Afternoon Market Commentary – September 29, 2022

by: Chris Betz

Corn Soybean Wheat
Old Crop (futures month, change, settle price) CZ2 1’0 669’4 SX2 2’0 1410’6 WZ2 7’0 896’2
New Crop (futures month, change, settle price) CZ3 0’2 614’0 SX3 4’4 1363’0 WN3 4’6 899’0

Technical Thoughts – September 29, 2022

By: Ken Lake

December corn seems to be at a crossroads. The contract scored a double top at 699 when it failed to move above 698 ½ on September 21st. The current break has brought about a likely bearish cross of the short-term, 10/20-day moving averages which are trading in the 677 region. On the other hand, the longer-term rally which began after scoring a seasonal low of 561 on July 22nd has brought about an apparent bullish cross of longer-term 50/200-day moving averages in the 645 region. Standing in the way of a further collapse is the 50-day moving average, 663 which is current support.

Switching to a weekly view one sees similar confluxus. The corn complex experienced a massive drop in the two-week period from July 11th to July 22nd causing a bearish cross of the 10 and 20-week moving averages. The 10-week moving average continued its bearish move crossing the 50-week moving average the week ending August 26th. Today, the 10-week moving average has reversed on the trend from the July 22nd low and converging upon the 50-week moving average now posted at 675.

December corn seems to have settled into a range between 645 and 677 and looking for direction. 675 has become a key number. The weekly close, this week, will be key. A close either side of 675 should set direction for the coming days.

November soybeans tested the 1478 area four times since recovering from its July 22nd low at 1288 and failed to advance all four times. Currently trading near its current trendline the contract must hold value in the 1412 area to avoid further collapse. Support below 1412 is 1356, 1306, 1288.

The weekly soybean chart defines the downside risk from here. Note the two areas circled in red. The first one was a bearish cross of the 20/20-week moving averages confirmed with that terrible two-week period from July 11th to July 22nd. The other red circle is current time. We are poised to make a new bearish cross as the 10-week moving average is converging upon the 50-week moving average. Also of note is the fact that we have only lost 38% of the weekly chart low, 780, to high, 1784. Most retracement cycles make at least a 50% retracement of the previous move. If that occurs, it will take us to 1282. Ironically, 1288 was the low made on the daily (November) chart. When two numbers show up like this it becomes a rather powerful magnet pulling values toward it. In order to avoid this collapse current support of 1412 from the daily chart and 1400 (below) on the weekly chart must hold.

December wheat now displaying a clear buy signal is about to test its 200-day moving average again. Note the green circle below. Twice in the past six sessions the contract has traded above the 200 dma but failed to close above there. Another failure will create a firm double top and a new bearish formation. This is a tough call as the contract is highly dependent upon Russia/Ukraine issues and hangs upon V. Putin’s every comment but for now, target 917 to make sales. A close above the 200-day moving average is needed to advance values.

The weekly chart view for wheat, below, clearly shows the double top created with the May collapse in values likely setting long-term resistance at 1281. Since then, we have created the first two bearish crosses in two years on the chart and we are poised to create the third as the 10-week moving average has converged upon the 50-week moving average near 895. But also of note is the direction of the 10-week moving average, the light blue line, the current 6-week reversal of the May to July collapse is attempting to reverse the longer-term down trend. If we get a close this week above the 200-day moving average (917 today) the May to July collapse may have been reversed. If that reversal is confirmed then approaching the 50% retracement line, 999, comes into play.

Charts of the Day – September 27, 2022

Chicago Wheat

Fertilizer Update – September 1, 2022

By: John Ezinga

Some thoughts on changing trade flows and energy…


Nitrogen prices are adjusting up again; CF and Koch both out of the market with no tons to offer.

Could it be that nitrogen producers quietly like the recent decision of the Federal Trade Commission (to reject tariff protection for UAN imports to the USA from Russia and Trinidad/Tobago)?

Does this now allow them to happily export UAN, NH3, and urea over to Europe or even maybe to customers of Russia and Ukraine without that guilty feeling of exporting while tariff relief is in place?

Although publicly they expressed disappointment, I think privately they were jumping for joy. Now they are free to export any ton the US farmer does not want to buy to anywhere in the world.

It’s just MATH…..

