Crops Analysis | January 5, 2024

Crops Analysis
Crops Analysis
(Pro Farmer)

Corn

Price action: March corn futures dropped 5 3/4 cents to $4.60 3/4, marking a 10 1/2 cent loss on the week.

5-day outlook: Corn futures underwent heavy selling pressure to end the week, making a fresh contract low. March futures fell below trendline support that capped losses since May early in the week, with Thursday’s rally retesting that level and today’s price action confirming the breakdown. That bearish momentum is likely to persist over the coming week, with prices likely to continue to face selling pressure, though some corrective buying is possible. Corn futures underwent heavy selling despite supportive outside markets today. Front-month crude oil futures saw solid gains and appear to be attempting to forge an interim low, which could help support corn futures in the near future. The U.S. dollar index is also struggling to follow through on stronger trade earlier this week and turned lower on the day despite firm gains early in the session. Prices were further pressured by this morning’s export sales report, which showed corn export sales of 367,500 MT for the week ended Dec. 28, a marketing-year low. Net sales were down 70% from the previous week as well as the four-week average and well below pre-report expectations of 500,000 MT to 1.2 MMT.

30-day outlook: USDA is set to update corn production to their “final” estimate for 2023-24 next Friday, along with an updated balance sheet, world production estimates and quarterly stocks as of Dec. 1. The stocks report has proved to be a market mover in the past, though focus leading up to the reports will be on U.S. and South American production. Our analysis points to a likely increase in domestic production that is likely to be more than offset by an increase in feed use. USDA is running well below historical averages on their feed and residual estimate, something we expect to be increased. Next week’s reports are likely to dictate much of the direction over the coming month. The market seems to be pricing in a bearish report, leaving little downside on the table with an expanding balance sheet, though the current path of least resistance remains lower.

90-day outlook: South American weather has been a driving factor in soybeans for several months, with improving forecast helping drive prices lower over the past several weeks. That focus will turn to corn as first crop soybeans are harvested and Brazilian producers begin planting their safrinha corn. While weather has seemingly improved, the safrinha corn crop has yet to hit the dirt and concerns are already rising over acres. Brazilian producers are purchasing less seed and fertilizer, leading analysts to believe that acres will see a steep year-over-year decrease. Paired with likely late planting due to the delayed planting and harvest of first crop soybeans, some risk premium could enter back into corn futures, as recent selling has removed much of the production risk premium built into current prices.

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.

 

 

Soybeans

Price action: March soybeans fell 12 1/4 cents to $12.49 3/4, a 48 1/4-cent loss on the week. March soymeal fell $6.80 to $369.40, down $16.60 from a week ago, while March soyoil fell 53 points to 47.63 cents, marking a 55-point drop week-over-week.

5-day outlook: Soybean futures took it on the proverbial chin to start the new calendar year, beginning the week with a notable gap lower as selling persisted throughout the week amid continued improvements in South American weather. A broad risk-off tone also hovered over the marketplace as geopolitical tensions in the Red Sea continue to escalate. However, technically oversold conditions could spark corrective buying into next week, though traders will continue to closely monitor weather in South America and likely begin to position in earnest ahead of USDA’s final production figures. Much of Brazil and Paraguay will see favorable conditions for crop development during the next two weeks while rain will fall frequently enough to slow fieldwork in northern Brazil, according to World Weather Inc.

30-day outlook: The odds of USDA’s final U.S. production estimates, due out Jan. 12, igniting volatility in the soy complex are relatively high as production surprises have historically driven price direction versus a surprise in stocks. Furthermore, given current managed money positions, a bullish surprise could lead to solid short covering toward at least the mid-$13 range, while a bearish surprise may push nearby soybean futures towards the sub $11.50 level, last touched in late May. Traders will also be laser focused on global production figures, namely from Brazil as the country has up until recently fought unseasonably hot, dry weather through much of the growing season. While Brazilian production has incrementally been lowered over the past several weeks as a result by government and independent analysts alike, the country’s production is still expected to rise notably due higher production expectations from formerly drought-ridden Argentina.

