Crops Analysis | January 11, 2024
Price action: March corn fell 1 3/4 cents to $4.57 3/4, nearer the session low.
Fundamental analysis: Corn futures edged narrowly sideways ahead of Friday’s USDA report data, while gains in soybean and crude oil futures largely offset pressure stemming from SRW wheat. The first daily export flash since Dec. 19 did little to excite the market along with weekly export sales data which proved tepid at 487,600 MT during the week ended Jan. 4. While net sales were up 33% from the previous week, they represented a 52% decline from the four-week average and were just above the pre-report range of 400,000 MT to 1.0 MMT.
Sideways to lower trade is largely expected ahead of USDA’s final production estimates, due out at 11 a.m. CT. A Reuters poll reflects an average analyst trade estimate of 15.226 billion bu. using an average yield of 174.9 bu. per acre. If realized, the figure would be down slightly from November’s estimate of 15.234 billion bu., though a deviation outside of the range of 15.068 billion bu. to 15.370 billion bu. will likely impact the market. Meanwhile, analysts expect Dec. 1 stocks of 2.105 billion bu., which would be down from December’s figure of 2.131 billion bu.
Technical analysis: March corn spent the session consolidating sideways between initial support and resistance at $4.55 1/4 and $4.62 1/2. A breakout of the range will face additional support at this week’s low of $4.51 3/4, then at 4.48 1/4 and $4.00. Meanwhile, a breakout above initial resistance will then face resistance at the 10-, 20-, 40- and 100-day moving averages of $4.63 1/4, $4.69 3/4, $4.77 1/4 and $4.89 1/2.
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 closed unchanged on the day at $12.36 1/2 despite trading as high as $12.49 3/4. March soymeal settled $2.10 lower at $362.20, marking a fresh seven-month low. March soyoil ended the day 47 points higher at 48.72 cents, nearer session highs.
Fundamental analysis: Soybeans continue to struggle garnering much bullish momentum, though have failed to follow through to the downside from early-week lows. Open interest increasing amid the sell-off on Wednesday indicates fresh sellers entering the market despite being on seven-month lows. While prices closed higher today, bulls failed to hold onto most of the overnight gains and prices saw persistent selling throughout the session. That being said, price action tomorrow and thereafter is going to be largely dictated by the upcoming USDA Crop Production and Supply and Demand Reports. With the downside being overdone recently, it will take more than a mildly bearish report to continue to force prices lower.
A poll of Reuters analysts pegged 2023-24 production at 4.134 billion bushels, which would be up from 4.129 billion bushels in the November Crop Production Report. Analysts have overestimated the January production number six times in the last ten years. The same group of analysts estimated ending stocks at 243 million bushels, which would be down from 245 million bushels in December, despite higher production. Quarterly stocks are forecast at 2.975 billion bushels as of Dec. 1, which would be down from 3.021 billion bushels at the same time last year.
Brazilian soybean production is seen as falling 4.74 MMT from the December estimate from USDA to 156.26 MMT, according to a Reuters poll. Many analysts see a significant drop in the production estimate as long overdue. Meanwhile, analysts see Argentine production as rising .87 MMT to 48.87 MMT. Interestingly, the lowest estimate for Argentine production in the survey is the USDA estimate in December and the highest estimate for Brazilian production is also the USDA estimate from December, showing no analysts sees production falling in Argentina or rising in Brazil.
USDA reported soybean export sales of 280,400 MT for the week ended Jan. 4, which were up 39% from the previous week but down 74% from the four-week average. Net sales were shy of the pre-report range of 325,000 to 950,000 MT.
Technical analysis: March soybeans continue to trend lower on the daily bar chart, lending the technical advantage to the bears. Bulls are seeking to close prices above initial resistance at $12.48, with firmer resistance at the 10-day moving average at $12.63, then the 20-day moving average at $12.85 1/4. Meanwhile, bulls are seeking to hold support at $12.34 on continued selling, with additional support at the psychological $12.25 mark.
