Crops Analysis | March 13, 2023
Price action: May corn fell 3 3/4 cents to $6.13 1/2, posting a mid-range close.
Fundamental analysis: Corn was unsuccessful in extending Friday’s gains despite strength in SRW wheat and a wavering U.S. dollar as Russia confirmed the possibility of a 60-day extension to the Black Sea grain deal. Negotiations began today between U.N officials and Russia’s Deputy Foreign Minister Sergei Vershinin on a possible agreement as the deadline of March 18 inches closer. Russian officials have asserted contention around the deal’s parameters, noting Western sanctions on the country’s payments, logistics and insurance industries which have “created a barrier for it being able to export its own grains and fertilizers.”
Safrinha planting efforts in Brazil continue to advance, albeit at a slower-than-normal pace. AgRural reported the center-south of Brazil reached a completion rate of 82% as of Thursday, a 12-point advance on the week, though progress continues to lag behind last year’s pace of 94% by the same time. Significant delays were noted in Mato Grosso do Sul, while sowing has virtually concluded in Mato Grosso and other states.
USDA reported weekly export inspections of 999,388 MT for week ended March 9, which was up 66,076 MT from the previous week and towards the top-end of the expected pre-report range between 500,000 MT and 1.225 MMT. Inspections continue to run 37% behind a year-ago.
Technical analysis: May corn traded an 11 3/4 cent range, ending the session mid-range after dropping below initial support of $6.09 1/2 in the overnight trade. A sustained breach below the level will find bears then working towards support at $6.02 and then $5.97 1/2. Conversely, attempts higher will continue to face resistance at $6.21 3/4, then $6.26 1/2 and $6.34.
What to do: Get current with advised sales. Be prepared to make additional sales on a corrective price rebound.
Hedgers: You should be 65% sold in the cash market on 2022-crop production. You should have 15% of expected 2023-crop production sold for harvest delivery.
Cash-only marketers: You should be 65% sold on 2022-crop production. You should have 15% of expected 2023-crop production sold for harvest delivery.
Fundamental analysis: Soybean futures saw losses despite early overnight and opening strength this morning with volatility raging on in outside markets. The VIX, which tracks stock market volatility, was priced at 30 this morning for the first time since October 2022. When markets become volatile, it becomes less about price action and more about capital allocation, which can cause “forced” moves in markets. There was a flight to safety in traditionally less risky assets, such as precious metals and treasury bonds, ironic because rising interest rates are what caused this volatility in the first place.
Warm temperatures and little to no rain continue to pound the Argentina soybean crop. There has been very little relief, although some rain is forecasted late this week and into the weekend, World Weather Inc forecasts. More rain will be needed to restore soil moisture and put a bottom in crop production potential, which may come next week. Due to how late the rain is coming, full restoration is not possible, but soybean yield could benefit some.
Technical analysis: May soybean futures traded in a 25 1/2 cent range before closing at $14.91 1/4. Bulls were unable to maintain early gains as volatility rages on in outside markets. Bean futures continue to trade in a sideways pattern as they largely have for the last 3 months, although bulls still maintain the near-term technical advantage. Bulls are attempting to put in a higher low against the Feb. 28 low at $14.77 3/4. This will be the bears downside objective, which would put in a lower high and a lower low, signaling an interim top could be in. Bulls want to regain the converging 10, 20, and 40-day moving averages around $15.10 and ultimately aim regain the recent high at $15.38 1/2. Additional support comes in at the 100-day moving average at $14.90.
May soybean meal traded in a $11.10 range and closed on the lows at $479.00. Meal had sympathy losses with soybeans, but the recent uptrend remains in place. Meal could be posting a bull-flag on the daily chart, which would imply a move to new highs above $498. May meal closed right on the 20-day moving average at $480, which will act as a pivot for tomorrow. Additional support comes in at the 40-day moving average at $472.1. Resistance comes in at the contract high at $498.00 with additional resistance at today’s high, $490.00.
May soyoil was unable to maintain the recent negative correlation with meal and closed lower today after trading in a 188-point range. The May futures contract continues to close in on July 2022 support at 55.00 cents with the July low coming in below that at 53.92 cents. Bulls want to regain some of the 6.50 cent sell that occurred over the last 10 days, with resistance at 58.27 and 59.67 cents, ultimately trying to put in a higher high, above 62.15 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.
Fundamental analysis: Winter wheat futures markets saw corrective bounces today, following recent losses. A sharp drop in the U.S. dollar index also aided the wheat market bulls. However, buying interest in wheat futures was limited by weaker corn and soybean futures prices and the “risk-off” attitudes in the general marketplace following the collapse of a major California bank late last week. Grain market bulls are likely to remain squelched as long as general marketplace risk aversion remains keener due to the U.S. banking scare presently playing out.
There is still some uncertainty regarding an extension of the Black Sea grain-shipping agreement. Negotiations began today between U.N. officials and Russian Deputy Foreign Minister Sergei Vershinin. The present agreement is set to expire March 18.
USDA this morning reported weekly U.S. export inspections of 249,017 MT for week ended March 9, which was down 92,070 MT from the previous week and below trade expectations.
Technical analysis: Winter wheat futures bears have the solid overall near-term technical advantage. SRW bulls' next upside price objective is closing May prices above solid chart resistance at the March high of $7.21 3/4. The bears' next downside objective is closing prices below solid technical support at $6.50. First resistance is seen at $7.00 and then at $7.10. First support is seen at today’s low of $6.67 1/4 and then at the contract low of $6.61. The HRW bulls' next upside price objective is closing May prices above solid technical resistance at the March high of $8.32 3/4. The bears' next downside objective is closing prices below solid technical support at $7.50. First resistance is seen at today’s high of $8.10 1/2 and then at last week’s high of $8.20. First support is seen at today’s low of $7.85 and then at the contract low of $7.72 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.
Price action: May cotton rose 300 points to 81.18 cents, after reaching the lowest level since late November overnight.
Fundamental analysis: May cotton rose the daily limit, recapturing a large portion of Friday’s losses which were spurred by uneasiness around the collapse of the Silicon Valley Bank (SVB). Today’s rebound was largely led by a lower U.S. dollar and sentiments of easier rates than the Fed’s recent increased hawkishness. Equities were also able to reverse early weakness, sending a message of potentially stronger consumer demand.
Weather is becoming increasingly more important as planting season nears. World Weather Inc. notes a few rounds of precip will occur during the next two weeks in the Blacklands, Coastal Bend and south Texas, but rain is not likely to be great enough to induce a lasting increase in soil moisture and much more rain will be needed to improve soil moisture before the coming planting season. The forecaster notes the U.S. Delta and southeastern states will remain favorable to abundantly wet.
Technical analysis: May cotton traded a 323-point range, carving a fresh near-term low overnight, then reversing to the upside to breach and closed limit up above initial resistance of 80.89 cents. Further resistance stands at the conversion of the 100- and 10-day moving averages of 82.87 and 82.92 cents, respectively. A further test to the downside will face support at today’s low of 77.95 cents, then at 76.82 and 75.47 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.
