Crops Analysis | November 15, 2022
Corn
Price action: December corn gained 1/2 cents to $6.66 3/4, after dropping earlier in the session to a 2 1/2-month low at $6.51 1/4.
Fundamental analysis: Corn bounced back from overnight declines that were driven by a continued pullback in the U.S. dollar index, which sank to a three-month low, as well as optimism the Ukraine export deal. However, grain futures rallied following Associated Press reports that Russian missiles crossed into Poland, killing two people. Missiles hit cities including the capital Kyiv, Lviv and Rivne in the west, Kharkiv in the northeast, Kryvyi Rih and Poltava in the center, Odesa and Mikolaiv in the south and Zhytomyr in the north, in what Kyiv said was the heaviest wave of missile strikes in nearly nine months of war. The strikes stirred concern a potential extension of the Ukraine grain export deal was in jeopardy as the agreement’s Nov. 19 expiration nears. Earlier today, Russia was expected to agree to an extension of a United Nations-brokered deal allowing exports of grain and other agricultural products from the Black Sea, Bloomberg reported, citing four people familiar with the discussions.
Grain markets will remain on edge as traders monitor the war in Ukraine, though if an export agreement extension ultimately happens, corn futures may resume a downward path on pressure from weak exports and an outlook for big crops in South America. Crop Consultant Dr. Michael Cordonnier kept his estimate for Argentina’s corn crop unchanged at 50 MMT but has a “lower bias,” citing slow planting progress. He held his Brazil corn estimate unchanged at 125.5MMT, with a neutral bias.
Technical analysis: The corn market’s technical posture took a bullish turn as December futures posted an outside day higher on the daily bar chart, dropping under Monday’s low but rallying back to close above Monday’s high of $6.62. Follow-through buying Wednesday could confirm this inflection point and signal a neutral-to-firmer bias over the near-term. December futures also closed slightly above the 200-day moving average at $6.66 but just under the 10-day moving average of $6.69. A further push above 20- and 40-day moving averages at $6.77 and $6.79 1/2, could spark renewed fund buying and embolden bulls to target $6.80 and $7.00 levels. Today’s low of $6.51 1/4 marks initial support, followed by the 100-day moving average at $6.50 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 for harvest delivery.
Cash-only marketers: You should have 50% of 2022-crop sold for harvest delivery.
Price action: January soybeans rose 16 3/4 cents to $14.57 1/4, the contract’s highest close since Nov. 4. December soymeal rose $3.90 to $409.90, and December soyoil rose 70 cents to 76.98 cents.
Fundamental analysis: Soybeans climbed on demand optimism in part driven by USDA earlier reporting a daily sale to Mexico for 261,272 MT for delivery during the 2022-23 marketing year. Early weakness in the U.S. dollar and strength in crude oil also supported the soy complex. Global vegoil markets continued provide support on expectations for disruptions to palm oil supplies from tropical storms in Indonesia and Malaysia. However, the Malaysian Palm Oil Board notes the prospect of a tough year in 2023 as global weather, geopolitical, and economic uncertainties persist.
Strong demand also supported prices. Earlier today, the National Oilseed Processors Association (NOPA) reported soybean crushing totaled 184.464 million bu. during October, up 17% from 158.109 million bu. in September and up 0.3% from October 2021. NOPA's crush figure of 184.464 million bushels exactly matched the average estimate from nine analysts in a Reuters survey. Soyoil supplies among NOPA members as of Oct. 31 rose to 1.528 billion lbs, up from 1.459 billion lbs at the end of September but down from 1.834 billion lbs a year ago.
Technical analysis: January soybeans traded a 32 1/4 cent range, breaking through and ending the session above 10-day moving average around $14.47 as well as first resistance near $14.52 1/2. Further attempts to the upside will encounter resistance at $14.64 1/4 and $14.73 1/2. Conversely, support now stands at former resistance at $14.52 ½, the 10-day moving average, as well as $14.31 ½, and $14.22.
December soyoil remains in a solid uptrend, maintaining a close above the 10-day moving average near 76.13 cents.
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.
Fundamental analysis: Wheat futures recovered from earlier weakness and climbed to solid gains after reports of Russian missiles striking Poland stoked renewed concern over disruption to global supplies and raised questions over the outlook for an agreement allowing Ukrainian grain shipments from Black Sea ports. Grains were under pressure earlier in the day amid optimism the deal would be extended beyond the Nov. 19 deadline. While further escalation of the war would be concerning for commodity markets, a relatively limited response in equities and the U.S. dollar suggested traders were taking more of a wait-and-see mindset.
Slight improvement in crop conditions also weighed on HRW futures. USDA late Monday reported 32% of the U.S. winter wheat crop in “good” or “excellent” condition as of Sunday, up from 30% a week earlier and slightly better than analysts’ expectations for 31%. Wheat rated “poor” to “very poor” totaled 32%, down from 34% a week earlier. When USDA’s weekly condition ratings are plugged into the weighted Pro Farmer Crop Condition Index (0 to 500-point scale, with 500 being perfect), the HRW crop improved 4.7 points to 270.6 while the SRW crop rose 6.6 points to 357.0. CCI ratings remain 71.3 points below the five-year average for HRW and 5.3 below for SRW.
Technical analysis: Winter wheat technicals took a slightly bullish turn as December SRW futures posed an outside day higher on the daily bar chart, dropping under Monday’s low but rallying to settle slightly under Monday’s high. Followthrough buying will need to develop Wednesday to confirm the formation as a possible inflection point that could portent sideways-to-firmer price action over the near-term. Still, December SRW futures remain in a month-long downtrend, failing to close above the 20-day moving average at $8.27 3/4 and failing to penetrate resistance at the 100-day moving average at $8.43 1/4. A close above the latter price could help at least partially negate the recent downtrend. Key downside levels to watch include $8.00 and a 10-week low at $7.95 1/2 posted Nov. 10.
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 346 points to 88.74 cents, a five-week high close.
Fundamental analysis: Cotton futures surged behind weakness in the U.S. dollar and signs of improved demand from China. Also, trader and investor risk appetite appeared to pick up, as the S&P 500 index climbed to a two-month high and crude oil strengthened. Positive news on China also supported cotton, as China has lifted some of its Covid restrictions, while at the same time U.S. President Biden and China President Xi Jinping met face-to-face this week to try to become less adversarial. All the above may work to increase domestic and export demand for U.S. cotton.
Reports of Russian missile strikes inside NATO member Poland that killed two people contributed to gains in grain markets but appeared to have limited effect in cotton. However, cotton traders will pay extra close attention to the key outside markets the rest of the week.
Technical analysis: Cotton futures bears still have a slight near-term technical advantage. However, the recent strong rebound from the October low suggests a market bottom is in place. The next upside price objective for the cotton bulls is to produce a close in December futures above technical resistance at 95.00 cents. The next downside price objective for the cotton bears is to close prices below solid technical support at 82.50 cents. First resistance is seen at the November high of 89.31 cents and then at 90.00 cents. First support is seen at 87.50 cents and then at 86.00 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.
