Crops Analysis | November 1, 2022
Corn
Price action: December corn futures rose 6 1/4 cents to $6.97 3/4, the contract’s highest closing price since Oct. 13.
Fundamental analysis: Corn futures rebounded from overnight weakness behind easing harvest pressure and spillover support from gains in soybeans and wheat. The uncertain status of a deal enabling grain shipments from Ukraine’s Black Sea ports continued to underpin grain futures. Shipments continued today even after Russia over the weekend said it would suspend its participation in a United Nations-sponsored deal providing a safe shipping channel from Ukrainian ports. The U.N. coordinator for the grain export initiative continued discussions with Ukraine, Russia and Turkey in an effort to resume full participation at the inspections center that oversees safe passage of vessels.
U.S. farmers are moving into the final stages of fall harvest ahead of the typical pace, reducing a source of pressure on futures. Late Monday, USDA reported the U.S. corn harvest at 76% complete as of Sunday, up from 61% a week earlier and ahead of the 64% average for that date the previous five years. Analysts expected harvest to be about 75% complete. USDA’s monthly Grain Crushings report later today is expected to show corn-for-ethanol use at 394.4 million bu. for September, which would be down 37.9 million bu. (8.8%) from August and down 12.7 million bu. (3.1%) from September 2021.
Technical analysis: Corn futures’ technical posture leans neutral to bullish as the December contract continues to face stiff resistance around $7.00. December touched $7.00 Monday but rose only as high as $6.98 1/2 today. A push above $7.00 could fuel chart-based buying that powers a test of the October high at $7.06 1/2. Further resistance is seen at $7.28 3/4 and the June high at $7.49 1/2. Initial support comes in at the 20- and 10-day moving averages at $6.86 1/2 and 6.85, respectively, followed by a gap between Monday’s low at $6.84 1/4 and Friday’s high of $6.83 3/4, followed by last week’s low of $6.76 1/4.
What to do: Get current with advised sales. Wait to make additional 2022-crop sales.
Hedgers: You should have 50% of 2022-crop sold for harvest delivery.
Cash-only marketers: You should have 50% of 2022-crop sold for harvest delivery.
Price action: January soybeans surged 28 1/4 cents to $14.47 3/4, the contract’s highest settlement since Sept. 22. December soyoil gained 16 points to 73.37 cents. December soymeal slid $3.30 to $424.80.
Fundamental analysis: Soybean futures climbed near six-week highs gains as international developments fueled concern over tight grain and oilseed supplies. Russia’s suspension of its participation in an export deal involving Ukraine remained a large source of uncertainty. In Brazil, protesters blocked the main access road to the grain export port of Paranagua for a second day, raising the potential for disruptions to shipments of soybeans and other agricultural goods. The blockades follow spreading demonstrations by truckers and other supporters of outgoing Brazilian President Jair Bolsonaro, protesting against his narrow election loss to leftist Luiz Inacio Lula da Silva. Chinese markets surged in early trading amid rumors that country’s authorities will back away from their stringent Covid Zero policy in early 2023. This suggests a potential increase in Chinese soybean buying activity.
Traders expect USDA to report soybean crushing totaled 167.9 million bu. for September, according to a Bloomberg survey. That would be down 7.1 million bu. (4.1%) from August but up 3.7 million bu. (2.3%) from last year.
Technical analysis: Bulls hold a strong technical advantage in January soybeans after the contract tested support at its 40-day moving average near $14.14 1/2, then used that as a springboard to higher levels. Initial support at the 40-day moving average is backed by its 10- and 20-day moving averages near $14.01 1/4 and $13.94 3/4, respectively, with a drop below those two levels then likely having bears targeting the October low at $13.62 1/4. Today’s high places initial resistance at $14.49 (which is reinforced by the psychological $14.50 level), with a push above that area opening the door to a potential test of $15.00.
December soyoil futures are still rallying, with underlying support defined by the 10-day moving average (now around 72.07) and resistance marked by today’s high at 74.57. In contrast, December soymeal futures are in ‘no-man’s land’ after last week’s strong bullish breakout above 40-day moving average support near $414.82 and Monday’s high at $440.50.
