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Market Thoughts 12.18.22

March corn gained 9’0 to finish the week at 653’0. Futures posted a high of 660’0 on Tuesday after trading down to 635’0 the week prior. Jan soybeans lost 3’6 to close at 1480’0. Inside week for beans as the Jan contract failed to take out last week’s highs but held well above last week’s lows. March spring wheat added 8 cents to close at 909’4 but finished well below a high of 932’0 on Tuesday.

Mostly quiet on the fundamental front this week, allowing us to focus our attention instead on a four-day blizzard. With an uneventful week our general theme remains intact – grains trade sideways through the winter with a low probability of major rally and a high probability of sharply lower prices next fall. We considered last week that March corn’s drop to 635’0 was low enough to complete its post-harvest correction and spring wheat hit buy signals both last week and this week, suggesting similar. All three commodities finally featured a week of strong/above needed pace export sales. Better-than-expected weekend rains for Argentina caused some bean weakness on Monday but the longer term forecast remains too dry/hot. The ethanol situation is still a developing bearish story as weekly grind and inventories were terrible again this week. But overall, most of the fresh bearish news that has accompanied the previous few weeks of selling pressure appears to now be fully digested. The selloff in energy appears to be easing up while the USD continues its collapse, both also supportive to grains. Beans still appear vulnerable for a deeper correction – 5 days of sell signals over past two weeks, unable to press to new highs this week, even a modest improvement in Argentine weather likely spurs significant selling pressure. But corn and wheat look to have made post-harvest lows and have a solid probability of trading sideways/slightly higher from now through March.

March corn seasonal as we continue to compare 2023 (orange) to 2012 (red) and 2013 (blue). It looks increasingly like corn has made a post-harvest low similar to each of those years and if so should trade sideways into the end of February, staying above the Dec low and below the Nov high.

Looking at new crop November bean futures from September through March, all three years featured similar prices in the fall but Nov 23 beans are now substantially higher than either 2012 or 2013, record high for the time of year along with multiple sell signals and strong profits at these prices.

Dollar Index free-fall continues as it hit its lowest level since late June this week.

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