Crops Analysis | December 29, 2022
Corn
Price action: March corn fell 3 1/4 cents to $6.79 1/2, ending around the middle of today’s narrow range. Late-2023 contracts posted modest gains.
Fundamental analysis: March corn fell for the first time in four sessions as traders booked profits with a three-day holiday weekend ahead. Weakness in crude oil and concern surging Covid cases in China could crimp commodity demand also weighed on grain prices. A drop in ethanol production and increase in stocks may have also contributed to price weakness. U.S. ethanol production averaged 963,000 barrels per day (bpd) during the week ended Dec. 23, down 66,000 bpd from the previous week and an 11-week low. Nationwide ethanol stockpiles jumped 569,000 barrels from a week earlier to 24.636 million barrels, the largest increase since April.
Also today, the Black Sea Grain Initiative reported 1.2 MMT of grain departed Ukraine ports during the week that ended Dec. 25, which was double the previous week’s volume and included six corn cargoes bound for China. USDA will release export sales for the week ended Dec. 22 early Friday, a day later than usual due to the Christmas holiday. Net U.S. corn sales are expected to range from 600,000 to 850,000 MT for the 2022-23 marketing year. The previous week’s sales were reported at 636,800 MT.
Technical analysis: March corn traded a narrow 5-cent range, remaining within the previous session’s range. A move higher will find bulls facing resistance at a seven-week high of $6.83 1/2 posted Wednesday, followed by $6.86 1/2, $6.90 1/4 and $6.97 1/4. The $7.00 level will continue to serve as psychological resistance. A turn lower, however, will encounter initial support at $6.75 3/4, again at the 100-day moving average near $6.70 3/4, and then at $6.68 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.
Fundamental analysis: Soybean futures rose a fourth consecutive session as persistent dryness in Argentina and China-driven demand optimism fueled speculative fund buying. Argentina “will be at a very important crossroad in weather over the next couple of weeks,” according to World Weather, Inc. The forecaster noted that “significant” rain must fall to get the remaining planting completed and to improve crop emergence and establishment. “The drought is ongoing and the environment remains less than favorable… for crop establishment and growth. Rain expected this weekend “will be too light to seriously change the status of drought and any improvement in crop conditions will be temporary. Concern over long-term crop prospects will persist.”
In Brazil, conditions are largely favorable outside of dryness in some southern areas, bolstering expectations for a record soybean crop. Much of Brazil will see regular rounds of rain and favorable conditions for crop development through the next two weeks, World Weather said. While Argentina’s weather remains price supportive, Brazil’s record crop prospects will continue to limit the bullish impact of Argentina dryness concerns. However, soybeans’ strength this week suggests traders believe longer-term demand fundamentals will continue, and fresh export business may be in the works.
USDA’s weekly export sales report Friday is expected to show net U.S. soybean sales of 500,000 to 900,000 MT, compared to 736,000 MT the previous week.
Technical analysis: Soybean futures’ near-term technical posture strengthened further as the March contract closed above $15.00 for the second day in a row and extended an uptrend that’s lasted nearly three months. March futures also posted a fresh six-month intraday high at $15.24 1/4, and a push above that level in coming days could motivate bulls to target $15.50 and the contract high of $15.72 1/4, posted June 9. However, prices are nearing overbought conditions and speculative funds have bought heavily this week, which could lead to some profit-taking and corrective selling before the three-day holiday weekend. Initial support in March soybeans comes in at Tuesday’s low of $14.85 followed by the 10-day moving average of $14.86 1/4 and the 20-day moving average at $14.77.
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 11 1/2 cents to $7.74. March HRW wheat lost 15 3/4 cents to $8.66 1/2. March spring wheat fell 20 cents to $9.14.
Fundamental analysis: Wheat futures were pressured by profit-taking and corrective selling following the market’s climb to four-week highs earlier this week, as well as weakness in corn and crude oil. Recent extreme cold in the U.S. Plains that raised concerns over potential damage to dormant winter wheat supported prices earlier this week, but a fuller picture of the crop’s status won’t be known for a few months, limiting further buying interest in futures. In the HRW belt, precipitation over the coming week will be limited mainly to northwestern and far eastern areas, World Weather said. Some increase in topsoil moisture is likely in these areas, “however, very short soil moisture will continue in a majority of the region,” the forecaster said. “Unusually warm temperatures will not be a concern for stimulating more development of the winter wheat crop.”
USDA’s weekly export sales report Friday is expected to show net U.S. wheat sales of 200,000 to 450,000 MT for the 2022-23 marketing year and zero to 25,000 MT for 2023-24. Last week’s weekly sales figure was 334,200 MT for 2022-23
Technical analysis: Winter wheat bears hold a near-term technical advantage, but prices are in fledgling uptrends on the daily bar charts. SRW bulls' next upside objective is closing March futures above solid resistance at $8.00. Bears' next downside objective is closing prices below solid support at the December low of $7.23 1/2. First resistance is seen at this week’s high of $7.87 1/2, then $8.00. First support is seen at today’s low of $7.65 1/2, then $7.58.
HRW bulls' next upside objective is closing March futures above solid resistance at $9.25. Bears' next downside objective is closing prices below solid support at the August low of $8.11 3/4. First resistance is seen at today’s high of $8.84 and then at this week’s high of $8.94 3/4. First support is seen at today’s low of $8.61 and then at $8.50.
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 66 points to 82.60 cents, marking the lowest close since Dec. 16.
Fundamental analysis: Cotton fell for the third straight session and ended near a two-week low as crude oil turned lower on global demand concerns with Covid cases surging in China following easing from the strict zero-Covid policy. The U.S. announced new Covid-19 testing requirements Wednesday for all travelers from China, joining other nations imposing restrictions due to the increase in infections. Fears of new variants taking hold globally are weighing on prices as China is said to have been withholding critical information about the viruses spreading across China right now. China’s National Health Commission said it would stop releasing data on daily Covid-19 caseloads from Sunday, without providing an explanation.
Traders will study USDA’s weekly export sales report tomorrow for any signs of a pick-up in the market’s soft export pace. Last week, USDA reported net weekly U.S. cotton sales reductions of 87,800 running bales (RB) for 2022-23, compared to sales of 18,600 RB the previous week.
Technical analysis: March cotton traded a 137-point range, briefly trading above the 20 and 40-day moving averages of 83.27 and 83.37 which will continue to serve as resistance. Further resistance lies at the 10-day moving average at 84.29, then at 84.77, 86.29 and 87.49. While initial support lies at $82.05, then at 80.85 and 79.33.
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.
