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While soybeans gained, corn, wheat prices fell due to stable Ukraine export conditions.

Brian Splitt, Technical analyst

December 1, 2022

5 Min Read
Soybeans and corn kernels with cash money

Brian Splitt is speaking at the upcoming Farm Futures Business Summit in Coralville, Iowa January 19-20, 2023. Learn more and register here.

The month of November has come and gone with mixed results for row crops.

March corn finished down 29.75 cents for the month, while March Chicago wheat and March Kansas City wheat were down $1.0375 and $0.745 respectively. Much of the weakness in corn and wheat can be attributed to the extension of the Black Sea grain corridor, although it will need to be revisited again in March as the extension is only for 120 days.

According to AgriCensus, since the grain corridor was established in July Ukraine has exported approximately 11.1 Million Metric Tonnes of agricultural products with 4.6 MMT of corn and 3.1 MMT of wheat making up the majority of goods exported. While both wheat varieties lost value in November, KC wheat outperformed Chicago wheat due to ongoing dryness in Hard Red growing regions.

January soybeans were the shining star for the month with a gain of exactly 50 cents, most of which has come this week with concerns regarding ongoing dryness in Argentina paving the way.

One more USDA report

As we look ahead to the end of 2022, there will be one more report from USDA to provide fundamental input into the market. However, we have come to expect USDA to make little to no changes to domestic balance sheets on the December WASDE report, to be released Friday, Dec. 9th. USDA usually “kicks the can” down the road to the January report, which will provide a plethora of data.

With poor conditions in Argentina continuing, it would not be a surprise to see USDA revise its production lower in the December report. If this happens it could also come with a small revision higher in Brazilian production to provide at least a partial offset.

Whether USDA leaves the domestic balance sheet alone in December or not, revisions to demand and especially corn for export will likely be addressed in the near future. Last week’s unexpected drop in ethanol output combined with an increase in ethanol stocks to a 12-week high will also be on traders’ minds.

Export sore spot

Corn exports continue to be a sore spot for bulls with sales down 48% year over year as of last week’s data. Corn inspections are down 33% year over year; they were down 30% the previous week. Low river levels are prioritizing the push of soybeans out of the country with soybean export sales running 1% higher year over year. Even with the aggressively front end loaded soybean export program, inspections are running 10% lower year over year.

We feel the priority will continue to be moving soybeans out while corn inspections will suffer. This will likely make an abrupt shift once the Brazilian soybean crop is online. Both inspections and new sales of soybeans could drop off a cliff as China focuses on a fresh crop from South America, especially if Brazil realizes its expectations of a 150+MMT soybean crop.

Time to take action?

With old crop soybeans trading over a dollar off the October lows, this might not be a bad time to price/hedge and take advantage of Argentina’s misfortune. Likewise, new crop soybeans are back to $14 which has been consistent resistance for the last several months. If you aren’t in the mindset to do any aggressive positioning for new crop soybeans, one could consider using March Short Dated options to at least provide a floor through the evolution of South America’s crop and the period when the average spring price will be established for crop insurance purposes.

As you think ahead to 2023, the cost of money should be considered as interest rates have been on the move. Gone are the days of cheap money; it is worth considering the benefit of selling physical grain and, if one desires, establishing paper ownership of bushels. Consider the interest relative to the full nominal value of 50,000 bushels of $7 cash corn for example. The interest on $350,000 of product versus the interest on the $22,500 margin requirement to own ten contracts of corn futures should not be ignored.

AgMarket.Net has been actively protecting 2023 production as the crop will be one of, if not the most expensive, crops to plant. We have numerous ideas on how to hedge and/or provide re-ownership based on your priorities so feel free to contact me directly at 815-665-0463 or anyone on the AgMarket.Net team at 844-4AGMRKT. We are here to help.

Brian Splitt is speaking at the upcoming Farm Futures Business Summit in Coralville, Iowa January 19-20, 2023. Learn more and register here.

The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. AgMarket.Net is the Farm Division of John Stewart and Associates (JSA) based out of St Joe, MO and all futures and options trades are cleared through ADMIS in Chicago IL. This material has been prepared by an agent of JSA or a third party and is, or is in the nature of, a solicitation. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading information and advice is based on information taken from 3rd party sources that are believed to be reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. The services provided by JSA may not be available in all jurisdictions. It is possible that the country in which you are a resident prohibits us from opening and maintaining an account for you.

The opinions of the author are not necessarily those of Farm Futures or Farm Progress.

About the Author(s)

Brian Splitt

Technical analyst, AgMarket.Net

Brian began his career in the financial services industry with expertise in insurance products, stocks, bonds, mutual funds and annuities. Brian studied technical analysis and migrated to commodities where he has built a successful career. As a technical analyst with AgMarket.Net, he utilizes prior price or volume action or trends to predict future price moves and break down agricultural balance sheets. Brian is a decorated combat veteran of Operation Iraqi Freedom as well as a member of a Gold Star Family.

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