Crops Analysis | December 14, 2022
Corn
Price action: March corn fell 3 cents to $6.50 1/2, nearer the session high, after briefly trading below the 10-day moving average at $6.47.
Fundamental analysis: Corn futures extended Tuesday’s late weakness amid spillover from weakness in the wheat market, which remains under pressure in part due to grain supplies from Ukraine reaching the global market. However, a decline in the country’s shipments could wane as harvest continues and losses are tallied. After Russia’s invasion, Ukraine’s 2022 corn harvest was expected to fall short of the previous year’s record. However, USDA slashed its production estimate to 27 MMT, down from last month’s 31.5 MMT. USDA’s Kyiv attaché released an even smaller estimate early this week, at 23.1 MMT, down from 25.8 MMT last month. Nearly 40% of corn was unharvested to start the month because of high moisture coupled with expensive or inaccessible grain drying and financial losses to farmers due to the conflict, according to Reuters.
U.S. ethanol production averaged 1.061 million barrels per day (bpd) during the week ended Dec. 9, down 16,000 bpd from the previous week and down 2.4% from the corresponding week a year ago, the Energy Information Administration reported. Ethanol stocks increased 1.15 million barrels to 24.407 million barrels. USDA on Thursday is expected to report net weekly U.S. corn sales of 600,000 to 900,000 MT, compared to 691,600 MT last week.
Technical analysis: March futures traded a 6-3/4 cent range, turning below support at $6.50 1/2 and making a low just below the 10-day moving average at $6.47. Both levels will continue to serve as support as the session ended above each level. However, attempts lower will encounter further support at $6.42 3/4, where a breach of support could find bears pushing towards $6.34. Efforts to the upside, however, will meet resistance between today’s high at $6.53 1/2, as well as the 20-day moving average at $6.57 1/4, and $6.58 1/4. A close above this area will likely increase momentum for bulls looking to inch toward resistance at $6.63 and the 100-day moving average near $6.65 3/4.
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: January soybeans rose 2 1/2 cents to $14.82 1/4, the highest close so far this week. January soymeal rose $7.80 to $460.20. January soyoil fell 57 points to 63.49 cents.
Fundamental analysis: Soybean futures ended higher behind demand optimism, strength in soymeal and crude oil and concerns over dryness in South America. Net drying is expected in Argentina the next 10 days despite some periodic showers and thunderstorms, World Weather Inc. said today. Most of the expected rainfall “will not be enough to counter evaporation,” the forecaster said. “Crop moisture stress will be rising once again as the ground firms and any rain would be welcome, but much more is going to be needed.” In Brazil, dryness is intensifying across Rio Grande do Sul as the state continues to miss out on rainfall, World Weather said. Still, soybean and first-season corn prospects “remain highly favorable in the remaining portions of Brazil.” While South American weather remains price-supportive, the strong prospects for a record Brazil crop are for now mitigating bullishness.
Soymeal remains a bullish leader in the soy complex, with January futures still near the contract high of $474.40 posted last week. U.S. soybean crush in November likely reached 181.473 million bu., the ninth highest on record for any month, based on a Reuters poll of analysts ahead of the monthly National Oilseed Processors Association (NOPA) report Thursday. USDA on Thursday is expected to report net weekly U.S. soybean sales of 1.5 to 2.0 MMT, compared to 1.72 MMT last week.
Technical analysis: Soybean futures hold a near-term bullish posture with the January contract extending an eight-week uptrend and closing above most key short- and medium-term moving averages. Key upside objectives for market bulls include last week’s intraday high of $14.92 3/4. A push above that level may trigger buy stops that could help fuel a continued rally above $15.00, with additional targets including the August intraday high of $15.12 1/4 (a break above $15.00 could also unlock a wave of farmer selling). Initial support comes in at the 10-day moving average at $14.62 1/2, followed by the 20- and 200-day moving averages at $14.51 3/4 and $14.49 1/2, respectively. Further downside support lies at the 40-day moving average at $14.37 3/4.
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 1 1/2 cents to $7.49 1/4, near the top of today’s range. March HRW wheat fell 15 cents to $8.50 1/4. March spring wheat fell 5 1/2 cents to $9.17 1/4.
Fundamental analysis: HRW futures led declines in the wheat complex on expectations snow this week will bring moisture relief in parts of the U.S. Plains. Snow fell substantially across the northern Plains Tuesday and overnight, with reported amounts from 0.05 to 0.75 inch in the Dakotas and Minnesota and 4 to 14 inches from western Nebraska through central South Dakota, World Weather said. A major snowstorm will continue to impact the region today through Thursday, with blizzard conditions most likely in the south where the strongest winds are expected.
Farther south in the HRW belt, rain and snow shower activity the next seven days is likely to be limited, World Weather said. “A larger snow event will be needed next week due to a surge of Arctic air which could send temperatures below zero Fahrenheit in at least central and northern production areas.” Kansas and other major HRW producing states continue to be gripped by drought, but bullish impact has been limited by poor export demand. USDA on Thursday is expected to report net U.S. weekly wheat sales of 150,000 to 350,000 MT, compared to 189,000 MT last week.
Technical analysis: March SRW futures recovered most of the market’s initial declines to end slightly off the high for the day, but retain a neutral to bearish bias, with winter wheat prices extending a two-month downtrend. Bears’ downside objectives include closing March SRW prices below a 14-month low of $7.23 1/2, posted Dec. 6, followed by $7.00. Bulls' upside objectives include closing March futures above this week’s high at $7.69 1/4, followed by the 40-day moving average at $7.78 3/4 and solid resistance at $8.00.
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 fell 26 points to 81.37 cents, near the middle of today’s range.
Fundamental analysis: Nearby cotton futures fell slightly in subdued activity as traders monitored outside markets and awaited the Federal Reserve’s interest rate decision and economic update. Weakness in the U.S. dollar and strength in crude oil were price-supportive, but cotton remains burdened by sluggish exports. Traders will study USDA’s weekly export sales report Thursday for a read on demand from China and other top buyers. China recently lifted Covid restrictions, fostering ideas the country’s growth may improve. However, some believe relaxed Covid restrictions will produce a surge in infections in China.
Buying interest in cotton futures remains limited after USDA last week unexpectedly raised its U.S. cotton production estimate. The agency pegged cotton production at 14.242 million bales, up 211,000 bales from November when traders actually expected a reduction.
Technical analysis: Cotton futures bears have the overall near-term technical advantage. Prices are in a four-week-old downtrend on the daily bar chart. 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 75.00 cents. First resistance is seen at today’s high of 82.55 cents and then at 83.75 cents. First support is seen at today’s low of 80.63 cents and then at 80.00 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.
