Market Thoughts 01.01.23

HAPPY NEW YEAR! Reminder markets are closed tomorrow and tomorrow night, trading resumes Tuesday morning.

• March corn gained 12’2 last week to close at 678’4, posting a third straight weekly gain. Daily high of 685 on Friday was exactly 50 cents above the December 7th 635 low. January Soybeans gained 40’2 to finish at 1519’2, best weekly close since making contract highs last June. March spring wheat settled at 938’6, up 7 for the week. Similar to corn, wheat managed a third straight weekly gain and has now added 42 cents since making a low on December 6th.

• One of our main points in last week’s commentary was that beans were going to break out of a recent triangle pattern this week. We were right about the breakout but wrong about the direction as news from both China and South America pushed beans into a textbook breakout higher. Chinese bean futures soared on Sunday night as the Dalian futures exchange announced it was open to foreign investment again and health officials indicated further relaxation of Zero Covid policies. Crop condition ratings declined more than expected in Argentina and drought is now expanding into southern Brazil. With both a technical breakout and legitimate weather story in hand, beans should continue higher in the short term. We noted three weeks ago that corn and wheat had probably made winter lows and would start to move higher. Our expectations included corn rallying back to its harvest highs and wheat testing resistance in the 960 area. Both have made decent strides and we still lean friendly in the short term, especially as beans now offer weather-rally support. But corn is really struggling with demand as ethanol run rates keep cratering and export shipments are still not approaching needed pace. March corn at 685 on Friday was within ~15 cents of our expectation for the peak of this rally and we continue to see a low probability that corn breaks out higher and moves sharply above 700 this winter.

• Interesting to look at January 1st prices for each of the grains. New crop soybeans, corn and canola are higher then they’ve ever been on January 1st while wheat is within 10 cents of its highest ever such level. Charts below show each of the commodities on January 1st, 2023 compared to other highest priced years – typically some combination of last year, 2012 and 2013. We’ve been on the idea for quite some time that 2023 seasonally is most similar to 2012 and 2013. Each of those years featured sideways trade through the winter, with 2012 then posting a massive drought-led summer rally and 2013 never rallying at all, trading lower through the entire year.