March soybean meal futures continue to fall in a tight, systematic downtrend on the daily bar chart. Bears continue to hold full control of the technical advantage. Bulls are seeking to hold support at $361.6, with backing from the psychological $360.0 mark, then $356.3. Resistance stands at $365.0, the intraday high of $368.9, then the 10-day moving average at $373.3.
March bean oil has pushed into the upper end of the recent sideways range. Bulls are seeking to close prices above the 20-day moving average at 48.93 cents, which capped gains today. Further resistance stands at 49.87 cents, then the psychological 50.00 cent mark. Meanwhile, support stands at 48.46 cents, then 47.63 cents.
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 fell 7 cents at $6.03 3/4. March HRW wheat lost 8 1/2 cents at $6.16. March spring wheat dropped 7 3/4 cents to $7.00. Prices closed nearer the session lows.
Fundamental analysis: The winter wheat futures markets today saw some technical selling pressure and position evening ahead of Friday morning’s USDA monthly supply and demand and quarterly grain stocks report. Friday’s USDA data will likely see the main focus on corn and soybean production, but winter wheat seedings could impact wheat futures prices. A poll of Reuters analysts shows expectations of 35.8 million acres seeded, which would be down from 36.7 million acres last year. The accompanying Supply and Demand reports are expected to show little change from December, while quarterly stocks were estimated at 1.387 billion bushels.
A rally in the U.S. dollar index today was a negative “outside market” element for wheat futures.
World Weather Inc. today reported wheat in North America, Europe and the western CIS should be sufficiently protected from bitter cold temperatures by snow cover. “However, snow depths will be a little light in Montana and the western Dakotas, but very little, if any, permanent crop damage is expected as long as at least some snow cover is present,” said the forecaster. Montana temperatures dropping to the -40s to the -20s this weekend may raise the potential for winter crop damage even with a little snow on the ground.
USDA this morning reported U.S. wheat export sales of 128,100 MT during the week ended Jan. 4, which were down 3% from the previous week and down 77% from the four-week average. Net sales fell short of analysts’ pre-report expectations.
Technical analysis: Winter wheat futures bears have the firm overall near-term technical advantage. Prices are trending lower on the daily bar charts. 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 today’s high of $6.14 3/4 and then at $6.21 1/2. First support is seen at the January low of $5.91 1/4 and then at $5.75. 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 the January high of $6.42 and then at $6.50. First support is seen at this week’s low of $6.09 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 rose 118 points to 81.36 cents, marking a high-range close.
Fundamental analysis: Cotton futures surged to the highest level in nearly a month as prices continue to gradually climb higher on the daily bar chart. Today’s trade likely took some weak shorts out of the market ahead of the upcoming USDA reports tomorrow, which will include a fresh production estimate and an updated balance sheet. A Bloomberg poll of analysts showed U.S. production as falling 10,000 bales to 12.77 million bales, with estimates ranging from 12.5 to 12.95 million bales. Ending stocks are forecast to rise 10,000 bales to 3.11 million bales. The same survey shows very little change in the world balance sheet from December.
The market driving factor in cotton continues to be exports. USDA reported weekly cotton export sales of 264.5 RB for 2023-24, which were up 99% from the previous week and 46% from the four-week average. The market mover in this mornings report was export shipments, which were a marketing year high at 254.8 RB. Export shipments have paced above the five-year average for four weeks in a row, showing robust importer demand, which has underpinned the cotton market in recent weeks.
Technical analysis: March cotton futures surged to the highest close since Dec. 11 as traders positioned ahead of Friday’s reports. Prices continue to trade in a sideways technical pattern. Bulls are seeking to close prices above 82.00 cents, which is quickly backed by the 100-day moving average at 82.24 cents. Bulls are targeting the Dec. 8 high of 83.13 cents beyond that mark. Meanwhile, support stands at 81.00 cents, backed by the 20-day moving average at 80.48 cents, then the psychological 80.00 cents mark.
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.
