Crops Analysis | November 2, 2022
Corn
Price action: December corn fell 10 1/4 cents to $6.87 1/2, the lowest close so far this week.
Fundamental analysis: Corn followed wheat lower after Russia said it will resume participation in the Black Sea grain deal, four days after suspending the agreement and sparking a sharp grain market rally. This comes after Russia received written guarantees from Kyiv not to use the Black Sea grain corridor for military operations against Russia. However, Russia reserved the right to withdraw from the grain deal if Ukraine violates the guarantee, maintaining uncertainty around the issue. Strength in crude oil futures likely restricted losses as the nearby December contract reached an intra-session high above $90 per barrel for the first time since Oct. 11, while the U.S. dollar fell after the Federal Reserve boosted interest rates another 75 basis points but suggested smaller increase may be ahead.
Ethanol production for week ended Oct. 28 averaged 1.040 million barrels per day (bpd), up 7,000 bpd from the previous week and the highest average since week ended July 29. However, production was 6.1% behind the same week last year. Ethanol stocks fell 59,000 barrels to 22.232 million barrels. USDA’s weekly export sales report Thursday is expected to show net U.S. corn sales at 250,000 to 600,000 MT for the week ended Oct. 27, compared to 263,999 MT a week earlier.
Technical analysis: December corn traded a 17 1/4-cent range, testing support at $6.90 1/2, as well as the 10- and 20-day moving averages, both near $6.86. While support at $6.90 failed into the close, prices held above the 10 and-20 day moving averages. Additional support stands at the 40-day moving average near $6.83 1/4, as well as $6.79 1/4. Resistance remained untested but stands at former support levels at $6.90 1/2, then $7.00, where significant psychological resistance remains a barrier for further upside. Additional resistance stands at $7.05 3/4, and $7.13.
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 6 1/4 cents to $14.54, the contract’s highest close since Sept. 22. December soyoil rallied 224 points to 75.61 cents, the contract's highest close since June 10. December soymeal fell 30 cents to $424.50.
Fundamental analysis: Soybean futures rose to a six-week high behind strength in crude oil and global vegoil markets, following the lead of Malaysian palm oil, which surged 4% earlier today to end near a 12-week high on supply concerns. Demand fundamentals remain bullish, underscored by stepped-up soybean purchases by China last month, while U.S. supplies are expected to drop to a seven-year low at the end of the 2022-23 marketing year (we expect USDA’s current estimate for U.S. ending stocks of 200 million bu. to be reduced to about 185 million bu.). USDA on Thursday is expected to report net weekly U.S. soybean sales ranging from 700,000 MT to 1.60 MMT, compared to 1.026 MMT the previous week.
Price pressure earlier today was tied in part to easing concern over Brazil supplies. Brazilian President Jair Bolsonaro did not concede defeat in his narrow election loss to leftist Luiz Inacio Lula da Silva, but his chief of staff said their team would begin the process of transition to a Lula government. Trucker blockades tied to election protests led to supply concerns earlier this week.
Technical analysis: Bulls retain a strong technical advantage in January soybeans after the contract posted a fourth consecutive higher close and settled above the 200-day moving average, currently $14.42 1/4, for the first time since Sept. 23. Today’s close puts the $15.00 mark within bulls’ sights, though the market still faces resistance at $14.57 3/4 and the $14.80 to $14.82 area. Further upside targets include the September high at $15.12 1/4. Initial support is pegged at the 100- and 40-day moving averages of $14.18 3/4 and $14.16, respectively, followed by $14.00 and this week’s low of $13.97 3/4. Soyoil’s technical posture is particularly bullish, with the December contract in a sharp, five-week uptrend and nearing the contract high of 79.29 cents, posted June 8.
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 fell sharply, giving back most of this week’s sharp price gains, following reports Russia will continue with an agreement to allow grain to be shipped out of war-torn Ukraine. Russia said its stipulations for extending the agreement have been met, adding that it reserves the right to suspend the agreement at any time. This situation remains fluid and will likely be closely monitored for quite some time to come.
Weather in U.S. wheat country still leans supportive to prices, with the winter crop off to its poorest start ever, based on USDA’s weekly crop condition reports. World Weather reported dryness and warmth today into Thursday will further support late-season fieldwork in the Plains states. A storm system is still expected late Thursday into Saturday, “with meaningful rainfall occurring mostly in central Oklahoma and portions of south-central Kansas. Western production areas will still mostly miss out from the precipitation and will continue to need more rain.” Meantime, in the northern Plains, the forecaster said precipitation in the first week of the outlook is still expected to be limited. “Some accumulating snow is likely, especially in the west, and this will be important due to threateningly cold temperatures that will be arriving in the west next week. Snow cover will be needed to protect wheat.”
Thursday’s weekly USDA export sales report is expected to show net U.S. wheat sales of 200,000 to 600,000 MT for the 2022-23 marketing year and zero to 50,000 MT for the 2023-24 marketing year.
Technical analysis: Winter wheat bears have regained a near-term technical advantage with today’s steep losses. SRW bulls' next upside objective is closing December futures above solid resistance at this week’s high of $9.04. Bears' next downside objective is closing prices below solid support at $8.00. First resistance is seen at $8.50 and then at $8.75. First support is seen at the October low of $8.22 1/2 and then at $8.10.
HRW bulls' next upside objective is closing December futures above solid resistance at $10.00. Bears' next downside objective is closing prices below solid support at $9.00. First resistance is seen at $9.50 and then at $9.75. First support is seen at $9.25 and then at the October low of $9.15 1/4.
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 expanded 400-point limit to 79.00 cents, the contract’s highest close since Oct. 21. March and May futures also rose the 400-point limit.
Fundamental analysis: Cotton futures were lifted by continued short covering and bargain hunting following the market’s drop to near two-year lows. It appears speculative shorts in futures are being squeezed hard, suggesting some more corrective price gains in the near term. More strong gains in the cotton market to end this week would suggest the market has put in at least a near-term bottom. Recent rallies in U.S. equities and rumors China may be backing off from its strict zero-COVID policies are also driving ideas of better demand in the coming months. Further supportive for cotton at mid-week were higher crude oil prices and a weaker U.S. dollar index.
Traders await Thursday’s weekly USDA export sales report. Recent weekly data has shown disappointing U.S. cotton sales abroad, including China last week cancelling some previous purchases.
Technical analysis: Cotton futures bears still have the solid overall near-term technical advantage. Prices are still in a 2.5-month-old downtrend on the daily bar chart. The next upside price objective for the cotton bulls is to produce a close in December futures above technical resistance at 85.00 cents. The next downside price objective for the cotton bears is to close prices below solid technical support at the October low of 70.21 cents. First resistance is seen at 80.00 cents and then at 81.00 cents. First support is seen at today’s low of 76.52 cents and then at 75.00 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.
