Crops Analysis | February 2, 2024
Price action: March corn futures fell 4 1/2 cents to $4.42 3/4, marking a 3 1/2 cent loss on the week.
5-day outlook: Corn futures fell under pressure from the sinking soybean market, though showed limited volatility to end the week. Volume in ag markets was particularly light today, which is concerning as it did not take much active selling to drive prices significantly lower. Bulls inability to mark a meaningful close above the 10-day moving average, and rejecting off that level today, foretells likely continued weakness over the coming week. Bulls will seek to hold the contract low at $4.36 1/2 to signal a potential bottom is in place. Next week’s USDA Supply and Demand reports will give a look into the most recent USDA projections. Exports continue to be the largest question mark on the balance sheet, though data for both Feed and Residual and Ethanol point to potential increases in those classes. It will take a significant shift on the demand side of the balance sheet to bring ending stocks below the key 2.0-billion-bushel mark, though. Attention will stay on the most recent South American crop estimates.
30-day outlook: Safrinha planting is underway in Brazil, which accounts for about three-quarters of their corn production. Planting continues to run well ahead of a year ago, though acres are seen as falling sharply. The average price for corn in Mato Grosso was quoted at the equivalent to $4.00 per bushel. Farmers would need to average 115 bushels per acre to break even, despite the average yield in Mato Grosso in the 2022-23 record being 102 bushels per acre, according to Dr. Michael Cordonnier. Production is seen as falling from last year’s record, with crop consultant Dr. Michael Cordonnier estimating the crop at 115 MMT, which is well below the current USDA estimate at 127 MMT, though that will likely be adjusted lower next week. As funds have been persistent sellers of corn, it will take a significant shift to change their tune, but a shrinking Brazilian crop could provide a bullish catalyst in the coming month.
90-day outlook: Springtime is quickly approaching, most recently noted by Punxsutawney Phil not seeing his shadow and thus projecting an early spring, which will turn the attention to new crop estimates over the coming quarter. Most estimates thus far indicate acres in the low- to mid-90-million-acre range, falling slightly from 94.6 million acres last year. While corn futures are not doing a great job of bidding for additional acres at the moment, the quick harvest and mild weather last fall allowed for record anhydrous applications, essentially locking in corn acres, which is likely to keep acres from falling too much year-over-year, despite corn’s relative cheapness to soybeans. Corn futures are likely to compete for acres over the coming quarter as attention returns to domestic production.
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 14 3/4 cents to $11.88 1/2, a near eight-month-low close and lost 20 3/4 cents on the week. March Soymeal fell $4.90 to $356.80 but gained $7.80 from a week ago. March soyoil fell 87 points to 44.73 cents and lost 220 points week-over-week.
5-day outlook: Soybean futures extended Thursday’s losses, eliminating early-week gains in their entirety, as demand woes and fresh South American supplies limited buying. Meanwhile, after spending the week mostly subdued, a surging U.S. dollar added insult to injury to future demand prospects. The dollar caught a bid following much-stronger-than-expected data in the Labor Department’s U.S. Jobs Report, indicating the U.S. economy is seemingly adapting to elevated interest rates. Traders will continue to monitor dollar movement next week, along with South American weather. Brazil’s weather outlook is mostly favorable into next week, though rains in southern Brazil, Paraguay and Argentina have been minimal and combined with hot temps in areas, which has increased crop stress in areas. World Weather Inc. reports relief late next week and into the following weekend is being consistently predicted for the most affected areas of Argentina, though confidence remains low because of the presence of high pressure in various locations across the continent.
30-day outlook: In the next month, traders will begin to prepare for USDA’s Prospective Plantings Report at the end of March. The report has a historical tendency to set the stage for increased market volatility, oftentimes due to last minute acreage bids as producers begin to sow their crops amid the arrival of spring across the U.S. As such, mother nature will dictate planting and crop conditions henceforth.
South American production will also have an increased focus over the next month as traders attempt to grasp soybean production in Brazil following a shaky start to the season. South American crop consultant Dr. Michael Cordonnier estimates Brazilian production at 149 MMT but notes a neutral-to-lower bias going forward due to disappointing yields across the country. Cordonnier also left his Argentine soybean estimate unchanged at 52 MMT, noting a neutral bias going forward amid increasing concerns of persisting hot, dry weather as the crop enters its reproduction phase.
