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Are South American weather concerns enough to push corn and soybean prices through resistance?

Brian Splitt, Technical analyst

December 17, 2021

4 Min Read
corn and beans on $100 bills
Getty/iStockphoto

Recent futures gains have allowed many producers to take advantage of $6 cash corn and $13 cash soybeans as the calendar year reaches its end. With chart resistance stacked at $6 basis March corn futures and $13 basis March soybean futures, the holiday week ahead may offer opportunity for bulls to push through resistance on thin trade.

Much of the recent narrative has been dominated by outside market forces, such as the omicron COVID variant and this week’s Federal Reserve meeting; both have provided large doses of volatility. One must admit that through the waves of macroeconomic selling seen since Thanksgiving, corn and soybean futures have performed very well.

In fact, corn futures have benefited from aggressive buying on each break caused by outside market pressures. To finish the week, March corn futures at 598’4 have traded at the highest level since the Aug. 12 WASDE report high of 599’6, while March soybean futures at 1298’2 traded just shy of the 1300’4 high made during the month of November. Until those levels are breached, we must remember resistance is still intact.

When looking at values on a spot basis (front month only), March corn was able to close above the 589’4 high made by September futures during the month of August with the highest spot settlement since July 1. In the same spot context, January soybeans traded above the 1289’2 high made during the month of November and at the highest level since the Sept. 30 Quarterly Stocks report. Friday’s settlement is the first close above the 100-day moving average, which has been consistent resistance since Aug. 18.

Related:The 9 grain market indicators to watch, now through the New Year

Factors to watch

Underlying support from concern regarding South America’s corn and soybean crops have continued to help grains fight the current like salmon swimming upstream. The question remains whether South American weather concerns are enough at this point to take values through resistance. Should weather forecasts for Brazil and Argentina continue to provide an outlook for stress over the weekend, we will likely have the answer early next week.

Regardless of the bullish weather influence, corn has been showing signs of strength, from both a cash basis and spread perspective, all the way through harvest. The carry from March to May corn is 1 cent, while May is at a 1.5 cent premium to July. This is not the structure of a well-supplied market, but rather indicates that domestic supplies of corn are possibly tighter than the USDA would have us believe.

The opportunity for USDA to acknowledge a tighter stock scenario than what they’ve reported will be on Jan. 12 when final production numbers for the 2021 crop will mesh with Quarterly Stocks as of Dec. 1 to provide a new set of domestic balance sheets. We will also find out whether USDA feels South American weather warrants a change to their production estimates.

Our team at AgMarket.Net has prompted producers to add to cash sales on recent strength while replacing physical ownership with July options to allow continued participation, with a limited risk, as we venture into the first half of 2022.

From everyone on the AgMarket.Net team, we wish you a very Merry Christmas and a Happy New Year ahead. As always, 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.

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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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