Crops Analysis | February 24, 2023

Corn

Price action: March futures fell 10 1/4 cents to $6.50, on session lows. Corn fell 27 3/4 cents on the week to the lowest level since the first week in January.

5-day outlook: Corn futures extended yesterday’s selling on the open and spent most of the session within a couple cents off session lows. There was a lot of buying interest propping March futures above the $6.50 level. Bulls want to see follow through to avoid a break below strong $6.50 support. There could be a bounce next week as the U.S. dollar takes a break off the recent bull run and corn buyers come out of the woodwork to take advantage of prices not seen since the beginning of January.

30-day outlook: Supplies remain tight and uncertain as Brazil continues struggling to plant safrinha corn. We are in the end of the ideal planting window, and though producers have been able to get valuable work done in the last week, they are still well behind schedule. Uncertainty lies in how well the late planted crop will perform as it is more vulnerable to weather stress. This uncertainty paired with tight supplies and continued uncertainty on the Black Sea grain corridor should be enough to continue to provide support for corn futures.

90-outlook:  U.S corn exports continue to be well below the last 5-year pace and below USDA expectations. The rising U.S dollar has continued to impact agricultural trade, evidenced in the recent revisions to the USDA trade estimates, which expanded the trade deficit to $14.5 billion. If the U.S. is able to ring together some exports following this week’s selling, that would be a promising sign for corn bulls. Eyes will continue to be on the USDA prospective plantings as well, comparing numbers released on March 31 to the forecast released at the Outlook forum this week.

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 $15.29, gaining 1 3/4 cents on the week. May soybeans fell 8 cents to $15.19 1/4. March meal rose $4.00 to $497.10, while May meal rose $2.00 to $480.0. March soyoil fell 93 points to 61.11 cents, while May soyoil fell 96 points to 61.22 cents.

5-day outlook: Soybeans ended weaker after gapping higher to start the week as weekend frosts in Argentina handed bulls the torch. However, corrective selling, albeit mild, turned out to be the flavor of the week as a higher U.S. dollar, combined with fresh Brazilian supplies weighed on exports, although Brazilian weather has proven difficult for harvesting efforts as persisting rains have slowed progress. World Weather Inc. predicts southern Brazil will continue to be rather damp in the coming week-to-ten days, resulting in further delays in soybean harvesting. However, the forecaster notes top producing state, Mato Grasso will experience showers and thunderstorms, too, but with less frequency and intensity allowing farmers to advance harvest activities a little better around the precip.

30-day outlook: While the USDA provided its initial projections for the 2023 crop, a deeper look will be provided in the government’s annual Prospective Planting Report, due out March 31. Preliminary estimates indicate soybean acreage at 87.5 million acres, with harvested acres of 86.7 million and a national average yield of 52.0 bu. per acre. Early projections suggest higher corn acres due to softening inputs and higher crop insurance guarantees; however larger-than-expected soybean acreage shouldn’t be ruled out as current prices indicate soybean gross incomes could be similar to corn in certain growing areas. Ultimately though, mother nature will determine final acreage.

90-outlook: Traders will continue to monitor U.S. exports as they gain a firmer grasp of South American crop size. Although harvest efforts in Brazil have been slower than normal due to excessive moisture, U.S. exports have progressively diminished as importing countries seek fresh supplies. USDA reported weekly export sales of 544,900 MT for week ended Feb. 16, which was a 20% increase from the previous week, but was down 18% from the four-week average. China was the primary buyer for the week. Export commitments are running 1.5% behind a year-ago, after recently running slightly ahead.

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 closed 30 cents lower at $7.08 1/4, its lowest level in 15 months, down 60 cents on the week. March HRW closed 20 cents lower at $8.41 3/4. March spring wheat closed down 22 1/2 cents to $8.85 1/2, the lowest level since August 2022.

5-day outlook: Wheat bulls fumbled their edge after a strong January. Uncertainty from the Black Sea grain corridor failed to prop prices up and ultimately March SRW fell on the week to prices not seen since September 2021. The market has completely priced out all gains from the Russia-Ukraine war. Eyes remain on the Black Sea corridor as Ukraine wants to renew the current deal, which expires March 17.

30-day outlook: Prices have underperformed compared to seasonal strength when winter wheat crop conditions are as poor. Early strength was achieved, but prices have since drifted. Strength is generally expected into mid-March when crop conditions are below average. We have seen an extreme divergence from this seasonal strength, so a bounce in prices to get more in line with the average is not out of the picture. This seasonal strength alongside continued uncertainty in the Black Sea deal could provide a catalyst for wheat bulls in the next 30 days.

90-outlook: Wheat exports for the week ending Feb. 16 were the most in a month coming in at 338,800 MT (12.4 million bushels), compared to the prior four-week average at 8.983 million bushels. Despite this week’s uptick, wheat exports are still well below average. To meet USDA expected exports, the U.S. needs to export 11.84 million bushels per week for the rest of the calendar year. Exports have averaged just over 9.8 million bushels per week this calendar year, so buyers will need to start stepping up, which should be expected after recent price declines. Unless buyers start to come in to buy U.S wheat, wheat will likely continue to underperform compared to corn and beans.

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: May cotton rose 274 points to 84.90 cents, a 340-point gain on the week.

5-day outlook: Cotton managed a solid rebound after marking low-range closes through much of the week as the U.S. dollar index edged higher. The rally stemmed from USDA’s weekly export sales which showed net sales of 425,300 RB, a marketing year high, for the week ended Feb. 16. Sales for the week were up 96% from the previous week and 97% from the four-week average. The demand increase is largely attributed to increased Chinese demand as the country reopens and makes an economic recovery. While near-term direction will come from crude oil, the direction of the dollar index and USDA’s weekly export sales will also guide price direction.

30-day outlook: USDA’s Prospective Planting report on March 31 will provide a deeper look into 2023 cotton acres after initial projections were released at the Economic Outlook Forum on Thursday. USDA estimated cotton acres at 10.9 million acres, which, if realized, would be a 21% decline from 2022. The government’s March 31 report will be the first survey-based look into 2023 acres, which could be a wild card considering varying estimates by analysts.

90-outlook:  The state of the global economy will largely be a market driver as the spring and summer months arrive. Economic strength could ultimately send the dollar skyrocketing higher, steamrolling exports, while a possible recession could curb domestic demand. Traders will continue to closely monitor data which provides insight into the health of the U.S. and global economy, and the Fed’s actions to dampen inflation. The pace of spring plantings, and the conditions extant at that time should exert increasing influence over prices as time passes.

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.