Crops Analysis | December 19, 2023
Price action: March corn futures fell 4 1/4 cents to $4.72 3/4 and near the session low. Prices posted a contract low close.
Fundamental analysis: Technical selling pressure was featured in the corn futures market today. Weaker soybean and soybean meal futures prices also spilled over into selling pressure in corn. Corn bulls got no help from bullish outside market forces today that included a lower U.S. dollar index and higher crude oil prices. Risk-on attitudes dominated the general marketplace today, as the U.S. stock indexes hit new highs for the year, but provided no visible benefit to the corn bulls.
Pro Farmer South American consultant Michael Cordonnier cut his Brazilian corn crop forecast by 1 MMT, to 117 MMT, with a lower bias. He raised his Argentine corn crop estimate by 1 MMT, to 53 MMT.
Weather in South American corn-growing regions leans bearish. World Weather Inc. today said returning rainfall to Brazil this week and timely rain for that country and Argentina as well as Paraguay and Uruguay over the next two weeks “should translate into a favorable environment for summer crop development.”
Technical analysis: The corn futures bears have the solid overall near-term technical advantage. The next upside price objective for the bulls is to close March prices above solid chart resistance at the December high of $4.93 3/4. The next downside target for the bears is closing prices below chart support at $4.50. First resistance is seen at today’s high of $4.78 1/4 and then at this week’s high of $4.82 3/4. First support is at the contract low of $4.70 1/2 and then at $4.65.
What to do: Get current with advised sales.
Hedgers: You should be 50% sold in the cash market on 2023-crop.
Cash-only marketers: You should be 35% sold on 2023-crop production.
Price action: January soybean futures fell 14 1/2 cents to $13.12 1/2, nearer session lows. January soybean meal fell $8.30 to $404.5. January soyoil rallied 2 points to 50.66 cents.
Fundamental analysis: Soybean futures continue to see large daily swings, with bears controlling the session today as more favorable weather conditions are forecast in South America. This morning’s daily export sale reported by USDA of 132,000 MT of soybeans for delivery to unknown destinations in 2023-24 did little to bolster prices. A sinking U.S. dollar index also did little to support prices, as the index is trading near four-month lows.
The ongoing hot and dry conditions in Brazil led Dr. Michael Cordonnier to cut his Brazilian corn estimate forecast by 2 MMT to 155 MMT and retains a neutral/lower bias. He opted to leave his Argentine forecast unchanged at 50 MMT. Dry areas of Brazil are forecast to receive rains from today and through the weekend, though World Weather Inc. notes the country’s weather pattern still won’t be “normal” during the next two weeks. More rains will be needed in order to replenish depleted soil moisture, as the nation’s seasonal rains have yet to begin.
Technical analysis: January soybean futures gave up all of Monday’s gains and then some as persistent selling overtook the market. The uptrend stemming from December lows was broken on a closing basis, which indicates additional weakness is likely. Support lies at $13.09 1/2 with backing from $13.02 1/2, as bears target a close below the December low of $12.92. Meanwhile, bulls are eyeing a close back above downtrend support turned resistance at $13.17, quickly backed by the 10-day moving average at $13.18 3/4, then $13.24.
January soymeal futures fell sharply Tuesday, negating Monday’s technical breakout above the downtrend line stemming from the November high. Bulls are looking to hold support at $402.5 then $400.0 on further weakness, with firmer backing from $397.9 support. Resistance lies at $409.1, then $412.5, which capped most gains the last two sessions.
January soyoil showed relative strength most of the session, though prices fell from session highs into the close. While prices challenged downtrend resistance, late session weakness bodes ill for soyoil bulls into Wednesday. Resistance stands at 50.77 cents, with backing from 51.21 cents, then 51.57 cents. Support stands at 50.48 cents, quickly backed by 50.35 cents, then the psychological 50.00 cent mark. Further selling targets staunch support at 49.10 cents.
What to do: Get current with advised sales.
