Crops Analysis | February 23, 2023
Corn
Price action: March corn fell 13 3/4 to $6.60 1/4, near the session low and is the largest daily drop since Jan. 4.
Fundamental analysis: Corn spiraled lower as weakening technicals and projections of a large 2023-24 U.S. corn crop ignited selling efforts, despite a rally in crude oil. Larger-than-expected weekly ethanol production likely weighed on futures as analysts were expecting an increase of just 6,000 barrels per day (bpd) in week ended Feb. 17, though the Energy Information Administration (EIA) reported an increase of 15,000 bpd to 1.029 million bpd earlier today. Ethanol stocks were up notably to 25.6 million barrels, indicating a 249,000-barrel increase from the previous week, while analysts were anticipating only a 60,000-barrel increase week over week.
Casting the greatest shadow was USDA’s initial 2023-24 projections released this morning at the kickoff of its Economic Outlook Forum. Assuming normal weather conditions, the government expects planted acreage at 91.0 million acres, with harvested acreage of 83.1 million and a national average yield at a record 181.5 bu. per acre, with total production of 15.085 billion bu. Softening inputs costs are driving producers towards higher corn acres, in hopes of a bumper crop following last year’s drought that crimped last year’s harvest. Conversely, total use was estimated at 14.490 billion bu., with feed and residual use of 5.6 billion bu., food, seed & industrial at 6.69 billion bu. (5.25 billion bu. for ethanol), and exports of 2.2 billion bu. Carryover was projected at 1.887 billion bu., increasing stocks to use to 13%.
USDA Friday morning will release its weekly export sales report, with traders expecting net sales to range from 500,000 MT to 1.3 MMT for week ended Feb. 16. Net sales of 1.024 MMT were reported for the previous week, which was toward the high-end of pre-report estimates.
Technical analysis: March corn encountered serious near-term technical damage, breaking out of the consolidated range that the contract has traded for nearly a month and a half and ending the session below support where the 40- and 100-day moving averages have intersected, around $6.73 1/2. With bears grasping the near-term technical advantage, further selling efforts toward $6.50 are likely, with an eye on the Dec. 7 low of $6.35. An upside reversal, however, will face solid resistance around the 40- and 100-day moving averages and around the 10- and 20-day moving averages of $6.76 1/4 and $6.77 3/4, respectively. A breach of these areas will find bulls recapturing control, with efforts towards $6.84 and then $6.86 3/4.
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 fell 5 1/4 cents to $15.34 1/4, near the session low. March meal ended the session mostly flat, just 50 cents higher at $493.10. March soyoil lost 62 points, closing at 62.04 cents, near the session low.
Fundamental analysis: Despite today’s rout in the corn market, soybeans held up remarkably well. The March contract continued yesterday’s reversal from $15.50 resistance, but bullish underlying fundamentals kept the downside limited.
USDA’s Economic Outlook Forum forecasted 87.5 million planted acres in 2023, which was within the range of the last six years. They pegged yield at 52 bu. per acre, .05 bu. per acre above the current 2016/2017 record. These estimates put production at 4.510 billion bushels.
The Buenos Aires Grain Exchange cut its soybean crop estimate to 33.5 MMT, down from 38 MMT in their last estimate. The impact from the recent frost is still unknown, and restricted rainfall patterns will likely increase crop stress across much of the country, per World Weather Inc.
Weekly USDA export sales will be released tomorrow, with traders expecting the range to be between 300,000 MT and 850,000 MT. Export sales last week were reported at 512,802 MT, in the middle of pre-report estimates.
Technical analysis: March soybeans continued to fall after yesterday’s reversal, trading in a 12 2/4 cent range and closing near the lows. Downside was limited by the 10-day moving average which will remain support around $15.34. Additional support comes in at $15.27 1/2 and then $15.14 3/4. Bulls are looking to recapture resistance at the psychological $15.50 level, with the recent high of $15.55 1/2 serving as the next target. Bulls continue to hold the near-term technical advantage.
