Crops Analysis | February 6, 2024
Price action: March corn futures closed down 4 cents at $4.38 3/4, near the session low and closed at a contract-low close.
Fundamental analysis: The corn futures market today fell victim to more technical selling and amid risk appetite in the general marketplace that is presently not robust. Bulls daily “outside market” forces (weaker U.S. dollar index and firmer crude oil prices) could not help the corn market bulls today, nor could mild gains in soybean and wheat futures. This highlights the weak overall posture of the corn futures market.
World Weather Inc. today said that in Brazil corn regions, drying in the south will maintain crop moisture stress in western Parana, Paraguay and areas south into western Rio Grande do Sul through Saturday. Mato Grosso do Sul will get relief after recent drying and crop stress. Areas farther to the north will get sufficient rain to maintain favorable crop and field conditions. In Argentina, net drying with hot temperatures will continue today through Wednesday, further stressing crops. There will be a few thunderstorms, mainly in far southern areas, but this is unlikely to counter evaporation outside of some localized fields. The rain will increase much more Thursday in the south. The meaningful rain occurs in central areas Friday and potentially in north, too. Rounds of thunderstorms will continue through Monday, leading to a rise in topsoil moisture and a reduction in crop stress, said the forecaster.
Traders are looking ahead to Thursday’s February USDA monthly supply and demand report. U.S. corn stocks are seen by the trade at 2.134 billion bushels, according to the average of a Dow Jones Newswires survey. That compares to a reading of 2.162 billion bushels in the January USDA report. Traders will also closely scrutinize the agency’s updated Brazil and Argentina corn-production numbers. Pro Farmer’s South American crop consultant, Dr. Michael Cordonnier, left his Brazilian corn crop estimate unchanged at 115 MMT, noting a lower bias going forward. His Argentine corn crop estimate was unchanged at 56 MMT, noting a neutral bias. Brazil’s CONAB also comes out with its latest crop data on Thursday morning.
Technical analysis: The corn futures bears have the solid overall near-term technical advantage. Prices are in a three-month-old downtrend on the daily bar chart. The next upside price objective for the bulls is to close March prices above solid chart resistance at $4.60. The next downside target for the bears is closing prices below chart support at $4.25. First resistance is seen at today’s high of $4.45 1/2 and then at $4.50. First support is at the contract low of $4.36 1/2 and then at $4.30.
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 rose 3 1/4 cents to $11.99 1/2, a near mid-range close. March soymeal fell $2.30 to $358.80, while March soyoil rose 61 points to 45.94 cents, each ending the session high-range.
Fundamental analysis: Soybeans posted mild gains for the second straight session, though soymeal pressure increasingly hovered over the complex as the session progressed. Traders are likely beginning to position ahead of USDA’s February World Agricultural Supply and Demand Estimates, due out Thursday at 11 a.m. CT. A Reuters poll indicates traders anticipate soybean ending stocks of 284 million bu., which would be a 4 million bu. increase from January’s estimate. World production and ending stocks will likely garner the most attention amid mixed weather conditions to date throughout South America. On average, analysts expect Brazil’s production to decline from January’s estimate of 157 MMT to 153.15 MMT, while Argentina’s is anticipated to rise 840,000 MT to 50.84 MMT. Meanwhile, global ending stocks are expected at 112,48 MMT, down from January’s estimate of 114.6 MMT.
In contrast to USDA, South American crop consultant Dr. Michael Cordonnier continues to forecast a Brazilian soybean crop of 149 MMT and indicates a neutral to lower bias going forward. Cordonnier reports weather has been a “mixed bag,” with heavy rainfall in northern Brazil, while southern areas received only light amounts. Forecasts are calling for much of the same in the near-term, though temps are expected to increase in parts of central Brazil as the Brazilian National Weather Service (Inmet) is forecasting above normal temps in west-central, northern and northeastern Brazil during February.
Dr. Cordonnier also left his Argentine soybean production estimate unchanged at 52 MMT. He noted a “tentative” neutral bias going forward in anticipation of this week’s forecasted rains, which will be critical to maintaining current yield projections as crops are in their critical reproduction phase.