Hedgers: You should be 55% priced in the cash market on 2023-crop production. You should have 10% of expected 2024-crop production sold for harvest delivery next fall.
Cash-only marketers: You should be 50% priced on 2023-crop production. You should have 10% of expected 2024-crop production sold for harvest delivery next fall.
Fundamental analysis: Short covering was featured in the winter wheat futures markets today. The key outside markets were friendly for wheat today as the U.S. dollar index was solidly lower, crude oil prices were higher and there was a risk-on mentality in the general marketplace. Lower corn and soybean futures prices today did limit the upside in wheat futures.
Weather leans a bit bearish for the wheat markets at present. World Weather Inc. today said recent precipitation and that coming this weekend into next week in the U.S. hard red winter wheat region “will prove favorable to help improve 2024 production potentials if timely rain occurs in the spring and late winter.” There is need for greater moisture in the U.S. Pacific Northwest, northern Plains and parts of Canada’s Prairies. Meantime, weather in Russia and Europe is not having much impact on winter crops because of their dormant state. Argentina’s heavy rain recently raised concern over head sprouting since winter crops are maturing in Buenos Aires and La Pampa where the greatest rain fell. These areas will receive some additional rain in the next couple of weeks, said the forecaster.
Technical analysis: Winter wheat futures bears have the overall near-term technical advantage. However, recent price gains suggest near-term market bottoms are in place. A bull flag pattern has also formed on the daily bar chart for March SRW futures. SRW bulls' next upside price objective is closing March prices above solid chart resistance at the December high of $6.49 1/2. The bears' next downside objective is closing prices below solid technical support at the contract low of $5.56 1/4. First resistance is seen at this week’s high of $6.32 and then at $6.40. First support is seen at today’s low of $6.11 1/4 and then at last week’s low of $6.02 1/2. The HRW bulls' next upside price objective is closing March prices above solid technical resistance at $7.00. The bears' next downside objective is closing prices below solid technical support at the contract low of $5.95. First resistance is seen at this week’s high of $6.43 1/2 and then at $6.50. First support is seen at today’s low of $6.23 and then at $6.10.
What to do: Get current with advised sales.
Hedgers: You should be 60% priced in the cash market for 2023-crop. You should also have 10% of expected 2024-crop production sold for harvest delivery next year.
Cash-only marketers: You should be 60% priced for 2023-crop. You should also have 10% of expected 2024-crop production sold for harvest delivery next year.
Fundamental analysis: Cotton futures have apparently remained under constant downward pressure lately, likely due to concerns about China’s economic outlook and its demand for U.S. cotton. That at least partially explains the market’s weak response to the Fed’s recent dovish shift toward domestic interest rates and its negative impact on the value of the U.S. dollar (which implicitly tends to lower the cost of U.S. fiber to international customers). Greenback weakness reportedly sparked some buying today. Ideas interest rate reductions in 2024 will also encourage domestic activity and buying might also be deemed as a supportive factor for cotton values. In contrast, traders are skeptical of China’s prospective cotton buying, especially as its government is actively working to avoid big economic problems in general and commodity deflation in particular.
Analysis from World Weather Inc. suggests the current El Nino recently reached a peak and may be marked by weakening central Pacific weather conditions in early 2024. That would seem to favor increased production and weaker prices next year.
Technical analysis: Bears hold the short-term technical advantage in March cotton futures, especially after the recent decline pulled the contract price well below its 20-, 10- and 40-day moving averages, which respectively mark resistance near 80.31, 80.84 and 81.12 cents. A surge above those points would have bulls targeting the 83.13 cent high posted Dec. 8, then the psychological 85.00-cent level. Monday’s low of 79.05 cents likely represents initial support, with backing from today’s low at 78.86 cents. A close below the latter would have bears targeting the Dec. 4 low of 78.49 cents, then the Nov. 8 low of 77.66 cents.
What to do: Get current with advised sales.
Hedgers: You should have 60% of 2023-crop production forward sold in the cash market.
Cash-only marketers: You should have 60% of 2023-crop production sold.
