Crops Analysis | November 22, 2022
Corn
Price action: December corn futures fell 2 3/4 cents to $6.56 3/4, while March futures fell 4 1/4 to $6.59 1/4, the contract’s lowest close since Nov. 15.
Fundamental analysis: Corn futures posted modest declines following two-sided, narrow-range trading, as surging Covid cases in China fueled concern over global demand. Beijing shut parks, malls and museums today while more Chinese cities resumed mass testing for Covid-19. Some analysts estimate 20% of China’s economy is being negatively impacted by the Covid lockdowns. Concern over a possible U.S. rail strike also pressured grain markets. Workers at the largest U.S. rail union voted against a tentative contract deal reached in September, raising the possibility of a year-end strike that could cause significant damage to the U.S. economy and disrupt shipments of grains and other commodities.
Late Monday, USDA reported the U.S. corn harvest at 96% complete as of Sunday, up from 93% a week earlier. With most of the crop out of the field, the corn market holds potential for a post-harvest rally, though price upside likely will be limited by sluggish exports. Continued dryness in Argentina could pose a threat to yield potential, but is more of a background factor at the moment. Crop Consultant Dr. Michael Cordonnier kept his Argentina and Brazil corn production estimates unchanged at 50.0 MMT and 125.50 MMT, respectively, though he has a lower bias for corn, citing unfavorable conditions and delayed planting. Cordonnier expects about three-quarters of Argentina’s corn will be planted late.
Technical analysis: The corn market’s near-term technical posture is largely neutral, with sideways, low-volume trade likely the rest of the holiday-shortened week. Key support levels in March futures include the 100-day moving average at $6.57 3/4 and a 2 1/2-month at $6.53 1/2, posted Nov. 15. A push under those levels, as well as $6.50, likely would trigger sell-stops and further fund liquidation that could send prices near the $6.40 level. Near-term resistance is seen around today’s March high of $6.66 3/4, including the 10- and 200-day moving averages at $6.65 and $6.68, respectively. A push above those levels could have bulls targeting last week’s high at $6.77.
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 fell 7 cents to $14.29 3/4, nearer the session low. January soymeal fell $3 to $405.00, and January soyoil fell 71 points to 71.44 cents.
Fundamental analysis: The soy complex ended mixed in low-volume trading ahead of the Thanksgiving holiday. However, a rally in palm and crude oil futures along with early morning strength in meal futures led to a mild boost to soybeans and lifted soyoil after the market Monday hit its lowest level since late October. As soymeal futures turned lower intraday, soybeans followed, giving up overnight gains.
Traders continue to monitor South American weather as irregular weather patterns are leaving dry pockets in many areas, with many remaining dry for 15 days and some for over 25 days, according to Dr. Michael Cordonnier. Soybeans planted in mid-September are now in critical reproductive phases, with the earliest soybeans reaching maturity in approximately five weeks. World Weather predicts Brazil weather will be favorably mixed over the next two weeks for most of the nation; however, multiple days of drying are expected Wednesday through the first half of next week from southern Mato Grasso through Mato Grosso du Sul and southwestern Sao Paulo to Rio Grande do Sul. The forecaster notes that recent rains in some of the drier areas of Mato Grasso and Goias have improved soil moisture and crop conditions, although more rain is needed.
In Argentina, rain has been limited and will continue to be over the next two weeks, and the country will also experience some extreme heat that will exacerbate crop stress as subsoil moisture is too low to support crops for very long without timely rain. World Weather notes the next nationwide precipitation event will hold off until mid-week next week and early indications suggest relief from dryness in central Argentina will be limited once again.
Technical analysis: January soybeans traded a 15 1/4 cent range, ending the session below former support at the 20-day moving average near $14.33 1/4. Attempts lower will encounter further support at $14.23 1/4 as well as significant technical support near the 40 and 100-day moving average which have nearly converged around $14.12 1/2. Conversely, attempts to the upside will see resistance at the 20-day moving average as well as the 10-day moving average near $14.36 1/4 as well as at $14.44, again near $14.51 1/4, and $14.64 3/4.
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.
Fundamental analysis: SRW wheat sank to a three-month low and HRW wheat posted a two-month low amid concern over slow export demand and the prospect shipping disruptions from a potential U.S. rail strike. Weakness in wheat also reflected speculation European Union wheat being booked in the U.S., Reuters reported, citing traders. French wheat sales to China and the prospect of Polish or German wheat being booked in the U.S. are creating an unexpected wave of demand for EU supplies after exports had been curbed by Russian competition in recent weeks, traders said. The reports further fueled pessimism over U.S. wheat’s uncompetitive position on global markets.
USDA’s weekly crop ratings for winter wheat expectedly deteriorated but produce little market response. USDA late Monday reported 32% of the U.S. winter wheat crop in “good” or “excellent” condition as of Sunday, unchanged from a week earlier and one percentage point below analysts' expectations. Acreage rated poor-to-very poor rose to 33% from 32%. 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 dropped 1.7 points to 269.0, which was 70.6 points below the five-year average. The SRW rating inched up 0.5 point to 357.5 and has improved each week since the initial rating, though that was still 4.3 points below the five-year average.
Technical analysis: Bears retain a near-term advantage in winter wheat futures with the SRW market extending a six-week downtrend, trading under most major moving averages and ending today at the lowest levels since late August. A push under Monday’s intraday low at $8.04 1/2 in March SRW could compel bears to target $7.98 to $8.00, as well as the August low at $7.60 1/4. Near-term resistance is seen at Monday’s high of $8.27 and the 10-day moving average at $8.28 3/4, followed by last week’s high at $8.62 1/2.
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 futures rose 264 points to 82.42 cents after hitting a three-week low earlier.
Fundamental analysis: Cotton futures recovered from initial declines as a pullback in the U.S. dollar and strength in U.S. equities and crude oil encouraged short covering and bargain buying, overshadowing concerns over surging Covid cases in China. Traders are monitoring the spreading Covid infections in China that have Beijing looking like a “ghost town,” according to reports. The cotton futures market may find further upside price potential limited by the Covid lockdowns in the world’s second-largest economy and a major cotton importer.
Technical analysis: Cotton futures bears still hold a near-term technical advantage. Today’s price rebound and a technically bullish “outside day” higher March futures suggests today’s low may mark a near-term market bottom. 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 the October low of 70.10 cents. First resistance is seen at this week’s high of 83.47 cents, then at 85.00 cents. First support is seen at 81.00 cents, then at today’s low of 79.30 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.
