Crops Analysis | February 8, 2023
Corn
Price action: March corn rose 4 1/2 cents to $6.78 1/2, nearer the session high.
Fundamental analysis: Corn futures traded a narrow range prior to USDA’s updates to supply/demand and global production estimates as traders squared up positions before its release. Weakness in the U.S. dollar and firmer crude oil futures set a slightly positive stage for corn going into the monthly report. Additional support came with Conab noting Brazilian farmers are expected to produce a smaller second corn crop because of soy harvesting delays that may force them to sow it outside the idea climate window. The agency said rains in top grower, Mato Grasso, are the main concern as the state represents 75% of national production in a given year. Conab reported less than 12% of the second corn area has been planted in Mato Grasso.
Weekly U.S. ethanol production for week ended Feb. 3 showed a 28,000 barrel-per-day (bpd) reduction to an average of 1 million bpd, which was up 0.6% from the corresponding week last year. Ethanol stocks declined 25,000 barrels on the week to 24.417 million barrels.
USDA’s updated data for the month was mostly neutral, with ending stocks pegged 1.267 billion bu., which was within the range of pre-report estimates, though the figure is considerably below estimates of 1.377 billion bu. a year ago. USDA trimmed food, seed and industrial use by 25 million bu., with the decline entirely in corn-for-ethanol consumption. Global carryover for 2021-22 increased from January’s figure of 305.95 MMT to 306.28 MMT. However, 2022-23 global carryover was lower than expected at 295.28 MMT after USDA cut Argentine production by 1.5 MMT, along with a small cut to Brazilian production.
Weekly USDA export sales will be released tomorrow, with traders expecting a figure within the range of 600,000 MT and 1.2 MMT. Export sales last week were reported at 1.593 MMT, well above pre-report estimates.
Technical analysis: March corn traded a narrow 6 3/4-cent range, dipping below the technically significant 100-day moving average near 6.74 1/4 throughout the session. The contract remains rangebound between initial support near $6.72 1/4 and resistance at the 10-day moving average of $6.79 1/2. A push higher, however, will find bulls facing additional resistance at $6.80 1/4, then at the Jan. 18 high of $6.88 3/4, with psychological resistance remaining at $7.00. Attempts lower will continue to encounter support at the 100-day moving average and $6.72 1/4, as well as $6.70 1/4 and the 40-day moving average of $6.67 1/2.
What to do: Get current with advised sales. Wait to make additional 2022-crop sales.
Hedgers: You should have 50% of 2022-crop sold in the cash market.
Cash-only marketers: You should have 50% of 2022-crop sold.
Soybeans
Price action: March soybeans rose 4 1/2 cents to $15.19 3/4 and near mid-range. March soybean meal gained $0.50 to $481.90 and nearer the session low. March bean oil fell 31 points at 60.58 cents and near mid-range.
Fundamental analysis: Trading in the soybean futures complex was quieter today, ahead of the late-morning USDA supply and demand report for February and remained subdued after the report as it contained no major surprises. USDA raised its U.S. soybean ending stocks forecast 15 million bu. from January. Traders expected a 1 million-bu. rise. USDA left its U.S. soybean export forecast at 1.99 billion bushels. USDA raised its 2022-23 national average on-farm cash price projection by 10 cents to $14.30, which is up $1.00 from last year at this time.
Meantime, the Rosario Grain Exchange lowered Argentina’s soybean crop production estimate to 34.5 MMT, down from 37 MMT in its last forecast, amid a major drought. Also, Conab raised its Brazilian soybean crop production forecast by 177,000 MT from last month to a record 152.9 MMT.
World Weather Inc. today reported Argentina soybean regions will be hot with restricted rainfall through Saturday and then get waves of rain and experience cooler temperatures next week. “Some relief from dryness is expected for a little while, but follow up rain will be needed,” said the forecaster. Southern Brazil, Paraguay and Uruguay will also experience dry-biased weather through the weekend with rain expected Monday through Wednesday of next week resulting in some relief from persistent dryness.
Traders now await Thursday morning’s weekly USDA export sales report, which is expected to show U.S. soybean sales of 400,000 to 1 million MT in the 2022-23 marketing year and sales of zero to 400,000 MT in the 2023-24 marketing year.
Technical analysis: The soybean futures bulls have the solid overall near-term technical advantage. A four-month-old price uptrend is in place on the daily bar chart. The next near-term upside technical objective for the soybean bulls is closing March prices above solid resistance at the contract high of $15.72 1/4. The next downside price objective for the bears is closing prices below solid technical support at the January low of $14.65. First resistance is seen at today’s high of $15.27 3/4 and then at this week’s high of $15.35 1/2. First support is seen at today’s low of $15.05 3/4 and then at $15.00.
The soybean meal futures bulls still have the solid overall near-term technical advantage. The next upside price objective for the meal bulls is to produce a close in March futures above solid technical resistance at $520.00. The next downside price objective for the bears is closing prices below solid technical support at $465.00. First resistance comes in at Tuesday’s high of $490.20 and then at the contract high of $500.40. First support is seen at today’s low of $477.80 and then at $470.00.
