Crops Analysis | April 21, 2023
Price action: May corn futures fell 1/2 cent to $6.63 1/4, ending the week a penny higher. July futures ended the day 10 3/4 lower at $6.15 1/4, down 20 1/2 cents on the week.
5-day outlook: Today’s price action was a bit of a head scratcher as the May/July spread rose nearly ten cents. The July contract saw continued weakness following Tuesday’s rejection of the 200-day moving average. The technical landscape has seemingly dictated much of the trade in the latter half of the week as price once again rejected off the $6.80 level. Price quickly retraced much of the first half of this week’s rally and traded into April 3 support which supported May futures today. Given a 20-cent pullback since Wednesday and price bouncing off support this afternoon, price will likely be supported into next week for a potential run back into $6.80 resistance. The technical landscape in both July and December futures are both approaching oversold as they saw bigger losses this week, indicating a corrective bounce in the near term.
30-day outlook: July prices lagged on news of reduced exports to China and the belief that those exports will continue to be weaker than normal going into the summer, especially faced with record production coming out of Brazil. This week, we saw what a Brazilian record soybean harvest and relatively cheap soybeans can do to the U.S. market. As weather forecasts in Brazil continue to support optimal growing conditions for second crop corn, concerns will continue to weigh on corn futures as risk premium is taken out of the market. There has been an increase in flash sales to China over the last month, but total commitments are still just a fifth of what they were a year ago. Continued demand out of China will be necessary to hit the USDA export forecast, and the more they get involved with Brazil, the less likely this is to happen.
90-day outlook: Weather will continue to be a main price driver as the summer months approach. Planting conditions have proven favorable over the last couple weeks, despite some flooding and cool temperatures. A 1.25 million acre increase over last year is expected between North Dakota, South Dakota and Minnesota. Many of these acres are still under snow and experiencing flooding, likely pushing planting dates into May. Whether or not these acres get into the ground will influence the June acreage report. As seen in this week’s newsletter, precip is expected to be above normal in most of the eastern corn belt, as is temperature. The bulk of the western corn belt is expected to see near normal precip and normal temperatures.
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.
5-day outlook: An early-week rally turned ill-fated after bulls failed miserably in testing resistance around $15.27 for the third time this month, handing the opposition increased momentum for a downside move. A record crop and advancing harvest in Brazil continue to weigh on futures, with additional bumps in expected production, despite a fading crop in Argentina, stealing confidence from bulls, with lackluster U.S. exports serving up the proverbial icing on the cake. Cheap soybean basis premiums in Brazil have restored China’s buying interest, along with U.S. purchases amid tight supply. While China’s Brazilian bean purchases were tepid in March, it has been noted that purchases have picked up in the past two weeks. Remarkably low basis premiums in Brazil in the last week coupled with higher domestic soymeal prices sent crush margin higher in China, making the Brazilian purchases more attractive. Traders will continue to monitor purchases from China in the near-term following rumors the country has covered most of its needs for May and June.
30-day outlook: U.S. weather will play an important role in price direction as spring planting efforts continue to progress throughout the Midwest. A slow start in the Delta and southeast due to persistent rains, along with lingering snows and flooding in the northern Midwest, could ultimately affect acreage, though there is still ample time before the optimal planting window closes. Moreover, recent warm weather through much of the Midwest provided many producers an early, extended window for sowing, though increased moisture prospects combined with colder temps could ultimately affect some emerging seedlings. World Weather Inc. notes planting will likely be delayed over the next ten days, but improving conditions in May should induce more aggressive planting at the end of this month, though the forecaster indicates cooler conditions may be present in late April as well.
90-day outlook: The global landscape will be the main market influencer as the marketing year progresses. Intrinsically, traders will continue to monitor economic data and export sales to gauge the global landscape. Earlier today, S&P Global released its Purchasing Managers Index (PMI) estimates for both manufacturing and services in the U.S., which showed U.S. manufacturing PMI rose from 49.2 in March to 50.4 in April, topping expectations of 49 and signaling the first increase in factory activity in six months. Furthermore, the U.S. composite PMI increased to 53.5 in April, up from 52.3 in March, indicating the fastest increase in business activity since May 2022. While undoubtedly the data seems positive on the surface, it could mean the Fed will continue its rate-hike journey, which could lead to a further breakdown of the financial industry.