Technical analysis: March soybeans edged briefly above initial resistance around $12.03 1/4, but additional resistance from the 10- and 20-day moving averages of $12.09 1/4 and $12.18 ultimately denied a close above the area. A move above the area, however, will face additional resistance at the 40-day moving average, with strong resistance serving at the convergence of the 100- and 200-day moving averages of $13.09 1/2. Meanwhile, initial support will continue to serve at $11.91 1/4, then at $11.84 1/4 and Monday’s low of $11.79 1/2, backed by the May 31 low of $11.45 1/4.
March soymeal spent much of the session pivoting around the 10- and 20-day moving averages of $359.50 and $360.80, though bears succeeded in forging a close below both levels. Initial support will serve at $355.70, then at $350.30. $347.40 and the Jan. 29 low of $346.20. Conversely, initial resistance will serve at the 10- and 20-day moving averages, then at $364.00, $366.90, $372.30, backed by the 40-, 200- and 100-day moving averages of $375.10, $387.60 and $390.60.
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 futures rallied 4 3/4 cents to $5.95, closing nearer session highs. March HRW futures rose 4 1/2 cents to $6.18 1/2. March spring wheat rose 2 1/4 cents to $6.93 1/4.
Fundamental analysis: Wheat futures posted modest corrective gains but continue to struggle garnering much momentum either way. Wheat continues to show relative strength compared to corn and soybeans but are unlikely to post a significant winter rally without help from outside markets. This week’s WASDE is likely to show little change in the wheat balance sheet, though traders will closely eye the export estimate for any changes, as that will be the leader for any potential changes. The U.S. dollar index modestly supported prices as it fell from recent highs due to corrective buying in the bond market, weakening interest rates.
Recent abnormally warm temperatures have gotten rid of much of the snow cover in U.S. winter wheat acres, reducing the winter hardiness of crops, World Weather Inc says. Precipitation throughout this week is boosting soil moisture, further reducing the portion of HRW acres covered by drought. Temperatures are expected to trend colder in the second week of the outlook, though are unlikely to damage drops.
Technical analysis: March SRW futures posted corrective gains. Bears continue to hold control of the near-term technical advantage, though bulls are attempting to forge another higher low on the daily bar chart. Resistance stands at $5.98, quickly backed by $6.00, then $6.03. Bulls are seeking to hold support at $5.90 1/4, $5.86 3/4, then $5.82.
March HRW futures saw corrective gains as well, though bears continue to hold the near-term technical advantage. Initial resistance stands at $6.21 1/4, which capped gains today. Further resistance stands at $6.27 then $6.34 1/2. Support stands at $6.14, $6.07 1/4, then the psychological $6.00 mark.
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 50 points to 87.54 cents, forging a high-range close.
Fundamental analysis: March cotton extended gains for the sixth straight session amid outside market support and spillover strength from gains in cocoa futures, which notched record highs today. Lending additional demand optimism to the natural fiber was a surge in China’ stock market, as the Shanghai Composite index made its largest daily gain since March 2022. However, momentum was likely curbed by traders positioning ahead of USDA’s World Agricultural Supply and Demand Estimates, due out Thursday, though only marginal changes are expected, according to a Bloomberg poll.
Also on Thursday, USDA will produce its weekly Export sales data, which has proven robust over the past several weeks.
Technical analysis: March cotton traded the highest intraday level since mid-October, but ultimately faded from the session high into the close. Initial resistance will serve at today’s high of 87.83 cents, then at 87.94 cents, 88.43 cents and the Sept. 28 high of 90.29 cents. Meanwhile, support will continue to serve at 87.00 cents, backed by 86.55 cents and the 10-, 20- and 100-day moving averages of 85.84 cents, 84.04 cents and 83.37 cents.
What to do: Get current with advised sales.
Hedgers: You should be 70% priced in the cash market on 2023-crop. You should have 10% of expected 2024-crop production sold for harvest delivery.
Cash-only marketers: You should be 70% priced on 2023-crop. You should have 10% of expected 2024-crop production sold for harvest delivery.