55 dollars for NG in Europe vs 6 in US means nitrogen costs of production per ton look a little like this:

                             Urea                      NH3                       UAN(32%)

USA                      $225                    $300                  $200

Europe               $1300                    $1800              $950

Now if you are a North American nitrogen producer or natural gas exporter you must be licking your chops. Let’s say freight from New Orleans/Tampa to Rotterdam runs about $50/ton. If you’re a north American producer you could sell UAN for $700/ton in Europe back $20 ton for unload fee, $50 ton for ocean freight, $20 barge to Ocean vessel fee and net $600/ton FOB NOLA(New Orleans). The first thing you ask is why not sell it for $950/ton FOB Europe…well you will not be the only one doing this so competition for the European business will likely take it under their cost.

Either way, you are selling UAN in North America right now for $425 so anything above that number is a big win and it moves product out of America in time for spring – so you can raise prices on what is left to sell to the American Farmer…….yes, I think the North American producers are not losing sleep about not getting tariff protection.

I would not be surprised if UAN has already been exported. Production levels of N in the USA will likely be higher than at any other time in the past, trying to fill the hole left not only by Ukraine but by the entirety of the European production market.

It all comes down to energy cost. I don’t think you need a calculator to decide if it is a good trade.

The restriction will be the depth of market…they don’t have a need for it all. Given the change in the energy market of Europe, I’ll try to lay out what I expect trade flows to look like.

With European producers restricting output because of cost, not only will supplying Europe be an opportunity, but there will be shortages in the global supply chain all over the world.

13 million metric tons of nitrogen sales will be up for grabs as Europe idles back production. Then throw in the decision of China not to export nitrogen (5-million-ton exporter 2021) and you will see a major shift in nitrogen trade flows for the next several years.

The question that bothered me is “WHY” did China not return to the Urea export business when NOLA was trading a whopping $900/ton?!


It all comes down to energy cost. China is energy deficient and when they export UREA they are basically exporting energy…this does not make sense long term. Russia, Arab Gulf, USA, Southern Caribbean are all long energy and will fill the void left by Europe and China. This will fundamentally drive our Nitrogen costs higher in the USA as we will compete in the newly organized supply stack to gain as much market share as possible.

I still feel we will get the best deal as we are the Sams Club buyers and are logistically set up for volume and cheap freight to our endpoints, but it does not mean we live on an island. I remember our MAC founder, Herm Geers, telling me that the semi-trucks will keep grain elevators honest as farmers can arbitrage price difference between locations within a region. Same can be said of ocean-going vessels that will equalize price differences created by war, geopolitics, and energy demand.

One past example of this freight arbitrage is the fact that Russian potash can compete in North America against Canadian producers as evidenced by Canadian and American use of Russian potash for many years out of east coast terminals.

Three reason Nitrogen will move higher for next several years:

  1. Energy Policy
    In the west, energy policy has been taken hostage by the thought that we can convert all fossil fuels to renewables and anyone who thinks otherwise is ANTI-EARTH, ANTI-ENVIRONMENT, or pick any other adjective that would be an ill-advised political position to stand on. You see BIG OIL is the enemy de jure right now and it is politically expedient to be for GREEN policy and almost UN-AMERICAN to be against renewables.  So, capex in the traditional energy business has been scaled way back as politicians vote time after time to regulate/stifle/smother any energy expansions whether it be exploration or even a pipeline. Not only have they regulated out expansion they overtly threaten traditional energy business with windfall taxes and the like. I am afraid it may take hunger or hypothermia for the west to change course on this front.
  1. Russia/Ukraine war.
    Well, I think Europe has found itself putting the GREEN horse before the GREEN cart.  In other words, their reliance on unreliable/intermittent power that is wind and solar as Plan A in lieu of Nuclear, Gas, or Coal generation has put them in a sticky spot politically as well as economically given Russia is squeezing price higher as they know they are the only easy option for Europe this winter when it gets cold.
  1. China Policy
    China has argued that they are curtailing nitrogen exports as an initiative towards cleaner air, but I have read that it is simply a choice to keep lights on or sell urea for export. Exporting energy vs population unrest is an easy choice for the CCP.So, given China’s decision to stay out of Energy (nitrogen) export business, European policy error on their energy mix and timing, and fundamentally a lack of support for any traditional energy expansion in North America we are going to pay the price as an industry for higher N costs for the next few years. Likely this will spill over and provide support for P and K markets as well.

If you have been following my charts over the past many years you will recall that the long-term trend for Nitrogen has been lower but given factors noted above, this trend has changed…see below:

There will be volatility. It will not be a straight line up. There will be air pockets that will offer a drop in price or a favorable spread. Knowing when to buy inputs vs your outputs is where MAC can help. If you follow our affordability charts, they will signal you when opportunity knocks. Please feel free to contact myself or any of our team to help.