What to do: Get current with advised cash sales. Wait to make additional sales.
Hedgers: You should be 60% sold for harvest delivery on 2022-crop production.
Cash-only marketers: You should be 60% sold for harvest delivery on 2022-crop production.
Price action: December SRW wheat rose 20 1/4 cents to $9.02 1/2, the contract’s highest close since Oct. 10. December HRW wheat rose 11 1/4 cents to $9.90, the highest close since Oct. 11. December spring wheat rose 8 1/2 cents to $9.89 3/4.
Fundamental analysis: Winter wheat futures rose firmly a second consecutive day and ended at the highest levels in three weeks amid concern over Ukrainian grain shipments and sharply lower than expected USDA crop ratings. The outlook for a deal allowing Ukraine to ship grain from Black Sea ports remained uncertain, as President Vladimir Putin told Turkish counterpart Tayyip Erdogan in a call Tuesday that Russia could consider resuming a deal allowing grain exports from Ukrainian seaports only after completion of an investigation of drone attacks on the Crimean naval port of Sevastopol. Russia suspended its participation on Saturday following a drone attack on Moscow's fleet in Crimea.
Wheat futures were also supported by the record-low crop ratings USDA reported late Monday. USDA’s initial national ratings for U.S. winter wheat pegged the crop at 28% “good” or “excellent” as of Sunday, far under expectations for 41% and an all-time low for any year. USDA pegged 35% of the crop “poor” or “very poor.” When USDA’s weekly crop condition ratings are plugged into the weighted Pro Farmer Crop Condition Index (0 to 500-point scale, with 500 being perfect), the HRW crop starts the growing season at 265.8, the lowest initial rating ever and the lowest on record for any week ahead of dormancy. The HRW CCI rating was 76.3 points below the five-year average.
Technical analysis: Bullish momentum in winter wheat increased as December SRW futures closed above the 40-day moving average, currently $8.67 1/2, for the second straight day, and above $9.00 for the first time in three weeks. Today’s strong close may have bulls targeting the 200-day moving average at $9.28 1/2 and the October intraday high at $9.49 3/4. Key downside levels include the 50-day moving average at $8.60 and the gap created with a strong open to start the week between last Friday’s high at $8.40 1/2 and Monday’s low of $8.53 3/4.
What to do: Wait on an extended price rally to increase cash sales.
Hedgers: December SRW futures hit our buy stop at $8.50 to exit the 15% 2022-crop hedge. We registered a 67-cent loss on the position. 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: December cotton rose the 300-point initial daily limit to 75.00 cents. The limit expands to 400 points Wednesday.
Fundamental analysis: Cotton futures were boosted by active short covering and bargain hunting after tumbling to near a two-year low Monday. Commodity markets were buoyed by unconfirmed reports the Chinese government has a plan to phase out its “zero covid” policies by as soon as March. China stock prices rallied but then backed off their daily highs on reports Foreign Minister Zhao Lijian said he is not aware of the matter. China is the world’s second-largest economy and if it gets rolling again, such would be significantly bullish for commodities, including cotton. Higher crude oil prices today also worked in favor of the cotton market bulls.
USDA late Monday reported the U.S. cotton crop at 55% harvested as of Sunday, compared to 44% at the same time last year and the five-year average of 46%.
Technical analysis: Cotton bears still hold a solid near-term technical advantage with prices in a 2 1/2-month downtrend on the daily bar chart. The next upside objective for bulls is to close December futures above resistance at 80.00 cents. The next downside objective for bears is to close prices below solid support at 67.00 cents. First resistance is seen at 76.00 cents and then at 77.00 cents. First support is seen at 75.50 cents and then at today’s low of 72.00 cents.
What to do: Wait on an extended corrective rebound to get current with advised 2022-crop sales.
Hedgers: You should be 70% forward-priced for harvest delivery on expected 2022-crop production.
Cash-only marketers: You should be 70% forward-priced for harvest delivery on expected 2022-crop production.
