Crops Analysis | November 9, 2023
Price action: December corn futures fell 8 cents before settling at $4.68, nearer the session low.
Fundamental analysis: Corn futures dropped to multi-month lows following today’s USDA Crop Production report that pegged production above nearly all analyst estimates. A pre-report survey done by Bloomberg had production pegged at 15.089 billion bushels with a yield of 173.3 bushels per acre. This morning, USDA reported production at 15.234 billion bushels, equating to a yield of 174.9 bushels per acre. This sent corn futures sharply lower, as the balance sheet expanded to 2,156 million bushels from 2,111 million bushels in October and above expectations of 2,141 million bushels. The USDA lifted nearly all of the demand side of the balance sheet as well, though not enough to offset the increase in production.
USDA reported export sales of 1.015 MMT during the week ended Nov. 2, which were up 36% from the previous week and 4% from the four-week average. Sales were near the top end of pre-report estimates between 600,000 MT and 1.2 MMT. In today’s WASDE, USDA lifted their export forecast for 2023-24. The export situation for corn is still grim, leading to questions of a more than 400 million bushel increase in exports year over year. Unless the export situation improves, a reduction in exports is likely at some point, though will likely be offset by an increase in feed use, which USDA continues to conservatively estimate.
USDA left both Argentine and Brazilian corn production estimates unchanged (though interestingly increased both Ukrainian production and exports). Center west, center south and northeastern Brazil are still advertised to see well below normal rainfall over the next ten days, with temperatures warm to hot, leading to some of the most stressful mid-November conditions seen in recent years, World Weather Inc says. Some regions are expected to see temperatures up to 110 degrees, rapidly decreasing soil moisture and increasing crop stress. USDA has been late to cut South American production estimates, which has added fuel to bears. This continues to affirm our recent bearish bias and gives us confidence in waiting for additional sales.
Technical analysis: December futures broke the recent for-the-move low at $4.67 3/4, continuing historical seasonal pressure throughout the month of November. While the Sept. 19 low was broken, bulls managed to limit selling much below the level and managed to close prices above that level. This stands as significant support, backed by today’s low of $4.67, though little support remains below that level until the $4.50 mark. Bulls are seeking a daily close above $4.74 resistance before tackling $4.80 resistance.
What to do: Get current with advised sales.
Hedgers: You should be 50% sold in the cash market on 2023-crop.
Cash-only marketers: You should be 35% sold on 2023-crop production.
Price action: January soybeans plunged 22 1/4 cents to $13.43 1/2, the largest daily loss since Sept. 29. December meal rose 10 cents to $449.90, marking a high-range close. December soyoil rose 50 points to 50.45 cents, ending nearer the session high.
Fundamental analysis: USDA’s November production updates earlier today cast a shadow over soybean futures amid an 0.3 bu. increase in the national yield to 49.9 bu. per acre. With harvested acres unchanged at 82.791 million acres, the yield bump raised production by 25 million bu. to 4.129 billion bu., larger than traders’ average pre-report estimate of a 1-million-bu. decline from October. Meanwhile, combined with increased production and a 1 million-bu. cut to estimated residual use to 26 million bushels, carryover increased to 245 million bu., a 25-million-bu. increase from last month. Projected crush was unchanged from last month at 2.3 million bu., with exports unchanged at 1.755 million bu. Global soybean carryover was pegged at 114.51 MMT for 2023-24, down from 115.62 MMT in October, while 2022-23 carryover was estimated at 100.31 MMT.
Ahead of the government’s November crop data, USDA reported daily soybean sales of 1.044 MMT to China, which marked the 13th largest ever daily sale, and 662,500 MT reported to unknown destinations during 2023-24. The two sales combined pushed the daily sales total to the seventh largest ever.
Weekly export sales data was also released first thing this morning, with USDA reporting net sales of 1.08 MMT during the week ended Nov. 2, which were up 7% from the previous week but down 8% from the four-week average. Sales for the week were within the pre-report range of 800,000 MT to 1.5 MMT. Top purchasers included China (692,400 MT, including 264,000 MT switched from unknown destinations and decreases of 140,300 MT), Mexico (230,660 MT, including decreases of 20,500 MT) and Spain (137,600 MT, including 87,500 switched from unknown destinations).
