Crops Analysis | January 26, 2024
Price action: March corn futures lost 5 1/2 cents before settling at $4.46 1/4 but marked a 3/4 cent gain on the week.
5-day outlook: Corn futures plunged, led lower by sinking soybean futures. Despite rallying for five consecutive sessions late last week and into this week, corn futures quickly turned lower, giving up nearly all of this week’s gains today. Bulls are seeking to hold prices above the Jan. 18 low of $4.36 3/4 if weakness persists into next week, with little support aside from $4.42 1/4 on the way. March futures failed to overcome prior support, turned resistance stemming from the early January lows at $4.51 3/4 and recent corrective buying efforts have added fresh longs to the market, which could force a fresh contract low next week. Technical selling pressure is likely to persist over the coming week, though futures remaining near oversold levels could limit the downside.
30-day outlook: Brazilian safrinha corn planting will likely dictate the direction of corn over the coming month. Brazilian safrinha corn planting has begun well ahead of last year’s pace due to early maturing soybeans due to the early season drought. Many private analysts see acres falling well below year ago as both seed and fertilizer purchases are down. USDA current forecasts Brazilian corn production at 127 MMT, though many private analysts, including Dr. Michael Cordonnier, have a much more conservative estimate. Cordonnier currently estimates Brazilian corn production at 115 MMT and maintains a lower bias going forward. As Brazil continues to plant, a better estimate will be made on safrinha acres, which could give key insight to just how far the Brazilian corn estimate will fall from where the USDA currently sees it.
90-day outlook: The coming quarter will provide much needed clarity on South American production, but before too long attention will turn back to the domestic situation and the U.S. balance sheet. U.S. corn exports are now in the spotlight as both export sales and shipments should increase into early spring. As the corn balance sheet is expanding from record production and yield, the market needs to find a place for those extra bushels. The last two weeks of impressive sales are a good start, though more will need to be done to provide a significant shift in futures. March will bring the USDA Prospective Plantings Report. We expect acres to fall year-over-year due to relatively high soybean prices, though record anhydrous application in the fall due to the early harvest challenges that claim. If acres fall as we expect, it could provide a much-needed boost to both old and new-crop futures.
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 13 3/4 cents to $12.09 1/4 and gave up 4 cents on the week. March soymeal plunged $9.20 to $349.00 and lost $7.50 week-over-week. March soyoil rose 40 points to 46.93 cents and gained a paltry 3 points on the week.
5-day outlook: Soybeans extended Thursday’s weakness amid improved sentiments toward South American supply prospects. Soymeal led the complex lower the end the week, with a weekly export sale of 100,000 MT to unknown destinations during 2023-24 ultimately lacking the merit to offset selling pressure. However, weather across Brazil and Argentina will continue to be closely monitored into next week. World Weather Inc. reports Brazil weather will be wettest in the north for another week, with local flooding possible, though no serious crop damage is expected. Meanwhile, a return of drier conditions in Argentina could pose a threat to later maturing soybeans.
30-day outlook: While market participants are seemingly satisfied that Argentina’s soybean production will largely offset Brazil’s shortfalls from a rough start to the season amid persisting hot, dry conditions, traders will continue to tune in for production updates. Earlier in the week, Dr. Michael Cordonnier reported an unchanged production outlook at 149 MMT for Brazil but maintained a neutral-to-lower bias going forward. Harvest efforts were estimated to be 6% complete as of late last week, ahead of a year ago due to a shortened growth cycle for early maturing soybeans and lower yields. Cordonnier also left his Argentine soybean estimate unchanged at 52 MMT but continues to hold a neutral to higher bias towards production going forward. However, he noted a warmer- and dryer-than normal forecast could cause moisture stress in southern areas such as La Pampa and Buenos Aires as crops are entering their reproductive phase.
90-day outlook: U.S. export activity will continue to garner attention as the marketing year progresses, despite increased probability of importing countries looking to fresh South American supplies to fulfill their needs. To date, soybean sales have consistently trailed year-ago amid a reduced Chinese hog population following increased slaughter due to depressed prices and low crush margins. On Thursday, USDA reported weekly 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. Sales missed pre-report expectations quite notably, though China was the top purchaser of the week, along with Mexico and Indonesia.
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 futures fell 12 cents to $6.00 1/4 and nearer the session low. For the week, March SRW rose 7 cents. March HRW wheat dropped 12 1/4 cents to $6.24 3/4 after hitting a new high for the month early on. For the week, March HRW gained 16 3/4 cents. March spring wheat futures fell 5 1/2 cents to $7.03 1/2 but picked up 8 cents on the week.
5-day outlook: The winter wheat futures markets today saw corrective price pullbacks from this week’s gains. Today’s losses and low-range closes suggest there will be some follow-through selling pressure early Monday. Losses in the corn futures market today also encouraged the wheat market bears to play the short sides.
Next week wheat traders will continue to monitor weather patterns in U.S. wheat country. World Weather Inc. today said that in hard red winter wheat areas a beneficial rain event is expected in the southern half of the Plains today. After that, several days of dryness are expected before a likely storm system Feb. 2 – 4 that brings more beneficial precipitation. No significant cold surges are expected in the next two weeks. Greater cooling is a possibility in the middle portion of February. Meantime, in the northern Plains, conditions will be mostly dry through next Thursday. Greater snow and a little rain are likely in the second week, Feb. 2-9. Temperatures will mostly be above average the next couple weeks.
30-day outlook: Wheat futures in the coming weeks will continue to take daily price direction from corn and soybean futures. With corn futures prices hovering near last week’s three-year low, that market shows little hope of sustaining a rally in the coming few weeks. Same goes for soybeans. Nearby bean futures today had their lowest weekly close since early November of 2021 as soybean and meal prices continue to trend down.
90-day outlook: USDA Thursday 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. For the wheat futures markets to start to sustain any price uptrends in the coming few months, U.S. sales abroad will have to continue to up-tick. The appreciation of the U.S. dollar on the foreign exchange market in January is not helping U.S. wheat export sales prospects in the near term.
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 plunged 139 points to 84.37 cents but picked up 42 points on the week.
5-day outlook: Cotton futures ended the week handing back a decent portion of the week’s gains on obvious profit-taking efforts into the weekend, despite a weaker U.S. dollar and crude oil strength. Selling was likely provoked by an end-of-week downturn in equities following a move to record highs in both the S&P and Nasdaq indexes earlier in the week. Over the next several days, cotton futures will likely continue to closely track equities, though near-term overbought conditions could ignite additional corrective selling, which would be tested by support at the near convergence of the 100- and 10-day moving averages.
30-day outlook: Projected plantings will be a market focus in the next month as traders prepare for the National Cotton Council’s first look at 2024-25 acres, with U.S. weather forecasts then taking the wheel. World Weather Inc. reports while West Texas received a little rain this week, the precip has not and will not change the moisture profile in a significant manner, though other areas in Texas are more favorably moist with parts of the upper coast too wet after recent rain. More rain is needed in South Texas. Meanwhile, Delta crop areas have become too wet and additional rain is expected this weekend, though drier weather is expected next week and then rain will resume again in early February. The southeastern U.S. is favorably moist, while southern California and Arizona will get some needed rain soon.
90-day outlook: U.S. export sales have proven robust in recent weeks but trailed lower during the week ended Jan. 18. Net sales for the week totaled 207,00 RB, which were down 51% from the previous week and 30% from the four-week average. Shipments during the week also slowed, to 142,200 RB, down 45% from the previous week and 30% from the four-week average. Traders will continue to monitor U.S. export business as China’s economy struggles and global supply increases.
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.