March meal futures traded in a tight $4.40 range. Prices hovered around the 10-day moving average at $493, which will likely act as the pivot for tomorrow’s session. Support lies at the 20-day moving average at $488.8 which coincides with last week’s low. Bulls want to defend against a lower low. Resistance lies at the psychological $500 level with the recent high of $501.5 right above that.
March soyoil faced corrective selling pressure today, trading in a 171-point range and closed near the lows. Prices were supported by the 40-day moving average at 62.09 cents which will act as a pivot for tomorrow. Further support lies at the converging 10-day and 20-day moving averages around 61.55 cents. Initial resistance lies at 63.55 cents, today’s high, followed by 64.11 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 wheat futures gained 1 3/4 cent to $7.38 1/4. May SRW rose 1/2 cent at $7.50 1/2. March HRW wheat futures fell 14 1/4 cents to $8.61 3/4. May HRW wheat dropped 12 3/4 cents at $8.56 3/4. Prices closed nearer the session lows with HRW futures hitting a three-week low today. March spring wheat futures fell 6 1/4 cents to $9.08.
Fundamental analysis: HRW wheat futures led losses in the wheat markets today, due in part to big losses in the corn market and weather forecasts for some beneficial precipitation in U.S. winter wheat country. World Weather Inc. today reported that while greater precipitation is still needed in U.S. hard red winter wheat areas, recent snow in the northwestern U.S. Plains and Canada’s Prairies has improved winter crop protection against bitter cold while also raising spring runoff potential.
SRW futures saw buying support on reports Black Sea grain traders are increasingly downbeat on prospects for a long-term renewal or expansion of the grain-shipping deal that has allowed Ukraine to export grain the past several months.
USDA today at its Ag Outlook conference forecast 2023 U.S. wheat acreage at 49.5 million, with 38.4 million harvested acres. The projected national average yield is 49.2 bu. per acre, which would produce a 1.887-billion-bu. crop.
Traders are awaiting Friday morning’s weekly USDA export sales report—delayed by one day this week due to the government holiday on Monday. U.S. wheat sales are seen at 150,000 to 500,000 MT in the 2022-23 marketing year and sales of zero to 150,000 MT in the 2023-24 marketing year.
Technical analysis: Winter wheat futures bears have the firm overall near-term technical advantage and have regained power this week. SRW bulls' next upside price objective is closing May prices above solid chart resistance at the February high of $8.07 1/2. The bears' next downside objective is closing prices below solid technical support at the January low of $7.29. First resistance is seen at Wednesday’s high of $7.66 3/4 and then at this week’s high of $7.84 1/2. First support is seen at $7.40 and then at $7.30. The HRW bulls' next upside price objective is closing May prices above solid technical resistance at the February high of $9.09 3/4. The bears' next downside objective is closing prices below solid technical support at $8.00. First resistance is seen at today’s high of $8.72 1/4 and then at $8.80. First support is seen at $8.50 and then at $8.40.
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 rose 16 points to 82.41 cents. May cotton rose 28 points to close at 82.16 cents, in the lower third of today’s range.
Fundamental analysis: Cotton bulls fought an uphill battle, despite a notable crude oil rally. We saw extended volatility in the US equities following the cotton close yesterday into today, with May cotton futures having held up remarkably well. Eyes remain on the crude oil market, which is trying to put in an interim low, along with the stock market, which has proven volatile as of late.
USDA’s Economic Outlook Forum pinned 2023 planted acres at 10.9 million acres, the lowest since 2016. If realized, it would be 20.8% below last year’s planted acres. The large crop can largely be attributed to a notable drop in prices year over year, which has ultimately reduced guaranteed income through crop insurance. Consequently, producers in the southern Plains who have endured persisting drought, lack the incentive to plant cotton.
Traders await Friday morning’s USDA weekly export sales report. Sales last week of 218,900 were the fourth largest of the marketing year.
Technical analysis: May cotton futures were supported by yesterday’s close at 81.88 cents which will remain support. We have seen rallies sold the last three days, so bulls want to manage a close near the highs to boost confidence around a low being established. First resistance comes in at the 10-day moving average at 83.49 cents and then at the 40- and 20-day moving averages of 84.65 and 84.96 cents, respectively. Nearby support lies at 81.08 and then at 80.13 cents.
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.
