Crops Analysis | January 25, 2024
Price action: March corn fell 1/2 cents to $4.51 3/4 but notched a high-range close.
Fundamental analysis: The grain complex ultimately succumbed to pressure stemming from heavy selling in the soy complex and resumed U.S. dollar strength, though rallying crude oil ultimately underpinned prices. Outside markets reacted accordingly after an unveiling of U.S. economic data, which revealed faster-than-expected growth in the last quarter and as tensions in the Red Sea continue to upset global trade.
As producers in Brazil are expected to reduce safrinha corn crop acres, weather in Argentina will be increasingly important as traders look to the country to offset Brazil’s expected production decline. Following a period of improved weather, Argentina has recently turned drier and is expected to dry down over the next ten days. World Weather Inc. reports there will be a need for widespread rain soon as both the far northern and southern parts of the nation will experience moisture stress. The forecaster notes rain during the first week of February will be critically important for parts of central and southern Buenos Aires and La Pampa where the driest areas are today and will be throughout the next ten days. Meanwhile, Brazilian production could continue to drift lower if weather during the ideal time to plant safrinha corn in central areas of the country proves iffy. The ideal window typically lasts through the third week of February, while southern Brazil’s is a bit earlier due to the potential for season-ending frosts.
Earlier today, USDA reported weekly export sales of 954,800 MT during the week ended Jan. 18. Net sales were down 24% from the previous week, but up 14% from the four-week average. Traders were expecting sales to range from 725,000 MT to 1.4 MMT. Top purchasers during the week included Mexico, unknown destinations and Colombia.
Technical analysis: March corn futures were able to turn from earlier lows, supported by the 10-day moving average of $4.47 1/2, though resistance at $4.54 1/2 and the 20-day moving average of $4.56 1/4 curbed a move higher. However, a move above initial resistance could find increased short-covering efforts towards resistance at $4.61, then the 40-, and 100-day moving averages of $4.68 1/4 and $4.84 3/4. Conversely, initial support will remain at the 10-day moving average, with further support serving at $4.43 3/4, $4.41 1/2 and last week’s low of $4.36 3/4.
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 plunged 17 1/4 cents to $12.23 cents, though settled well off session lows. March soymeal dropped $5.10 to $358.20, settling near session lows. March soyoil slipped 79 points to 46.53 cents, the lowest close since May.
Fundamental analysis: The soybean complex underwent heavy selling pressure most of the session, sending soybeans back below support levels as traders took advantage of selling the recent rally. March soybeans gave back most of this week’s gains and reinforced the bearish technical outlook on prices. Crush values have faced extreme volatility over the past several weeks, trending lower from late November highs. That has done little to hamper crushers from running at capacity, but continued depressed values could limit crusher willingness, especially once Argentina begins their harvest in the spring. Surging outside markets did little to support soybeans today, as crude oil futures surged to a nine-week high on better-than-expected GDP data released this morning.
Rain was common from northern Mato Grosso to Bahia and Espirito Santo Wednesday, restoring some of the topsoil moisture that was lost due to recent dryness, World Weather Inc. says. Frequent rain is expected over the coming week to ten days in much of northern Brazil, improving crop conditions but slowing down fieldwork. Meanwhile, Mato Grosso do Sul and western Sao Paulo to Rio Grande do Sul are expected to see infrequent and light rain with drying expected, though the soil has enough moisture to continue crop development over the period, the forecaster says.
USDA reported net soybean sales of 560,900 MT for the week ended Jan. 18, which were down 28% from the previous week but up 6% from the four-week average, which is dragged lower by the depressed figures from the holiday shortened weeks in late December and early January. Sales were one of the lowest for the marketing year. Net sales missed the expected pre-report range of 700,000 MT to 1.2 MMT.
Technical analysis: March soybean futures underwent heavy selling Thursday, further cementing that the near-term technical advantage is held by the bears. Prices fell below the 10-day moving average, currently at $12.32, marking that area as initial resistance. Above that mark, bulls are eyeing $12.40 1/4, then $12.49, which capped gains the last two sessions. Support stands at $12.15 1/2, $12.05 3/4, then the recent for-the-move low at $12.01.