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.
Price action: May SRW wheat fell 6 cents to $6.61 3/4 and for the week lost 20 3/4 cents. May HRW wheat rose 1/2 cent to $8.40 3/4 and on the week fell 38 cents. Both markets hit four-week lows today. May HRS wheat fell 8 3/4 cents to $8.47.
5-day outlook: It was not a good week for the wheat market bulls. The technically bearish weekly low close in SRW on Friday and the fractional gain in HRW set the table for more chart-based selling pressure from the speculators early next week. “Rain in the Plains makes grain” was the mantra for wheat traders late this week. World Weather Inc. today reported U.S. hard red winter wheat areas will get welcome rainfall during the next ten days. “The greatest amounts may not be widespread, but all of the moisture will be good for improved wheat development and for the planting and emergence of summer crops.” Meantime, U.S. northeastern Plains and upper Midwest crop areas will continue to deal with flooding for a while and the current storm system in the region will diminish from west to east later today and Saturday. Cold temperatures in the north half of the U.S. Plains and Midwest this weekend will not induce any serious harm to winter crops.
And while still shaky, the Ukraine-Russia grain-shipping deal has not unraveled, which leans bearish. Reports said Ukraine’s efforts to unblock of grain shipments to eastern Europe improved today as Romania decided against a unilateral ban on food imports. However, there was no progress on extending a deal on Black Sea exports. Traders will continue to closely monitor this fluid situation.
30-day outlook: There is a stark contrast between SRW and HRW wheat crop conditions, as seen by the widespread between their futures prices. The SRW crop situation is unlikely to improve as U.S. harvest gets under way in a few weeks and U.S. exports remain lackluster. Continued drought in the Panhandle area underscores that poor HRW production is likely in that region. The HRS outlook remains uncertain due to potential flooding in the north. This suggests HRS prices will remain elevated in the coming weeks.
90-day outlook: Weekly U.S. wheat export sales on Thursday morning showed 259,000 metric tons sold for 2022/2023 were up 91 percent from the previous week and 93 percent from the prior 4-week average. Continued better U.S. wheat sales abroad in the coming months would go a long way toward improving U.S. wheat price prospects. Also, the U.S. dollar index last week hit a 2.5-month low as the index continues to trend down. Continued greenback weakness would also provide support to the U.S. wheat markets in the coming months, making U.S. wheat more price-competitive on the world markets.
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 fell 83 points to 78.41 cents, closing 445 points lower on the week. The higher-volume July contract rose 6 points to 80.15 cents, a 278-point loss week-over-week.
5-day outlook: Cotton fared rather poorly this week as a strong selloff in crude oil futures and expected rains in key U.S. cotton-growing areas sent the natural fiber in downward spiral on Thursday. Today’s efforts by the higher-volume July contract to turn higher proved bleak. Positive manufacturing data released earlier by S&P Global is seemingly sending mixed signals as it could prolong the Fed’s rate-hike journey, which could ultimately take a toll on the economy. Traders will continue to monitor near-term economic data which will drive outside markets and ultimately cotton futures.
30-day outlook: As planting progresses throughout the U.S., weather will serve as a key market driver. World Weather Inc. notes rains in portions of Texas next week will prove to be welcome and favorable for future planting, although there will need to be more moisture in West Texas, where initial rains will be welcome, but not nearly enough to seriously soak the ground with needed moisture. Precip totals will be greatest in the Blacklands, Coastal Bend and “possibly” a part of South Texas. The forecaster indicates rains in the Delta will saturate the soil over the next week to ten days, slowing planting progress, with similar conditions in the southeastern states, where wet conditions may not last quite as long.
90-day outlook: U.S. export sales will continue to provide insight into global demand and the overall economy as global cotton consumption is correlated with global GDP growth. USDA reported U.S. export sales of 62,100 RB in week ended April 13, which was down 57% from the previous week and 72% from the four-week average. Top purchasers were Bangladesh, Pakistan and China. Though shipments for the week reached a marketing year high at 16,800 RB, which was up 90% from the previous week and noticeably from the four-week average.
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.
