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Market Thoughts 12.25.22

Christmas edition of Market Thoughts, Merry Christmas everyone! Reminder, no markets on Monday, trading resumes Tuesday morning at 8:30.

• A second week of gains for corn as March futures added 13’2 to finish at 666’2. Jan soybeans lost exactly 1 cent, finishing at 1479’0 to record a second straight weekly loss and make it now three weeks since posting a new high for the move. March spring wheat gained 22’2 to close at 931’6, highest weekly close since Thanksgiving and strongest weekly performance since September.

• So far so good on our perspective from two weeks ago that corn and wheat had made winter lows and would start rebounding while beans would struggle to move higher from current lofty levels; opinions heavily influenced by our Price Signals and seasonal comparisons to other high-priced years. Fundamentally, it was another quiet week and this week likely will be the same. That said, it continues to appear most of the bearish news that influenced the November/December swoon in corn and wheat prices is fully factored in now, creating an opportunity for the narrative to change. The dollar index extended its slide, making new lows again this week while Crude Oil has rallied an incredible 13% since posting a calendar-year low on December 12th. Decent rains last weekend had beans under pressure but South American weather remains supportive. There appears to be potential for uncertainty again in Ukraine as the U.S. is talking about equipping Ukraine with Patriot missile defense systems, something Russia has said would be a major escalation. And this massive blizzard is lending support, both through wrecked logistics/no grain moving and ideas (probably wrong) that winter wheat will be harmed.

Looking at each of the three commodities individual, our perspective today:

• We’ve been on this theme for months now and corn continues to track similarly to 2011 and 2012. Each of those years featured a 80+ cent break from early November into late December. March 23 corn lost 69’6 cents from its November 1st high to its low two weeks ago. In each of those two prior years, futures then recovered 60-70 cents by mid-January while failing to trade above early November highs. If that pattern holds for 2023, it would suggest March corn gets back to 690ish at some point early in 2023, something we think has a high probability of happening

• Looking at Jan bean daily chart, the uptrend that began in early October has stalled out now with beans drifting lower over the past two and a half weeks. Chart-wise, a breakout appears imminent and our expectation today is it would be lower.

• Spring wheat is on pretty solid ground now, having held about the August lows and making a somewhat orderly 40 cent rally over the last three weeks. We think it’s probable the rally extends at least into the 950 area and tests the long term downtrend line.

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