March soymeal failed to maintain recent corrective gains and turned lower. Bulls are eyeing initial resistance at $361.5, which has acted as in important pivot for the last two weeks. Further resistance stands at $362.3, then $366.8. Meanwhile, support stands at today’s low of $357.0, $355.8, then the recent low at $351.4.
March soyoil continues to face methodical selling on the daily bar chart, giving the technical advantage to the bears. Bulls are seeking to overcome resistance at 47.32 cents, with further backing at 47.61 cents, then 48.808 cents. Prices made a fresh for-the-move low today, which will mark initial support at 46.12 cents, which coincides with the May low close at 46.11 cents. Further support stands at 45.68 cents, then the psychological 45.00 cent mark.
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 rose 1 1/2 cents at $6.12 1/4 and near mid-range. March HRW wheat closed up 11 1/4 cents at $6.37, nearer the session high and hit a two-week high. March spring wheat futures rallied 4 1/2 cents to $7.09, near session highs.
Fundamental analysis: The winter wheat futures markets today saw mild buying interest, led by HRW, amid bullish outside market forces that included a rally in crude oil prices and U.S. stock indexes this week hitting record highs, prompting keener risk appetite in the general marketplace. However, a stronger U.S. dollar index today and languishing corn futures prices did somewhat limit buying interest in wheat futures.
USDA this morning reported U.S. wheat sales of 451,400 MT during the week ended Jan. 18, down 36% from the previous week but up 45% from the four-week average. Sales were within pre-report expectations.
World Weather Inc. today said no serious changes to world wheat conditions have occurred recently and none are expected for a while. Most of the forecast weather is similar to that of the recent past days, “leaving little incentive for weather-related commodity price change,” said the forecaster. U.S. wheat conditions have not changed much recently but there is still some concern about possible crop damage from the bitter cold in the northwestern Plains during early January.
Technical analysis: Winter wheat futures bears have the overall near-term technical advantage. However, six-week-old downtrends on the daily bar charts for SRW and HRW have been negated to suggest near-term market bottoms are in place. SRW bulls' next upside price objective is closing March prices above solid chart resistance at $6.50. The bears' next downside objective is closing prices below solid technical support at the January low of $5.73 1/4. First resistance is seen at today’s high of $6.17 1/4 and then at $6.25. First support is seen at Wednesday’s low of $5.96 1/2 and then at this week’s low of $5.87. 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 $5.86 3/4. First resistance is seen at $6.40 and then at $6.50. First support is seen at $6.25 and then at $6.15.
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 rose 36 points, settling at 85.76 cents, near the session mid-point and marking the highest close since October.
Fundamental analysis: Export sales falling back near average levels did little to deter cotton bulls today as futures continue to march higher on the daily bar chart. A surging crude oil market helped support cotton prices today as well as nearby crude futures surged to a nine-week high, seemingly boosted by U.S. GDP coming in above expectations at 3.3% on an annual basis. Traders expected GDP at 2%, so this morning’s Q4 reading implied the economic state of the U.S. is better than expected, increasing risk appetite in the overall marketplace.
Cotton futures continue to perform well despite continued fruitful growing conditions in the southern hemisphere. Australia has seen what many producers are calling the greenest summer they can remember. Brazil’s planting is advancing well with timely rain, which is expected to continue over the coming weeks, says World Weather Inc. Australia and Brazil together grow considerably more cotton than the U.S. and both export nearly all of their production. That could limit U.S. cotton exports once they begin harvesting in the spring and early summer.
USDA reported cotton export sales of 211,700 RB, about half of a week ago. Weekly exports dropped as well despite running above 200,000 RB for five consecutive weeks.
Technical analysis: March cotton futures continue to show impressive strength as bulls continue to control the technical advantage, with prices trading near three-month highs. Bulls’ next target is closing prices above 86.12 cents, further backing stands at 86.90 cents, then 87.50 cents. Initial support stands at 85.00 cents, with further backing from 84.60 cents, then the psychological 84.00 cent 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.
