advance favorably, though greater rain may be needed soon. Greater rain is also needed in the Pacific Northwest as well as the west-central and southwestern high Plains region. Meantime, western Australia dryness will continue a concern for that nation’s wheat production. Argentina will get some rain this weekend into next week that may help late season wheat yields in the far south. Southern Brazil wheat is suffering from too much rain and more is expected, said the forecaster.
Technical analysis: December SRW wheat futures have this week seen a 2.5-month-old downtrend on the daily bar chart negated. Bears still have the overall near-term technical advantage. However, recent price action begins to suggest a market bottom is in place. SRW bulls' next upside price objective is closing December prices above solid chart resistance at $6.10. The bears' next downside objective is closing prices below solid technical support at $5.25. First resistance is seen at today’s high of $5.89 3/4 and then at $6.00. First support is seen at this week’s low of $5.68 1/2 and then at last week’s low of $5.47 1/4.
HRW wheat futures bears still have the firm overall near-term technical advantage. However, a 2.5-month-old downtrend on the daily bar chart has stalled out. The HRW bulls' next upside price objective is closing December prices above solid technical resistance at $7.25. The bears' next downside objective is closing prices below solid technical support at $6.25. First resistance is seen at the October high of $6.90 1/4 and then at $7.00. First support is seen at the October low of $6.55 1/4 and then at $6.50.
What to do: Get current with advised sales.
Hedgers: You should be 50% sold in the cash market on 2023-crop production.
Cash-only marketers: You should be 50% sold on 2023-crop production.
Price action: December cotton rose 3 points to 84.27 cents, marking a high-range close above the 100-day moving average.
Fundamental analysis: Cotton futures rallied from earlier lows amid weak export sales data. However, traders saw Wednesday’s low as a buying opportunity, with solid selling in in the U.S. dollar and gains in crude oil giving the natural fiber a boost.
Demand concerns continue to hover over the market, with USDA’s export sales proving somewhat tepid. In the week ended Oct. 12, net cotton sales totaled 71,300 RB, which were up 64% from the previous week but down 36% from the four-week average. Top purchasers included Guatemala, China and Bangladesh. Meanwhile, shipments for the week totaled 109,900 RB which rose 6% from the previous week but were 22% below the four-week average.
World Weather Inc. reports dry and favorable conditions for cotton maturation and harvesting is expected for most of the next two weeks, with a notable exception Tuesday into next Thursday when significant rain will spread across the region causing temporary harvest delays and some cotton discoloration that should also be temporary.
Technical analysis: December cotton rebounded from early lows and ultimately ended the session above the 100-day moving average of 84.24 cents. Initial resistance will now serve at the 10-day moving average of 85.25 cents, then at 86.07 cents and the 20- and 40-day moving averages of 86.38 and 86.81 cents. Conversely, initial support will now lie at the 100-day moving average, then at 83.35 cents, 82.67 cents, 82.01 and 81.09 cents.
What to do: Get current with advised sales.
Hedgers: You should be 100% priced on 2022-crop in the cash market. You should have 60% of expected 2023-crop production forward sold for harvest delivery.
Cash-only marketers: You should be 100% priced on 2022-crop. You should have 60% of expected 2023-crop production forward sold for harvest delivery.
