Crops Analysis | November 9, 2022
Corn
Price action: December corn fell 3 1/2 cents to $6.64 1/2, the contract’s lowest settlement since Aug. 26.
Fundamental analysis: Corn futures ended at the lowest levels in over two months, sustaining early declines after USDA raised its estimate for the U.S. crop more than expected. USDA, in its Crop Production Report, said U.S. farmers will produce an estimated 13.93 billion bu. of corn this year, up 35 million bu. from an October forecast and about 43 million bu. above the average analyst estimate. USDA also boosted its average U.S. yield estimate to 172.3 bu. per acre from 171.9 bu. per acre. In its monthly Supply and Demand update today, USDA hiked its forecast for U.S. corn stockpiles at the end of the 2022-23 marketing year by 10 million bu. to 1.182 billion bu., though that figure was slightly lower than trade expectations. Estimated overall demand in 2022-23 was increased slightly, reflecting higher feed and residual use.
The reports overall were neutral to slightly bullish for corn prices, and the market’s somewhat muted response today indicates traders have shifted focus to outside factors, including South American weather and the status of a deal allowing Ukraine grain shipments from Black Sea ports. Top U.N. officials will meet a senior Russian delegation in Geneva on Friday to discuss extending the deal past its Nov. 19 expiration, as well as efforts to smooth shipments of Russian food and fertilizers to global markets, the United Nations said.
Also today, U.S. ethanol production averaged 1.051 million barrels per day (bpd) during the week ended Nov. 4, up 1.2% above the corresponding week last year for the first year-over-year increase since the week ended Sept. 9. Ethanol stocks dropped 40,000 barrels to 22.192 million barrels.
Technical analysis: December corn traded a 13 3/4-cent range, dipping below support at $6.63 1/2 and $6.59 1/2 and marking a session low at $6.58. While support held at both levels at the end of the session, a close below would find bears edging towards support at $6.52 1/2 as well as the technically significant 100-day moving average at $6.51 1/2.Resistance levels remained untested in today’s session, and continue to stand at $6.74 1/4, along with $6.81, with solid resistance around $6.82 1/2, where the 10- and 40-day moving averages have nearly converged. Additionally, the 20-day moving average around $6.84 1/2 adds to resistance strength of the area. However, a breach of the area would find bulls targeting the $7.00 level once again, which will continue to stand as psychological resistance.
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 5 1/2 cents to $14.52, near the high end of today’s range. December soymeal fell $1.70 to $417.60. December soyoil rose 51 points to 75.54 cents.
Fundamental analysis: Soybean futures ended higher as demand optimism overshadowed USDA’s higher than expected production and supply forecasts. In its Crop Production Report today, USDA hiked its U.S. soybean crop estimate a larger than expected 33 million bu., to 4.364 billion bu., and boosted the average U.S. yield to 50.2 bu. per acre from 49.8 bu. per acre. Analysts expected a production increase of only about 2 million bu. USDA also raised its forecast for 2022-23 U.S. ending stocks by 20 million bu. to 220 million bu., though supplies would still shrink to a seven-year low.
Bearish implications in today’s reports were mitigated to some extent by upward revisions to U.S. crush demand in 2022-23, as well as fresh export business. Early today, USDA reported daily soybean sales of 264,000 MT for delivery to China and 198,000 MT for delivery to “unknown destinations,” both for the 2022-23 marketing year. On Tuesday, USDA reported soybean sales totaling 414,700 MT to China, Mexico and unknown destinations. With today’s USDA absorbed by the market, focus will likely shift to export demand and weather in South American, where mostly favorable conditions so far are boosting confidence in a record Brazilian soybean crop.
Technical analysis: Bulls retain a short-term technical advantage in soybeans, helped by the January contract settling above the 200-day moving average at $14.45 1/2. A break above the past week’s consolidation pattern, marked by Monday’s six-week intraday high at $14.69, may have bulls targeting the psychological $15.00 level, then the Sept. high at $15.12 1/4. Initial support comes in at the 10-day moving average at $14.36 1/2, slightly above today’s low, and is backed by the 50-day moving average at $14.18 1/2 and 20- 40- and 100-day moving averages, which converge at $14.14 to $14.16. Further downside levels to watch include the October low at $13.62 1/4.
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 tumbled on deteriorating near-term technicals and bearish outside markets, including a sharp gain in the U.S. dollar and sharp declines in crude oil. USDA’s Supply and Demand Report today was a mixed bag. U.S. lowered its estimate for 2022-23 U.S. wheat ending stocks by 5 million bu. to 571 million bu., contrary to expectations for an increase of about 2 million bu. But USDA also unexpectedly hiked its forecast for global ending wheat stocks, to 267.82 MMT.
In U.S. winter wheat country, the west-central Plains will not likely see much precipitation of significance for a while, World Weather said. Weather in Europe, China and India is still favorable for winter crop planting, emergence and establishment. Thursday’s weekly USDA export sales report is expected to show net U.S. wheat sales of 250,000 to 500,000 MT, compared to 348,100 MT reported last week.
Technical analysis: Winter wheat futures bears have the overall near-term technical advantage. Prices are in four-week-old downtrends on the daily bar charts. SRW bulls' next upside price objective is closing December prices above solid chart resistance at $9.00. The bears' next downside objective is closing prices below solid technical support at the August low of $7.43 1/4. First resistance is seen at today’s high of $8.34 and then at $8.5. First support is seen at $8.00 and then at $7.85.
HRW bulls' next upside price objective is closing December prices above solid technical resistance at the November high of $9.91. The bears' next downside objective is closing prices below solid technical support at $9.00. First resistance is seen at today’s high of $9.51 1/4 and then at this week’s high of $9.71 3/4. First support is seen at the October low of $9.15 1/4 and then at $9.00.
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 fell 118 points at 86.50 cents.
Fundamental analysis: Cotton futures fell for the first time in seven sessions on bearish numbers in USDA monthly Supply and Demand Report. USDA raised the U.S. cotton crop estimate 219,000 bales from last month, higher than expectations for a 190,000-bale decline. USDA raised its average U.S. yield estimate by 13 lbs. to 855 lbs. per acre and left harvested area unchanged at 7.876 million acres. Estimated 2022-23 cotton carryover was increased 200,000 bales from last month to 3 million bales, contrary to expectations for a decline.
USDA increased total supplies 220,000 bales due to the increase in the cotton crop estimate and USDA pegged the national average on-farm cash cotton price at 85 cents, down 5 cents from October. Since 1970 there have been eight previous years when the upland yield forecast was down in September and October and increased in November. Of those, the January forecast was higher six times and lower two times. The average was an increase of 6 pounds.
Cotton traders await Thursday’s weekly USDA export sales report for a gauge of Chinese demand.
Technical analysis: Cotton futures bears still have the overall near-term technical advantage. However, the 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 80.00 cents. First resistance is seen at this week’s high of 89.31 cents and then at 90.00 cents. First support is seen at today’s low of 84.19 cents and then at 83.00 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.