Soybean oil bears have the firm overall near-term technical advantage. Prices are in a six-week-old downtrend on the daily bar chart. The next upside price objective for the bean oil bulls is closing March prices above solid technical resistance at 64.00 cents. Bean oil bears' next downside technical price objective is closing prices below solid technical support at the December low of 58.50 cents. First resistance is seen at this week’s high of 61.48 cents and then at last week’s high of 62.46 cents. First support is seen at Tuesday’s low of 59.30 cents and then at 58.50 cents.
What to do: Get current with advised cash sales. Be prepared to advance sales.
Hedgers: You have 70% of 2022-crop sold in the cash market. No 2023-crop sales have been advised.
Cash-only marketers: You have 70% of 2022-crop sold. No 2023-crop sales have been advised.
Wheat
Price action: March SRW rallied 15 cents to $7.64 3/4, the contract’s highest close since Jan. 3, while March HRW rose 10 1/4 cents to $8.96. March spring wheat closed 8 1/4 cents higher at $9.25 1/4.
Fundamental analysis: SRW wheat futures were able to turn moderately higher after having closed lower in the previous three sessions. A weaker U.S. dollar and persisting strength in crude oil lent underlying support, despite mostly neutral data from USDA. A series of global supply-related issues may have the market focus in the wake of a catastrophic earthquake in Turkey, which has heavily affected ten cities within in the country, known as key locations for milling and flour production. The CFO of the International Associations of Operative Millers noted there are around 128 flour mills out of a total 535 (around 24% of total capacity) in the region. Additionally, second-largest wheat producer, India, is considering extending a ban on wheat exports in an effort to restore state reserves and bring down prices. If the extension is approved, wheat exports from the country may not resume until mid-2024.
Western U.S. hard red winter wheat areas are expected to continue a pattern of lacking precipitation through the weekend, though there is potential for rain in the southwestern Plains Monday and in the remainder of the west during mid-week next week, though World Weather Inc. notes confidence is low.
USDA reported wheat ending stocks at 568 million bu. for 2022-23, which was up from 567 million bu. in January, but slightly less than traders were expecting. USDA cut food use 2 million bu. and increased seed use 1 million bu. Global carryover was pegged at 269.34 MMT, which was up from January’s 268.39 MMT, but is notably lower than 276.70 MMT in 2021-22.
Weekly U.S. export sales for week ended Feb. 2 will be released on Thursday, with traders expecting a figure between 125,000 and 450,000 MT. USDA reported net sales of 136,383 MT for the previous week, which was well below pre-report expectations.
Technical analysis: March SRW traded a 16-cent range, finishing the session above resistance at the 40-day moving average of $7.53 1/4, the 10-day moving average of $7.55 3/4 and $7.63. Attempts higher will face additional resistance near $7.69 and the Feb. 3 high of $7.76 1/2. Conversely, a turn lower will encounter support at former resistance at the 40- and 10-day moving averages, as well as the 20-day moving average of $7.47 1/2, then at $7.43 1/2 and $7.37 1/2.
What to do: Wait on an extended price rally to increase cash sales.
Hedgers: You should be 85% sold in the cash market on 2022-crop. You should be 30% forward-priced on expected 2023-crop for harvest delivery next year.
Cash-only marketers: You should be 85% sold on 2022-crop. You should also be 30% forward-priced on expected 2023-crop production for harvest delivery next year.
Cotton
Price action: March cotton futures fell 26 points to 85.37 cents. May cotton dropped 38 points to 86.00 cents. Prices closed nearer the session highs today.
Fundamental analysis: The cotton futures market was mildly pressured today be a slightly bearish USDA monthly supply and demand report and by a sell-off in the U.S. stock market.
USDA today raised its U.S. cotton ending stocks forecast by 100,000 bales from the January report, which was in line with market expectations. USDA made a 100,000-bale cut to projected domestic use. The U.S. export forecast remained at 12 million bales. USDA kept its 2022-23 average cash price forecast at 83.0 cents--down 8.4 cents from last year at this time.
USDA today also reported Feb. 1 cotton ginnings at 14.1 million running bales. There is a high correlation between Feb. 1 ginnings and final U.S. cotton production. Based on the latest data, it implies a modest rise in the U.S. cotton crop size to around 14.85 million standard 480-pound bales. USDA’s current U.S. production forecast is 14.68 million bales.
Cotton traders now await Thursday morning’s weekly USDA export sales report. U.S. cotton sales have picked up a bit recently.
Technical analysis: Cotton futures bulls have the very slight overall near-term technical advantage. There are stiff chart resistance levels that lie overhead and have turned back recent rallies. The next upside price objective for the cotton bulls is to produce a close in May futures above technical resistance at the January high of 89.31 cents. The next downside price objective for the cotton bears is to close prices below solid technical support at the January low of 80.46 cents. First resistance is seen at this week’s high of 87.80 cents and then at 89.31 cents. First support is seen at this week’s low of 83.90 cents and then at 82.50 cents.
What to do: Get current with advised sales. Wait to extend 2022-crop sales.
Hedgers: You should be 70% sold in the cash market on 2022-crop production. You also should have 20% of expected 2023-crop forward sold for harvest delivery.
Cash-only marketers: You should be 70% sold on 2022-crop production. You also should have 20% of expected 2023-crop forward sold for harvest delivery
