Crops Analysis | October 20, 2022
Price action: December corn rose 5 3/4 cents to $6.84, nearer the session high.
Fundamental analysis: Corn futures rose for the first time in five sessions with support from a weaker U.S. dollar and lack of progress to extend a deal allowing Ukraine to ship grain out of its Black Sea ports. Talks on extending a July deal that resumed Ukraine Black Sea grain and fertilizer exports are showing little progress because Russian concerns are not being taken into proper account, Russia's U.N. ambassador in Geneva said today. Senior United Nations officials are negotiating with Russia to extend and expand the July 22 deal that could expire next month if an agreement is not reached. Expanding harvest pressure limited futures’ upside as traders continued to closely monitor low water levels on the Mississippi River that have slowed grain shipments into export markets. Low water levels are likely to persist this winter as drier-than-normal weather is expected across the southern United States and Gulf Coast, U.S. government forecasters said today.
Early today, USDA reported net U.S. corn sales of 408,300 MT for the week ended Oct. 13, up from 200,200 MT the previous week and within trade expectations for 250,000 to 700,000 MT. U.S. export commitments so far in 2022-23 are running 52.1% behind the same period a year-ago, compared to 51.4% behind last week. USDA projects exports in 2022-23 at 2.150 billion bu., down 13% from 2021-22.
Technical analysis: December corn traded a 10 1/4-cent range, breaching resistance near $6.83 3/4 and maintaining strength into the close above the level, as well as the 20-day moving average at $6.81 1/2. The 10-day moving average at $6.88 remained out of reach for bulls throughout the session and will continue to provide near-term resistance in addition to $6.94 1/4 and psychological resistance at $7.00. The 40-day moving average around $6.79 1/4 will now act as near-term support as well as $6.73 1/4, and $6.68 1/2. The 100-day moving average, currently near $6.55 3/4 will continue serve as critical support.
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: November soybeans rose 19 cents to $13.91 1/2, the contract’s highest closing price since Oct. 13. December soymeal surged $11.60 to $413.30. December soyoil fell 22 points to 70.42 cents after earlier rallying to a four-month high at 72.06 cents.
Fundamental analysis: November soybeans rose to the highest settlement in over a week behind signs of improving export demand, particularly from China. USDA early today reported daily soybean sales of 201,000 MT of soybeans for delivery to China and 132,000 MT to “unknown destinations,” both during the 2022-23 marketing year. Today’s announcement follows USDA-reported daily soybean sales Oct. 12-14 totaling 1.622 MMT to China or unknown destinations.
Also today, USDA reported net U.S. soybean sales totaling 2.336 MMT during the week ended Oct. 13, more than triple the previous week’s sales of 724,400 MT and the highest weekly total in a year. Sales came in at the high end of expectations for 1.7 MMT to 2.5 MMT. Top buyers included China at 1.976 MMT, including 436,000 MT switched from unknown destinations. Export commitments are running 5% ahead of a year-ago, versus 7.3% ahead last week. Soymeal sales sharply topped expectations at 542,300 MT, which is supporting soymeal futures this morning.
Today’s export numbers help spark fund buying in soybean futures but price upside may be limited by pressure from the expanding U.S. harvest and concerns over shipping slowdowns caused by low Mississippi River levels. Additionally, an outlook for record South American production looms as a bearish longer-term factor. Archer-Daniels-Midland Co. on Wednesday said it expects to boost its soybean exports from Brazil’s 2022-23 crop-year by 11%, reflecting an outlook for a record crop. Brazil’s soybean output is estimated at a record 152.4 MMT, up 21% from last year.
Technical analysis: November soybeans retain a neutral-to-bearish technical posture despite today’s gains, as prices remain in a five-week downtrend and under key medium- and long-term moving averages. Market bulls may be encouraged by November futures’ close above the 10- and 20-day moving averages at $13.81 1/4 and $13.86 1/4, respectively, which may foster followthrough buying Friday. Upside targets include the 40-day moving average at $14.12 and last week’s high at $14.14. Initial support comes in at Wednesday’s low at $13.57 and an 11-week low of $13.50 posted Oct. 6, the low so far this month. A break under the October low may have bears targeting $13.00 and the July low of $12.88 1/2.
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 rose 8 cents to $8.49 1/4. December HRW wheat gained 8 cents to $9.49 3/4. December spring wheat rose 9 cents to $9.62 1/2.
Fundamental analysis: Winter wheat futures rose for the first day in three as weakness in the dollar and strength in corn and soybeans spurred bargain buying and short covering. Concern over supply disruptions stemming from the Russia-Ukraine war continued to support wheat futures amid a broader backdrop of tightening global stockpiles. Strategie Grains raised its 2022-23 European Union wheat crop forecast by 1.4 MMT to 125.5 MMT, though that would still be down 4.3 MMT (3.3%) from last year.
Dryness in the Plains as winter wheat seeding winds down remains a concern. U.S. central and southwestern Plains will miss out on “significant” precipitation events “for a while,” World Weather said. A weather disturbance late this month may bring some needed moisture to a part of Nebraska, northern Kansas and northeastern Colorado, but most other areas in the production region will not be impacted by much more than sporadic showers. The late month disturbance is expected to bring a little moisture to a part of the region, but no general soaking is expected.
USDA reported net weekly U.S. wheat sales totaling 163,100 MT, down from 211,800 MT the previous week and below trade expectations. This time of year is typically a low point for U.S. wheat export sales.
Technical analysis: Winter wheat bears still hold a near-term technical advantage. SRW bulls' next upside price objective is closing December prices above solid resistance at the October high of $9.49 3/4. Bears' next downside objective is closing prices below solid support at $8.00. First resistance is seen at Wednesday’s high of $8.62 3/4, then at this week’s high of $8.77 3/4. First support is seen at this week’s low of $8.32 3/4, then at $8.25.
HRW bulls' next upside objective is closing December prices above solid resistance at the October high of $10.37 1/2. Bears' next downside objective is closing prices below solid support at $9.00. First resistance is seen at Wednesday’s high of $9.60 1/2 and then at this week’s high of $9.69 1/4. First support is seen at this week’s low of $9.29 and then at $9.20.
What to do: Get current with advised hedges. Wait on a corrective rebound to increase cash sales.
Hedgers: You have 15% of 2022-crop hedged in short December SRW futures at $7.83. 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 89 points to 77.40 cents, the lowest settlement for a nearby contract since December 2020, based on continuation charts.
Fundamental analysis: Cotton futures extended Wednesday’s sharp sell-off as concerns over global demand overshadowed a weaker U.S. dollar and firmer crude oil prices. Slumping U.S. stocks, which conveyed ongoing worries over recession potential, also weighed on cotton, as did soft export demand. USDA today reported net weekly U.S. cotton net sales of 84,500 running bales (RB) for 2022-23, down from 144,800 RB the previous week. Top buyers included Pakistan (27,600 RB), Egypt (22,000 RB) and China (10,100 RB). Net sales of 4,400 RB for 2023-24 were reported for Portugal (2,200 RB) and Pakistan (2,200 RB). Exports of 165,700 RB were primarily to China (71,700 RB), Pakistan (24,800 RB) and Turkey (19,200 RB).
Technical analysis: Cotton bears have the strong overall near-term technical advantage, with prices in a two-month-old downtrend on the daily bar chart. Market bulls are likely to remain sidelined in coming days as there appear to be chart clues to suggest a market bottom is close at hand. 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 75.00 cents. First resistance is seen at 80.00 cents and then at 81.00 cents. First support is seen at 77.00 cents and then at 76.00 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.
