Crops Analysis | December 6, 2022
Corn
Price action: March corn fell 3 1/4 cents to $6.37 1/4, the contract’s lowest close since $6.36 1/4 on Aug. 19.
Fundamental analysis: Corn faded from earlier gains on spillover from slumping wheat prices and bearish outside markets. Crude oil futures fell a third straight session to a low for the year, while the U.S. dollar index rebounded following a recent drop to five-month lows. Traders continued to monitor China, where the easing of Covid restrictions has fostered hopes for improved demand as major cities including Beijing, Shanghai, and Guangzhou are no longer requiring tests to enter many venues. On Monday, China reported the fewest infections in two weeks.
Sparse rainfall and high temperatures are increasing crop stress in Argentina. Consequently, South American crop consultant, Dr. Michael Cordonnier, lowered projections for Argentina’s corn crop for the second week in a row, most recently a cut of 1 MMT to 48 MMT. He holds a neutral to lower bias. Cordonnier said planting continued to be delayed by adverse weather that showed little sign of near-term improvement, and noted that temperatures were expected to climb to the mid-90s to above 100 degrees Fahrenheit as early-planted acres enter pollination. The consultant left estimates for Brazil corn production unchanged at 125.5 MMT.
Technical analysis: March corn traded a 9 3/4-cent range, falling below the previous session’s low and testing support at $6.35 3/4 which held into the close and will continue to serve as support. Further downside attempts will encounter support at $6.31 as well as $6.24 1/2. Conversely, a turn higher will be presented with resistance at $6.47, along with $6.53 1/2, and at the 10-day moving average near $6.58 1/4, with strong resistance at the intersection of the 20 and 100-day moving averages near $6.62 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.
Price action: January soybeans rose 17 1/4 cents to $14.55, the contract’s highest close since Nov. 30. January soymeal surged $16.50 to $448.60, the highest close for a nearby contract since Sept. 21, based on the continuation chart. January soyoil fell 95 points to 61.62 cents, a three-week closing low.
Fundamental analysis: Soybeans climbed back near 2 1/2-month highs posted last week with support from fresh demand from China, a rally in soymeal and escalating concerns persistent dryness in Argentina could hamper the country’s production outlook. Early today, USDA reported daily soybean sales of 264,000 MT for delivery to China and 240,000 MT for delivery to “unknown destinations,” both for the 2022-23 marketing year. Today’s announcement follows three separate daily purchases by China since Nov. 23 totaling 376,000 MT and underscored the firm supply-demand fundamentals that are expected to keep soybean prices elevated well into 2023.
Also today, consultant Cordonnier lowered his estimate for Argentina’s soybean crop, citing a lack of rain and high temperatures increasing crop stress. Cordonnier now estimates the Argentine soybean crop at 48 MMT, down 1 MMT from his previous forecast and the second consecutive week he trimmed his outlook by that amount. “Near-term temperatures are forecast to be much above normal which will increase moisture stress on the crop that has already planted and it could result in poor germination and emergence for the crop yet to be planted,” Cordonnier said of Argentina. Cordonnier kept his Brazilian soybean crop estimate at 151 MMT.
Technical analysis: The soybean market’s technical posture strengthened today and holds a neutral-to-bullish near-term bias, through January futures faded from earlier gains and settled around the middle of the past two weeks’ trading range. January futures closed above the 200-day moving average at $14.48 3/4, which could encourage followthrough buying Wednesday and prompt bulls to test the 2 1/2-month high of $14.78 1/2. Additional upside targets include the $15.00 level and the September high of $15.12 1/4. Key downside levels include the 10-, 100- and 50-day moving averages at $14.25 1/4, $14.20 1/2 and $14.18 1/2, also with last week’s low of $14.24.
Bulls are firmly in command in soymeal futures. January futures topped the previous contract high of $437.40, posted Sept. 20, and rallied as high as $453.10. January soymeal faces little meaningful resistance till the $475.00 area, based on continuation charts.
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 10 cents to $7.29, the contract’s lowest close since late September 2021. March HRW wheat dropped 11 3/4 cents to $8.30, a 3 1/2-month closing low. March spring wheat fell 6 cents $8.96, also a 3 1/2-month low.
Fundamental analysis: Wheat futures extended a three-week slide as eroding charts spurred technically-driven fund selling and sluggish exports continued to burden prices. Sharp declines in crude oil and U.S. equities also pressured grain markets amid a general “risk-off” day in the global market. Weather in U.S. wheat country still leans bullish for the longer-term but is being overshadowed by bearish outside markets and weak demand. World Weather today expects no relief for dryness in the west-central U.S. High Plains, but recent rain in Oklahoma and northern Texas has improved crop emergence and establishment. Additional rain is expected in the coming ten days in Oklahoma, northern Texas and in the lower Midwest. Winter crops in the northwestern U.S. are dormant and will likely remain that way for a while. Limited new crop development is also expected in the central U.S. Plains due to recent cooling and that which is coming, said the forecaster.
Technical analysis: Winter wheat bears hold a near-term technical advantage with prices in an accelerating seven-week downtrend on 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 $7.00. First resistance is seen at today’s high of $7.43 1/2, then $7.50. First support is seen at $7.15, then $7.00.
HRW bulls' next upside objective is closing March futures above solid resistance at $9.00. Bears' next downside objective is closing prices below solid support at the August low of $8.11 3/4. First resistance is seen at $8.50 and then at this week’s high of $8.77 3/4. First support is seen at $8.11 3/4, then $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 rose 73 points to 84.59 cents, around the middle of the past week’s range.
Fundamental analysis: Cotton futures shrugged off bearish outside markets to end with firm gains, supported by hopes that China’s recent easing of Covid restrictions will give its economy a boost and lead to greater demand for commodities such as cotton. Traders await Friday’s USDA Supply and Demand Report, which may carry slight adjustments in U.S. cotton production. Recent USDA reports have shown world cotton production numbers and usage trending lower, while global ending stocks have been trending higher. USDA is expected to slightly lower its estimate of this year’s U.S. cotton crop to 13.96 million bales from 14.03 million bales in a November report, based on a Bloomberg survey of analysts.
Technical analysis: Cotton bears hold a near-term technical advantage, though recent price action suggests a market bottom is in place. The next upside objective for bulls is to close March futures above resistance at the November high of 89.92 cents. The next downside objective for bears is to close prices below solid support at last week’s low of 77.50 cents. First resistance is seen at today’s high of 86.39 cents, then at last week’s high of 87.23 cents. First support is seen at this week’s low of 82.75 cents, then 81.00 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.
