Front Month CTZ22

Let's have a closer look into December'22 cover month

Conclusion of latest market report:

The market has shown its hand last week and EAP believe that any rallies in the Cotton market, up to the 200 day moving average at 105.25 should be sold. We would be surprised to see Z22 reach the 120’s again this season and longer term, EAP remain of the belief that the 22/23 season will prove to be an inverted one, with the final low at the end of the season and scale up selling into any strength over the coming days will likely prove to be prudent.

70.34 c/lb

Average price of CTZ for the past 50 years.

January & May

In the past 50 years of data, highs in CTZ have occurred 7 times each in the months of January and May.

January & November

Interestingly enough, we have also seen CTZ hit its lowest price in the month of January 11 times and 10 times in November. 

Average price of CTZ for the past 50 years

Average price of Cotton per decade

Cotton's big brothers

Conclusion of latest report

With the current economic environment we are in, we think this downward move isn’t quite finished yet, however we expect the market to bounce in the near term.

Analysis

  • Europe has faced its worst drought in the last 500 years according to experts with 47% under warning conditions with clear deficit of soil moisture, and 17% in a state of alert with vegetation affected. This has obviously led to EU crops being hit very heavily this season with soybean yield expected to be down 15% for 2022 as much of the European crop is heavily water stressed. Any rains have been few are far between across the continent so the subsoils have received very little moisture if any, meaning the effects of this could be felt well into this season.
  • Indian growing regions have taken a hit recently with the vast amounts of rain hey have received which has lead to widespread flooding. This rain isn’t due to stop either with India expected to receive 9% more rainfall than usual in September. The soybean growing regions in central and western India are expecting above average levels which could damage crops, especially as they are usually harvested over September.
  • The USDA announced that its export sales reports will continue on the 15th September following issues with the launch of its new system.
  • Managed money is long the same amount of contracts they were at the beginning of the year having fallen from a high of around 180,000. However, this year they have the second longest position for this time of the year in the last 6 years with only the 2020 year higher at this point. So while it may seem that they sold off a couple of months ago and haven’t really changed their position in the last 2 months, we must remind ourselves that they are still pretty bullish soybeans.

Conclusion of latest report

The market is facing mounting macroeconomic pressure. The weather premium for U.S. market is back for now production and yield estimates have been reduced. We may see further downgrades and reductions in both the U.S. and Europe. Demand has picked up but the question mark remains on whether the funds will build back an even larger long position which would be the catalyst for a big move. In short, we need to see some bullish news or technical buying in order to change the “funds” appetite for grains. 

Analysis

December Corn’22 (ZCZ22) –  Technically, the market met strong resistance between at the prior swing high 682.00 – 688.00 which coincides with the 61.8% Fibonacci Retracement level. The market remains far above the major moving averages but will need to close above the mentioned levels to bolster the bullish view. 

  • Corn futures bounce back on Friday after the market subsided after Monday’s rally. The front month December’22 closed at 665.60 with trading take place within a narrow 29.60 cent range between 654.00 and 683.60. 
  • After a large spike in trading on Monday’s  session, the daily traded volume of futures and options averaged just 260,506 contracts. This reflecting a quiet end of the month. The market is closed on Monday 5th of September for Labor Day. 
  • The USDA has announced that the weekly export sales reports will continue on the 15th September 2022. This is resulting from the issues with the launch of its new system. In its daily reporting, the USDA confirmed the sale of 396,000mt of Soybeans for 2022/23. The marketing year started on September 1st. 
  • Non-commercial hedge fund traders are 235,099 contracts (chart below) net long agricultural futures compared to flat one month ago. Hedge funds reloaded their long positions on dry weather in the U.S., strong cash prices and lower corn yields. The caveat to their bullish tone is the bearish macroeconomic outlook. 
  • For corn, the managed money bought CBOT Corn futures and options for their 5th straight week. As of 30th August 2022, their net long position now stands at 221,467 contracts which is their biggest position since the 28th June 2022.

Cotton CEPEA/ ESALQ - 8 days credit

Date Cents US$/lb Daily % move Monthly % move
08/09/2022
123.14
-0.23%
-4.54%
06/09/2022
123.43
-3.28%
-4.32%
05/09/2022
127.62
-0.24%
-1.07%
02/09/2022
127.93
0.61%
-0.83%
01/09/2022
127.16
-1.43%
-1.43%
31/08/2022
129.00
-1.77%
11.55%

Monthly news on Brazilian domestic market

945.58

Average price of Soy since 2000. High of 1118 and low of 773. 

383.95

Average price of Corn since 2000. High of 471 and low of 296.

517.95

Average price of Wheat since 2000. High of 635 and low of 400.

696.50

Average price of Soy for the past 50 years.

283.97

Average price of Corn for the past 50 years.

376.33

Average price of Wheat for the past 50 years.

46.56%

Range % move since 1964.

49.71%

Range % move since 1964.

46.99%

Range % move since 1964.

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