Technical analysis: January soybeans reached the lowest intraday level in five sessions, though support, first at the 100-day moving average of $13.44 and again at the 10-day moving average of $13.37 curbed selling. While support at $13.56 1/4 and $13.46 3/4 ultimately failed, the 100- and 10-day moving averages will now serve as support, along with $13.32 3/4, the 20-, 200- and 40-day moving averages of $13.25 1/4, $13.23 1/4 and $13.16 3/4. Conversely, corrective buying efforts will now face initial resistance at today’s failed support levels, then at $13.70 1/4, $13.79 3/4, again at Wednesday’s high of $13.84 1/2, $13.93 3/4 and $14.03 1/4.
What to do: Get current with advised sales.
Hedgers: You should be 55% priced in the cash market on 2023-crop production. You should have 10% of expected 2024-crop production sold for harvest delivery next fall.
Cash-only marketers: You should be 50% priced on 2023-crop production. You should have 10% of expected 2024-crop production sold for harvest delivery next fall.
Fundamental analysis: The wheat futures markets saw spillover selling pressure today as corn and soybean futures markets suffered solid losses. Look for the wheat markets to continue to take price direction from the daily movements in corn and soybean futures markets.
Today’s monthly USDA supply and demand report contained no major surprises for wheat, showing U.S. wheat carryover for 2023-24 rising 14 million bu. from last month and which was 15 million bu. above the average pre-report trade estimate. The agency put the national average on-farm cash wheat price for 2023-24 at $7.20, down 10 cents from last month’s report.
Earlier this morning USDA reported U.S. wheat export sales of 354,300 MT during week ended Nov. 2, up 29% from the previous week, but down 26% from the four-week average. Sales were within the pre-report expectations.
Technical analysis: Winter wheat futures bears have the overall near-term technical advantage. However, in SRW futures the sideways price grind at lower levels the past five weeks begins to suggest a market bottom is in place. SRW bulls' next upside price objective is closing December prices above solid chart resistance at the October high of $6.04 1/2. The bears' next downside objective is closing prices below solid technical support at the contract low of $5.40 1/2. First resistance is seen at today’s high of $5.92 1/2 and then at $6.00. First support is seen at Wednesday’s low of $5.70 1/4 and then at the November low of $5.54 3/4.
December HRW futures have seen a 2.5-month-old downtrend on the daily bar chart stall out. The HRW bulls' next upside price objective is closing December prices above solid technical resistance at $6.87 3/4. The bears' next downside objective is closing prices below solid technical support at $6.00. First resistance is seen at this week’s high of $6.61 1/4 and then at $6.70. First support is seen at this week’s low of $6.29 3/4 and then at the October low of $6.25 1/2.
What to do: Get current with advised sales.
Hedgers: You should be 50% sold in the cash market on 2023-crop production.
Cash-only marketers: You should be 50% sold on 2023-crop production.
Price action: December cotton futures rallied 163 points on corrective buying before settling at 76.52 cents.
Fundamental analysis: Cotton futures surged on Thursday despite an unexpected rise in production in today’s Crop Production report, leading suspicions that recent selling was overdone. Cotton futures surged overnight into this morning’s open and saw mild profit-taking from this morning’s peak, though prices held onto gains. Production rose month over month, despite all but three analysts cutting production forecasts in a pre-report survey done by Bloomberg. Ending stocks rose outside the highest analyst guess as well, rising to 3.2 million bales from 2.8 million bales in October. The strength seen in the futures market despite the bearish report give confidence to traders that the recent selling pressure, which pushed December futures more than ten cents lower in as many sessions, is overdone.
Front-month crude oil futures lent some spillover strength to cotton bulls today as well, though prices remain in a firm downtrend on the daily bar chart.
USDA reported weekly sales of 415,500 RB during the week ended Nov. 2. While this dipped from 482,900 RB a week ago, sales were the second highest of the marketing year, a breath of fresh air for the struggling market. USDA retains a steep export forecast despite relatively low sales compared to recent years.
Technical analysis: December cotton futures saw corrective gains, though the downward trendline that supported prices from late September until it’s break earlier this week capped gains at 77.10 cents. Bears, who remain in control of the technical advantage, will seek to keep pressure on prices Friday, targeting yesterday’s for-the-move low at 74.77 cents, with support at 75.00 cents on the way. Beyond 77.10 cents, bulls are targeting the 10-day moving average at 78.76 cents, firmly backed by the psychological 80.00 cent level.
What to do: Get current with advised sales.
Hedgers: You should have 60% of 2023-crop production forward sold in the cash market.
Cash-only marketers: You should have 60% of 2023-crop production sold.
