Crops Analysis | December 7, 2022
March corn rose 4 cents to $6.41 1/2 after earlier falling as low as $6.35, a 3 1/2-month low.
Fundamental analysis: Corn turned moderately higher after touching a 3 1/2-month low overnight as corrective buying in SRW wheat futures offered spillover support, despite persisting weakness in crude oil futures. Weaker-than-expected Chinese trade data sent crude to an 11 1/2-month low on global growth and demand concerns, with the U.S. dollar paralleling crude’s negativity in anticipation of next week’s FOMC meeting which may produce a smaller rate hike than the past four.
China’s easing of its Zero Covid policy remains a trader focus, as the country made its most extensive changes to the policy since the pandemic began. China’s national health authority said asymptomatic Covid cases and people with mild symptoms can quarantine at home. Testing requirements while traveling within the country were also lifted.
U.S. ethanol production averaged 1.077 million barrels per day (bpd) during the week ended Dec. 2, up 59,000 bpd from the previous week but down 1.2% from the same week in 2021, according to the Energy Information Administration. Ethanol stocks increased 323,000 barrels to 23.257 million barrels.
Technical analysis: March corn traded a 10 3/4-cent range, testing resistance at $6.43 1/4, though the level held into the close. Additional upside attempts will continue to see resistance at $6.43 1/4, as well as $6.49 1/4, and $6.53. A close above the 10-day moving average around $6.57 would help bulls gain momentum to test the 20- and 100-day moving averages around $6.62. Downside efforts will encounter support at today’s low at $6.35, along with $6.33 1/2, $6.29 3/4, and $6.23 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 17 cents to $14.72, the contract’s highest close since Sept. 20. January soymeal surged $10.40 to $459.00, a lifetime-high close for the contract. January soyoil fell 66 points to 60.96 cents, the contract’s lowest close since Sept. 30.
Fundamental analysis: Soybean futures extended Tuesday’s gains as soymeal rallied, recent China purchases fueled demand optimism and continued dryness in Argentina stirred concern over reduced yield potential. Private analysts have already cut their production forecasts for Argentina, and traders will watch Friday’s USDA Supply and Demand Report for any further changes to its South American outlook. In November, USDA lowered its soybean target for Argentina by 1.5 MMT to 49.5 MMT.
High temperatures in Argentina Tuesday reached the 90s into the 100s Fahrenheit. Rain expected this weekend “will be extremely important for crops due to the following week of weather expected to trend dry and warm once again,” World Weather Inc. said. Argentina’s bottom line “will remain one of concern,” World Weather added. “The previously wettest areas of southwestern Argentina will experience the poorest distribution of rain in this next 10 days and the ground will firm up with crop stress evolving once again.” Net drying in southern Brazil is expected to continue into the weekend, but some showers are expected, including during the early part of next week. Rio Grande do Sul “has not been dry enough yet this season to threaten crop development, but this coming week of warmer and drier weather may change that,” World Weather said.
Technical analysis: The soybean market’s technical posture further strengthened and bullish momentum could accelerate if January futures follow the past two sessions’ strength with a break above last week’s high of $14.78 1/2, a 2 1/2-month intraday high. A push above that level would have bulls targeting the $15.00 level and the September high of $15.12 1/4. Key downside levels include the 10- and 200-day moving averages, which converge around $14.48 3/4 to $14.49, and the 20-day moving average at $14.42 3/4. January soymeal touched $463.20, a contract high for the second day in a row.
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 rallied 21 1/2 cents to $7.27, while March HRW wheat gained 18 3/4 cents to $8.48 3/4. March spring wheat rose 6 cents to $9.02.
Fundamental analysis: SRW wheat futures rose for the first time in five sessions behind short covering and technically driven buying following the market’s drop to 14-month lows earlier this week. Weak U.S. exports, a U.S. dollar that remains historically strong and stiff competition from other top wheat producers likely limit futures’ upside. Consultancy Sovecon raised its forecast for Russia's 2022-23 July-June wheat exports to 43.9 MMT from 43.7 MMT, citing due active shipments. Sovecon expects Russia's October-December wheat exports at 12.7 MMT, up 33% from the same period a year ago, the consultancy said. Shipments continue from Ukraine’s Black Sea ports, and a record crop outlook for Australia has eased global supply concerns.
USDA on Thursday is expected to report net U.S. export sales ranging from 150,000 to 350,000 MT, compared to 155,500 MT a week earlier.
Technical analysis: Winter wheat bears hold a near-term technical advantage despite today’s sharp gains, as prices remain in an accelerating seven-week downtrend on daily bar charts. March SRW wheat remains technically weak after falling Tuesday to $7.23 1/2, the contract’s lowest intraday price since October 2021. Bears' downside targets include closing March futures below solid support at $7.00, followed by the October 2021 low at $6.94 3/4. Initial resistance is seen at $7.50, today’s high of $7.56 1/4 and the 20-day moving average at $7.72 3/4.
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 276 points to 81.83 cents, the contract’s lowest close since Nov. 29.
Fundamental analysis: Cotton futures were pressured by risk-off attitudes in the broader market as U.S. equity benchmarks and crude oil tumbled, sinking to 11-month lows and overshadowing weakness in the U.S. dollar index. Traders await USDA weekly export sales numbers Thursday. Recent U.S. cotton exports have been uninspiring. However, cotton bulls are hoping the recent slide in the U.S. dollar and easing of Covid restrictions in China, a top cotton importer, will boost demand.
Traders also await Friday’s USDA Supply and Demand Report, which may carry only 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 have the overall near-term technical advantage. However, recent price action still suggests a market bottom is in place. The next upside objective for bulls is to produce a close in March futures above resistance at the November high of 89.92 cents. The next downside price objective for bears is to close prices below solid support at 75.00 cents. First resistance is seen at 85.00 cents and then at the December high of 87.23 cents. First support is seen at 80.00 cents and then at 77.50 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.
