Corn, Soybean and Wheat drop into support as yield concerns drive resurgence

[MongiIG]

Agricultural commodities show signs of potential strength as lower yields bring potential for further upside

Source: Bloomberg

 Joshua Mahony | Senior Market Analyst, London | Publication date: Friday 02 September 2022 

Agricultural commodity prices have been on the rise of late with the likes of Soybeans, wheat and corn showing the potential of a bullish reversal after periods of weakness. Understandable concerns around demand in the face of global recessionary pressures have driven prices lower, yet the resurgent we are seeing serves to highlight the repercussions of a particularly hot summer in the Northern Hemisphere. Subsequent questions around potential shortfalls in yield do provide the basis for supply demand questions that could benefit these markets. Meanwhile, elevated natural gas prices have also served to drive up the cost of fertiliser, similarly raising questions around the ability to achieve comparable yields against previous years. The latest comments from the US Department of Agriculture stated that "US feed grain production in 2022 is forecast to be 6.3 million tons lower this month, reflecting lower yields in corn, sorghum, and barley. US corn production is lowered 146 million bushels on a 1.6 bushel per acre yield drop to 175.4 bushels." This clearly has the potential to raise prices, although there is some speculation that such a move could lead to lower demand from China. Thankfully Chinese Corn demand hit a record hit in 2021, so they are at relatively elevated levels nonetheless.
From a charting perspective, there is a chance that the recent weakness provides a buying opportunity as we see signs of a potential bottoming out over the past month. As such, let's take a look at these markets with a view to understanding the potential for further upside.

Corn
Corn looks to have bottomed out over the course of the past two-months, with price starting to turn higher from a confluence of the 50-SMA and 76.4% Fibonacci support. With price steadily creating higher lows over the course of the past six-weeks, this latest pullback looks to have provided us with a fresh buying opportunity here.

Source: ProRealTime

Soybeans
Soybean prices have similarly been gaining ground over the course of the past month, with the recent pullback taking us into trendline support. While we could see that bullish trend negated with a break below $13.79, it makes sense to expect a continuation of the trend until such a move takes place.

Source: ProRealTime

Wheat
Wheat prices have managed to push up towards the $8.55 resistance level, raising hopes of a bottom taking shape. However, it is notable that we are yet to see that level break, raising the risk that price simply remains within the $7.62-8.55 range seen over the course of the past two-months. Nonetheless, with price at the 76.4% Fibonacci support level, this is an interesting region of support that should help inform us over where we go from here. Ultimately, we would need to see $8.55 broken to bring greater confidence that price has bottomed out in a similar manner to Soybeans and Corn.

Source: ProRealTime