90-day outlook: Earlier today, USDA reported weekly export sales for the week ended Dec. 28, which showed soybean sales during the week reached a marketing-year low of 201,600 MT. While the report certainly didn’t spark buying in the soy complex, the data was not much of a shock considering the last reported daily soybean sale was on Dec. 19., marking the longest stretch without a reported daily sale since the marketing year 2023-24. U.S. export sales could continue to wane into the fresh calendar year as Brazilian supplies come available, though as was the case a year-ago, later harvested crops due to weather delays caused U.S. exports to stay elevated into April before a series of sizeable cancellations in late May, Early April transpired from China.

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.

 

 

Wheat

Price action: March SRW wheat futures rose 2 1/2 cents to $6.16 and near mid-range. For the week, March SRW fell 12 cents. March HRW wheat futures gained 2 1/4 cents at $6.28, near mid-range and for the week down 14 cents. March spring wheat rose 3/4 cent to $7.12 but lost 11 1/2 cents on the week.

5-day outlook: The winter wheat futures bulls staged a modest recovery in prices late this week after hitting multi-week lows in early trading Thursday. Such may give the speculative bulls some momentum to do some follow-through buying early next week. Wheat traders next week will continue to focus on the daily price action in the U.S. dollar index. The USDX today hit a three-week high but then backed off sharply, to suggest the greenback bulls are near-term exhausted. That would be a positive for wheat traders next week. Wheat traders will also take their daily cues from price action in the corn market. Corn futures faltered this week, with March corn hitting a new contract low today. Wheat traders will closely scrutinize next Friday’s (Jan. 12) monthly USDA supply and demand (WASDE) report.

Wheat traders will be closely watching a wintry weather pattern in the U.S. Plains early next week. World Weather Inc. today said a strong storm system is expected to impact the region Monday. Snow and strong winds will be involved with this and some rain as well in southeastern areas. The greatest impacts from this system will be possible from the Oklahoma Panhandle and northern Texas Panhandle through central Kansas and into southeastern Nebraska. “Blizzard or near-blizzard conditions are likely,” said the forecaster. Another snow event is likely Jan. 12 – 13 as arctic air moves into the Plains.

30-day outlook: USDA this morning reported U.S. wheat export sales of 131,600 MT during the week ended Dec. 28. That’s down 52% from the previous week and down 79% from the four-week average. This week’s rally in the U.S. dollar index will not help the wheat market bulls looking for improved foreign demand for U.S. wheat in the coming weekly sales reports. Better weekly U.S. wheat export numbers will very likely be need to jumpstart any significant rallies in the winter wheat futures markets.

90-day outlook: With colder weather forecast for U.S. wheat country in the near term, wheat traders in the coming weeks will be reminded that snow cover will be important to protect wheat plants from winterkill and for providing needed moisture in the spring. World Weather reports that early winter snow cover in much of the winter wheat regions is favorable. Trader focus in the coming weeks will also turn to the quarterly grain stocks and acreage reports that come out at the end of March.

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.

 

 

Cotton 

Price action: March cotton rose 7 points to 80.19 cents but lost 81 points on the week.

5-day outlook: Cotton futures were able to eek out mild gains to end the first week of the new year, though moderate selling efforts were the main feature for the natural fiber, inversely tracking recent gains in the U.S. dollar. Meanwhile, notable gains in crude oil futures were seemingly offset by a broad risk-off tone across the general marketplace amid rising tensions in the Red Sea, while stronger-than-expected jobs and wage data, released earlier today, likely further hemmed hopes of rate cuts from the Federal Reserve. Next week’s trade will likely continue to be rangebound as traders anticipate USDA’s production, supply and demand data.

30-day outlook: As traders continue to assess global economic data for demand insight, USDA’s final estimate of the 2023 U.S. cotton crop, due out Jan. 12, will provide supply data, providing direction for traders and producers alike as plans for the 2024-25 crop begin to come to life.

90-day outlook: U.S. cotton exports will continue to capture trade attention as the marketing-year progresses, as will Brazilian production following prospects of a heftier safrinha crop due to unfavorable soybean planting weather conditions early on. Meanwhile, the National Cotton Council will publish its acreage estimates at its annual meeting, which will be held February 16-18, with USDA’s Prospective Planting Report released shortly thereafter on March 28.

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.

 

 

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