Crops Analysis | January 2, 2024
Price action: March corn futures dropped 7 1/2 cents at $4.63 3/4, near the session low and hit a contract low.
Fundamental analysis: The first trading day of 2024 saw heavy fund and speculator technical selling pressure, to suggest still more price downside is likely in the near term. Solidly lower wheat and soybean futures markets, a “risk-off” trading day in the general marketplace, strong gains in the U.S. dollar index and lower crude oil prices all had the corn bulls running for cover.
Weather in South American corn-growing regions also leaned a bit bearish today. World Weather Inc. said recent rain in the north half of Brazil will prove beneficial in raising soil moisture and ensuring a more favorable crop development environment through the first half of this month. Southern Brazil and Argentina will have lighter and less frequent rain, “but it will still be timely and should translate into very good summer crop conditions.”
USDA this morning reported U.S. corn export inspections of 569,735 MT during week ended Dec. 28, down from 657,504 MT the previous week but within the pre-report range of expectations.
Technical analysis: The corn futures bears have the solid overall near-term technical advantage and gained fresh power today. Prices are in a six-week-old downtrend on the daily bar chart. The next upside price objective for the bulls is to close March prices above solid chart resistance at last week’s high of $4.81. The next downside target for the bears is closing prices below chart support at $4.47. First resistance is seen at today’s high of $4.70 3/4 and then at $4.75. First support is at $4.60 and then at $4.55.
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 24 1/2 cents to $12.73 1/2, the lowest close since June 29. March soymeal fell $6.50 to $379.50, while March soyoil rose 11 points to 48.29 cents.
Fundamental analysis: Soybean futures plunged to a six-and-a-half-month low to start the new year amid continued forecasts for increased rain in Brazil. Weekend rains fell through several key growing areas in northern, central and southern Brazil. However, South American crop consultant Dr. Michael Cordonnier noted the moisture arrived too late for early maturing soybeans, though it should be beneficial for the later-maturing varieties. Cordonnier trimmed his Brazilian soybean production estimate by 2.0 MMT, to 151 MMT, and noted a neutral/lower bias going forward. Meanwhile, his Argentine soybean estimate remained unchanged at 50 MMT and maintains a neutral/higher bias as weather has been steadily improving in the country over the last several weeks.
A solid rally in the U.S. dollar index and lower crude oil prices were bearish “outside market” factors for the soybean complex today.
World Weather Inc. reported four-day rainfall increased in Brazil as expected and sufficient moisture has occurred to further improve the low soil moisture situation that dominated much of the spring and early days of summer in center west and some parts of the northeast. However, the forecaster noted rainfall is expected to be greatest in the next 10 days across most of the north, resulting in an expansion of saturated soil conditions.
USDA will report November soybean crush shortly after the close in its monthly fats and oils report, with a Reuters poll indicating analysts expect crush eased to 199.7 million bu. during the month, while soyoil socks rose to 1.634 billion pounds.
USDA reported export inspections of 961,694 MT (35.3 million bu.) during the week ended Dec. 28, which were down 156,053 MT from the previous week but within the re-report range of 600,000 MT to 1.1 MMT.
Technical analysis: March soybeans gapped lower to begin today’s session, with bears taking full advantage by notching a new for-the-move low and securing a close below support at $12.90 3/4 and $12.83 3/4. Initial resistance will now serve at $12.70 3/4, with little support serving between the area and psychological support at $12.00. However, a push into near-term oversold territory could ignite buying, though today’s failed support levels will serve up initial resistance, then at today’s high of $12.90 3/4. A fill of today’s gap will hen face technical headwinds at 10-, 20-, 100- and 40-day moving averages of $13.10 3/4, $13.20 3/4, $13.44 3/4 and $13.36 1/4.
March soymeal ended the session below initial support at $382.80 and $379.70. Initial support will now serve at $375.00, with little support lying between the area and the Oct. 5 low of $365.30. Corrective buying, however, will face resistance at today’s failed support levels, again at the session high of $385.60, then at the 10- , 200-, 20- and 100-day moving averages of $390.60, $392.00, $394.60 and $396.90.
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 wheat dropped 21 1/4 cents to $6.06 3/4, near the session low and hit a two-week low. March HRW wheat closed 13 lower cents at $6.29 and nearer the session low. March spring wheat fell 8 1/2 cents to $7.15.
Fundamental analysis: Selling in the corn and soybean futures markets spilled over into price pressure for the wheat markets on this first trading day of 2024. Fund and speculator technical selling were featured amid a big rally in the U.S. dollar index, lower crude oil prices and keener risk aversion in the general marketplace.
Weather in global wheat-producing areas leans a bit bearish. World Weather Inc. today said colder air will impact Canada, the northern and central U.S., western Russia and Eastern Europe over the next two weeks. “Snow cover will be important in winter wheat, barley and rye production areas to adequately protect crops from the cold. Early indications suggest sufficient snow cover will be present in all areas to prevent winterkill,” said the forecaster. The possible exception may be in the northwestern U.S. Plains, where snowfall may be limited prior to the coldest air.
USDA today reported U.S. wheat export inspections of 273,671 MT during the week ended Dec. 28 were down 187,760 MT from the previous week but within pre-report expectations.
Technical analysis: Winter wheat futures bears have the overall near-term technical advantage and gained fresh power today. SRW bulls' next upside price objective is closing March prices above solid chart resistance at the December high of $6.49 1/2. The bears' next downside objective is closing prices below solid technical support at the contract low of $5.56 1/4. First resistance is seen at $6.20 and then at today’s high of $6.28 3/4. First support is seen at $6.00 and then at $5.90. The HRW bulls' next upside price objective is closing March prices above solid technical resistance at the December high of $6.77 1/2. The bears' next downside objective is closing prices below solid technical support at the contract low of $5.95. First resistance is seen at today’s high of $6.42 and then at $6.50. First support is seen at $6.19 1/4 and then at $6.00.
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 fell 106 points to 79.94 cents, a low-range close.
Fundamental analysis: Cotton futures erased last week’s gains and notched the biggest decline in two weeks amid a rallying U.S. dollar and a slide in crude oil futures. Weak economic data from China also weighed on the natural fiber along with a pause in equities following an end-of-year run.
Earlier today, China’s purchasing managers index (PMI) came in at 49.0 for December, down from 49.4 in November, while the services sector PMI was unchanged at 49.3 in December. Reading below 50.0 suggest contraction in the sector. Traders will continue to closely monitor export demand from the number-one cotton importer.
World Weather Inc. reports West Texas precip is still expected to be restricted for a while, while Eastern Texas crop areas will all receive moisture in the next couple of weeks that will be of use in the spring. Rain is also expected in abundance in the Delta and southeastern states which may help to ease the long-term dryness in the Delta and Tennessee River Basin. Meanwhile, Brazil’s improved rainfall the past few days and that which is expected this week will further ensure a good start to safrinha crops and support some of the full season cotton that was recently planted. The forecaster sates Argentina cotton will get periods of rain during the next couple of weeks supporting crops favorably well.
Technical analysis: March cotton bears were able to increase their posture, with a close held below the 20- and 40-day moving averages of 80.31 and 80.27 cents. Initial support will now serve at the 10-day moving average of 79.91 cents, then at 79.07 cents and the Nov. 8 low of 77.66 cents. Conversely, initial resistance will serve at today’s failed support levels, then at 81.06 cents, 81.69 cents, 82.37 and 83.00 cents.
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.