Crops Analysis | November 8, 2022
Corn
Price action: December corn futures fell 8 1/4 cents to $6.67 1/2, the contract’s lower closing price since September 27.
Fundamental analysis: Corn futures fell to the lowest levels in over five weeks as eroding technicals and soft export demand encouraged sellers ahead of USDA’s Crop Production and Supply & Demand Reports Wednesday. Near-term demand fundamentals lean bearish, with U.S. export demand so far in 2022-23 running over 53% below the same period in 2021-22, based on export commitments. That means it may take a bullish surprise from USDA to fuel a renewed upside push in futures, though any rallies should continue to face stiff resistance toward $7.00 USDA’s Nov. 9 Crop Production and Supply & Demand Reports are expected to feature only minor adjustments. USDA is expected to lower its estimate for U.S. corn production to 13.887 billion bu. from 13.895 billion bu., based on a Reuters survey of analysts. U.S. corn stocks at the end of 2022-23 may be revised up about 35 million bu. to 1.207 billion bu.
USDA late Monday reported 87% of the U.S. corn harvest was complete as of Sunday, up from the previous week and the average for the previous five years for that date, both 76%. Progress was slightly ahead of trade expectations at 86%.
Technical analysis: The corn market’s technicals took a bearish turn for the near-term with today’s soft close. December futures fell as low as $6.66 1/4 today, and Followthrough pressure Wednesday could have bears targeting the 200-day moving average at $6.63 3/4 and the late-September low at $6.61 1/2. A decisive move under those levels could signify a downside breakout from the trading range that’s persisted for nearly two months, possibly sending prices under $6.50. Other key downside levels to watch include the 100-day moving average at $6.52 and the low for all of September at $6.54. Initial resistance comes in at today’s high of $6.77 and the 50- and 40-day moving averages at $6.81 and $6.82 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 slid 3 3/4 to $14.46 1/2. December soyoil fell 130 points to 75.03 cents per pound, while December soymeal gained cents to $419.30 per ton.
Fundamental analysis: Soybean futures gained early support from fresh export business but faded with the crude oil market’s sharp losses as traders marked time ahead of USDA’s Wednesday reports. USDA reported daily soybean sales totaling 144,000 MT for delivery to Mexico, 138,700 MT to China and 132,000 MT to “unknown destinations,” all for the 2022-23 marketing year. Today’s announcement was the first daily soybean purchase by China since Oct. 28 but seemed to be overshadowed by diminished longer-term expectations for Chinese buying.
USDA is expected modestly increase its estimate for U.S. soybean production to 4.315 billion bu. from 4.313 billion bu., based on the Reuters survey. U.S. 2022-23 ending stocks may be boosted about 12 million bu. to 212 million bu. Also, USDA late Monday said the U.S. soybean crop was 94% harvested as of Sunday, up from 88% the previous week and ahead of the 86% average for that date the previous five years. Progress matched trade expectations.
Technical analysis: Bulls still own a short-term technical advantage in January soybeans, with initial support at today’s low of $14.40 1/2 backed by the contract’s 10-, 40- and 20-day moving averages near $14.31, $14.16 ½ and $14.12, respectively. Look for additional psychological support near $14.00. Today’s high places initial resistance at $14.54. Significant backing is also likely at yesterday’s high of $14.69, especially since that high essentially matched the downtrend line drawn across the contract’s June and September highs. A breakout above Monday’s high would have bulls targeting the psychological $15.00 level, then the Sept. high at $15.12 1/4.
Although this week’s losses have hurt prospects for December soyoil, look for strong support at the contract’s 10-day moving average near 74.35, with bulls still likely focusing upon pushing above Monday’s five-month high at 77.80. The technical picture in December soymeal is less clear, especially with the contract recently fluctuating on either side of the 10-day moving average near $420.00. Stout support is marked by the confluence of its 20- and 40-day moving averages near $415.20, with recent highs placing stiffening resistance near $423.30.
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 fell 18 cents to $8.27 3/4, the contract’s lowest close since Sept. 6. December HRW wheat fell 11 1/2 cents to $9.45 3/4. December spring wheat fell 9 3/4 cents to $9.50 1/2.
Fundamental analysis: SRW wheat futures sank to a nine-week low as weak technicals combined with a slump in crude oil and a lack of fresh news on the Ukraine/Russia export deal to encourage sellers. USDA’s Supply and Demand update Wednesday is expected to include few significant changes to the wheat balance sheet. Estimated global wheat endings stocks for 2022-23, already at a six-year low, may be trimmed further to about 266.52 MMT from 267.54 MMT, based on the Reuters survey. USDA may raise estimated U.S. ending stocks by about 2 million bu. to 578 million bu., which would still be the lowest in 15 years.
HRW futures held up slightly better after USDA crop ratings illustrated the impact of persistent dryness on the recently planted crop. USDA late Monday rated 30% of the U.S. winter wheat crop in “good” or “excellent” condition as of Sunday, a two-point improvement from a week earlier. Wheat rated “poor” to “very poor” increased one point to 36%. 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 inched up 0.2 point to 265.9 but remained 77.2 points (22.5%) below the five-year average for early November. The SRW crop improved 2.6 points to 350.5, 12.5 points (3.4%) below average for the date.
Technical analysis: Winter wheat bears retain a near-term technical advantage as December SRW futures continue trading under most key moving averages and are approaching key support at the October intraday low of $8.22 1/2. A push under that low would likely trigger further fund-driven selling that could lead to tests of a late-September low of $8.19 1/4, the $8.00 mark and the intraday low for all of September at $7.91 1/4. Initial resistance comes in at today’s high of $8.55, which lies just above resistance at the 20-, 100- and 40-day moving averages at $8.50, $8.52 1/2 and $8.53, respectively.
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 19 points to 87.68, after reaching the contract’s highest close since Oct. 10.
Fundamental analysis: Nearby cotton rose a sixth straight session as the market extended a sharp, short-covering-driven rally from near two-year lows last month. A pullback in the U.S. dollar encouraged buyers, along with strength in U.S. equities. Expectations for a smaller U.S. crop, along with flooding in Pakistan and Australia, fueled supply concerns, though the prospect China’s harsh COVID lockdowns could crimp demand may limit further rallies. USDA on Wednesday is expected to lower its estimate for the U.S. cotton harvest to 13.62 million bales from 13.81 million in an October estimate.
World Weather notes that the U.S southeastern states may experience good harvest weather for the next day or two, but rain is possible in the Carolinas and Virginia late Thursday through Saturday from Tropical Storm Nicole which is expected to move into Georgia Friday after passing through Florida’s Peninsula Thursday. The storm will then move through the Carolinas and Virginia during the weekend. Enough rain will fall to discolor cotton fiber, but very little production loss is expected.
USDA late Monday said the U.S. cotton harvest was 62% complete, up from 55% a week earlier and ahead of the five-year average for that date, also 55%.
Technical analysis: December cotton traded a 306-point range, breaching resistance at 88.88 cents, which remains as a close was held below the level. Attempts higher will encounter further resistance at 90.26, again at 92.28, with the 100-day moving average near 94.96 standing as solid near-term resistance. Conversely, attempts lower will be met with support first at the 40-day moving average near 85.51, as well as 83.46, and 83.11. A breach of these areas will find bears eyeing the 20- and 10-day moving averages near 80.23 and 79.69 cents, respectively.
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.
