Crops Analysis | December 29, 2023
Price action: March corn futures lost 3 cents on the session to $4.71 1/4, losing 1 3/4 cents on the week. On the year, corn futures fell 31%.
5-day outlook: Corn futures sold off for three consecutive days, giving up all and more of Tuesday’s surge higher. March corn futures quickly resumed the downtrend stemming from the early December highs and look to make a fresh contract low sooner than later. The market continues to discount the risk in the South American crop, namely Brazil. While some corrective buying may be possible over the coming week, corn futures are likely to continue the recent technical downtrend barring any significant fundamental shift, which is unlikely to come at this juncture.
30-day outlook: South American weather has been a driving factor in soybean prices for the better part of two months. As first crop beans are harvested, that attention will turn to corn. Early reports note slow fertilizer purchases by Brazilian farmers, accentuating recent talks of sizeable cutbacks in safrinha corn plantings. When paired with El Nino’s effect on Brazilian precipitation thus far this year, safrinha acres could fall more than most anticipate, including USDA. Crop consultant Dr. Michael Cordonnier recently left his Brazilian corn production forecast at 117.0 MMT, though maintains a lower bias and notes that there are concerning indications on safrinha acreage. Continued weather issues and concerns over Brazilian production could be a leading factor in the corn market over the coming month.
90-day outlook: USDA releases an updated production estimate in the January Crop Production Report, along with an updated balance sheet in the WASDE report. Historically, there have been significant revisions in the January report, and with significant changes in the estimate throughout the crop year, this year is no different. USDA released their weekly Export Sales Report this morning a day late due to the holiday. Net sales of 1.242 MMT for 2023-24 were in the upper end of expectation, though the highlight of the report was exports, which came in at 1.28 MMT- a marketing year high. While bookings have increased substantially over the past few months, shipments have been slow to develop, in part due to the focus on shipping soybeans. Seeing exports tick up were a bullish sign, though the balance sheet is still likely to push above the 2-billion-bushel mark, which is difficult to ignore and will likely lead to weakness over the coming quarter.
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: March soybeans fell 14 cents to $12.98 and gave up 8 1/4 cents on the week. March soymeal fell $4.70 to $386.00 and lost $5.10 week-over-week. March soyoil rose 20 points to 48.18 cents but is down 84 points from a week ago. Year-over-year, March soybeans are down 7%.
5-day outlook: Soybean futures ended the week on a bitter note, marking a two and a half month low amid improving forecasts in Brazil. Moreover, markets are broadly ending the 2023 calendar year in a risk-off tone, given the recent escalation of the Russia/Ukraine conflict and rising tensions in the Middle East. However, following the New Year holiday, traders will continue to focus on South American weather. Most medium range forecast models have suggested above normal rainfall may evolve in northeastern Brazil during the first week of January while center west Brazil experiences a boost in rainfall.
30-day outlook: USDA’s final 2023-24 production data, along with global production updates, due out Jan. 12 will provide direction for market participants. Earlier this week, South American crop consultant, Dr. Michael Cordonnier lowered his Brazilian soybean production estimate by 2.0 MMT to 153.0 MMT and noted a neutral/lower bias going forward. Changes to use will also be of note amid record crush levels.
90-day outlook: U.S. soybean exports will continue to be a market focus into the 2024 calendar year. Earlier this morning, USDA reported 983,900 MT of net soybean sales during week ended Dec. 21, which were down 51% from the previous week and 38% from the four-week average. Top purchasers for the week included China, the Netherlands and Indonesia. Meanwhile, exports during the week totaled 1.216 MMT, which fell 9% from the previous week and 6% from the four-week average. Top destinations included China, Japan and Mexico.
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.
Price action: March SRW futures lost 3 1/2 cents to $6.28, though gained 11 3/4 cents on the week. March HRW futures dropped 1 3/4 cents to $6.42 while gaining 19 cents on the week. March spring wheat futures fell 2 cents, settling at $7.23 1/2. SRW futures lost 21% on the year.
5-day outlook: Wheat futures ended the year on a whimper despite buying efforts overnight. Despite selling efforts today, wheat futures continue to trade on recent highs and look to be consolidating in a bullish consolidation pattern. As more traders return to their desks next week, it could provide enough momentum to break out of the recent sideways range, though global shipping woes could weigh heavily on the market. The technical outlook of wheat futures should be enough to spur prices higher over the coming week, which could be helped by rebalancing of managed money at the turn of the year.
30-day outlook: USDA reported wheat export sales of 276,400 MT for the week ended Dec. 21, which was down 14% from the previous week and 60% from the prior four-week average, which is inflated due to the abnormally high sales number a few weeks ago from Chinese purchases. USDA was quick to adjust export demand higher after the flurry of Chinese buys, demand that has not been sustained in the last few weeks. That leaves the door open for concern that USDA was trigger happy in adjusting U.S. exports higher, which has likely weighed on prices recently. Demand concerns are likely to continue to weigh on wheat futures over the coming month, leaving little room to rally unless there is a significant fundamental shift.
90-day outlook: January will bring U.S. winter wheat acreage numbers, which will be key in determining direction over the coming quarter. As will the health of the spring wheat crop. The Plains continue to be too dry, though some precipitation is expected in the second week of the outlook. The health of the winter wheat crop coming out of dormancy will play a significant role in determining price action of the coming quarter, as will the demand side of the balance sheet, which will be largely dictated by the export outlook mentioned above.
What to do: Get current with advised sales.
Hedgers: You should be 60% priced in the cash market for 2023-crop. You should also have 10% of expected 2024-crop production sold for harvest delivery next year.
Cash-only marketers: You should be 60% priced for 2023-crop. You should also have 10% of expected 2024-crop production sold for harvest delivery next year.
Price action: March cotton futures surged early though faced profit taking as the session went on, ultimately rising 5 points on the session to 81.00 cents, marking a 124-point gain on the year. Cotton futures lost 3% on the year.
5-day outlook: March cotton futures ended the week subdued, but able to end the trading year on a slightly positive note. The natural fiber has found strength from recent strength in equities and widespread sentiments the Fed will cut interest rates in the coming year. Traders will continue to closely eye outside market activity into next week as the new calendar year kicks off.
30-day outlook: Traders seem likely to continue relying on the Chinese cotton market and global economic data over the next month. However, USDA’s January 12 Crop Production Report for the department’s “final” estimate of the 2023 U.S. cotton crop will prove especially important in determining market direction. The simultaneously released Supply & Demand report might also affect the market, since it will contain USDA’s latest take on international cotton trading.
90-day outlook: U.S. export activity will have longer-term significance due to the particular significance of Chinese demand. Earlier today, USDA reported robust cotton sales of 369,900 RB during week ended Dec. 21, which were up noticeably from the previous week and four-week average. China was the top purchaser during the week. Meanwhile, shipments notched a marketing-year high of 231,000 RB, up 4% from the previous week and 54% from the four-week average.
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.
