• jcrist18

Market Thoughts 10.23.22

Dec corn lost 5’4 to finish last week at 684’2. Futures fell to a low of 674 on Wednesday, down 32 cents from the previous Monday’s 706 high, before recovering to close out the week. Despite what seems like a lot of volatility and a generally bullish trend, corn instead just continues to consolidate in a surprisingly narrow range with each of the last seven weekly closes occurring between 677 and 689. Nov soybeans added 11’6 to close at 1395’4 for a third straight weekly gain. Dec spring wheat fell to a low of 938 on Tuesday, down nearly 90 cents from the prior Monday’s high, before recovering to 961’4 by week’s end.

Our now three week old expectation for corn to have a 40-50 cent correction, landing in the 650-660 area in the process, is faring ok at best. Though Dec futures did manage to fall 32 cents from last week’s high to this week’s low, Friday’s 684’2 close is a long ways from 650 . And as noted above, it was also the seventh straight weekly close within just a 12 cent range. Corn is at peak harvest pressure, 45% harvested as of last Monday. At the same time, recent fundamental news has not been helpful with slow ethanol grind rates, shockingly low export sales and Mississippi river issues. Yet futures have chewed through all that and still mange to be at 684, second-highest level ever for the time of year. It suggests grains won’t need much convincing for a post-harvest rally. And moving forward, basis is already extremely strong and has been firming right through harvest in the western Corn Belt, energy prices look set to rebound as the U.S. finishes dumping oil from strategic reserves, diesel fuel supplies are at all time lows and OPEC recently announced substantial production cuts. Equities appear to have stabilized with the S&P holding lows near the 3600 level. And largest percentage of the U.S. ever is in a drought currently; little correlation of course to next summer’s weather but still something traders will be on edge about given extremely tight 2022 carryouts.

Revisiting the Dec corn daily chart we looked at last week, it did manage the breakout lower we were expecting.

Revisiting soybean seasonals: We discussed a few weeks ago the likelihood of beans making a harvest low sometime between October 5th and October 15th. Beans did make a double bottom at 1350 in that window, though we’d feel a little better about that if it wasn’t a double bottom (those tend to get taken out) and if we’d finished filling the gap on the chart (3/4 of a cent to go…) Anyhow, looking at price action through December 31st in all high-price years, every year except 2012 featured December 31st prices that were sharply higher than October lows.

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