90-day outlook: U.S. exports have proven lackluster, which is likely to persist as fresh South American supplies hit the world market at a bargain price. Earlier in the week, Agricensus reported three Brazilian soybean cargoes were traded a week ago to a U.S. East Coast crusher, in what is an atypical movement for this time of year. While it isn’t unusual for East Coast purchases to be made, they typically occur around May. The transaction was largely attributed to the unusual presence of heavy discounts for physical Brazilian soybeans versus Chicago soybeans, which reflects how well-supplied much of the world’s agriculture complex currently is. A further indication of heavy discounts for Brazilian supplies was indicated in USDA’s weekly export sales data for the week ended Jan. 25, which showed U.S. sales a marketing-year low of 164,500 MT. Net sales were down 71% from the previous week and 64% from the four-week average.
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 1 3/4 cents to $5.99 3/4 and nearer the session low. For the week, March SRW lost 1/2 cent. March HRW wheat futures rose 4 1/4 cents to $6.25 and near mid-range. For the week, March HRW rose 1/4 cent. March spring wheat rose 3 3/4 cents to $6.99 3/4 but lost 3 3/4 cents on the week.
5-day outlook: The winter wheat futures markets continue to languish in sideways and choppy trading at lower price levels. Wheat traders next week will continue to look to the corn and soybean markets for direction. However, corn and soybeans remain in bearish technical postures, which does not offer much hope for the wheat market bulls in the near term. Improved state wheat condition ratings for January will not help the bulls’ case next week. Also, wide cash basis levels, with futures almost doubling average premiums over cash for this time of year, may also limit the upside potential for futures in the near term.
30-day outlook: Wheat traders will continue to monitor weather patterns in major global wheat regions. U.S. wheat crops are rated mixed, with concern over bitter cold damage in the northwestern Plains from early January. Crop conditions may improve in the spring in the Pacific Northwest because of improving soil moisture. Most of the Midwest crops and those in hard red winter wheat country are in good shape, though more moisture is needed in the high Plains. “Warming in the United States is reducing winter hardiness this week with frost coming out of the ground in many areas as far to the north as the southwestern Canada Prairies. Some greening and early season development is occurring in Texas and southern Oklahoma,” said the forecaster. Meantime, wheat conditions in most of the world are presently “holding at status quo.” Concern remains over the potential for spring flooding in the western CIS, while Europe crops are in mostly good shape. There is need for rain in Spain, Portugal and northwestern Africa. These dry areas should get some rain starting late next week, but it may not last long. China wheat is in good shape and poised for a favorable start to spring development. India’s wheat will benefit from some rain in the north over the coming week, but more will be needed to induce the best production potential.
90-day outlook: USDA Thursday reported weekly U.S. wheat export sales of 322,500 MT for the 2023/2024 marketing year--down 29 percent from the previous week and down 9 percent from the prior 4-week average. U.S. wheat sales abroad will likely have to improve in the coming months for the wheat futures markets to sustain significant price uptrends. Today’s surge in the U.S. dollar index to a 2.5-month high only makes U.S. wheat prices less competitive on the world trade markets.
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 62 points to 87.11 cents and gained 274 points on the week.
5-day outlook: March cotton pressed higher for the fourth straight session, trading at the highest intraday level since mid-October. The extended move came despite a rally in the U.S. dollar following stronger-than-expected data in today’s U.S. Jobs Report. However, equity strength largely offset pressure from the dollar and fading crude oil prices, ultimately allowing the natural fiber to finish the fourth straight week higher, and the most consecutive weekly increases in two years. In the next week, cotton will continue to take direction from equities, though a reach into near-term overbought territory could ignite a corrective pullback.
30-day outlook: The National Cotton Council will produce its initial 2024-25 acreage estimates during its annual meeting, set to begin Feb. 16, giving traders the first look at domestic production, though weather will quickly become the price driver as producers begin to plant in earnest. Current weather conditions indicate West Texas is unlikely to receive much precip in the foreseeable futures, though the region’s moisture profile is not far off from normal, notes World Weather Inc. The forecaster states South Texas needs a little rain near the lower Rio Grande Valley, while the Delta, Texas Blacklands and southeastern states are plenty wet. The far western U.S. will get some timely rain in the next two weeks which will also be welcome and beneficial.
90-day outlook: U.S. cotton exports continue to prove robust, with USDA’s weekly export sales data reflecting sales at a marketing-year high of 362,900 RB during the week ended Jan. 25. Net sales were up noticeably from the previous week and 89% from the four-week average. China was the primary purchaser during the week, securing (183,700 RB), followed by Pakistan (53,000 RB) and Vietnam (34,500 RB). Traders will continue to closely monitor weekly sales data to gauge global demand prospects as the marketing year progresses.
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.
