Crops Analysis | February 7, 2024
Price action: March corn fell 4 1/2 cents to $4.34 1/4, closing nearer the session low.
Fundamental analysis: Corn futures edged to a new contract low in early trade, with spillover pressure stemming from the soy complex, though another day of corrective gains in SRW wheat helped limit selling a bit. Overnight rains in interior southern and central Buenos Aires, Argentina have improved sentiments towards crop conditions in the area following an extended period of hot, dry conditions since late December. However, other areas have not received much rain, though World Weather Inc. indicates better rains will organize in the southwest Thursday and Friday before advancing northeast during the weekend and into early next week. Follow-up rain will be very important later in the month, and some forecast models are suggesting the rain is forthcoming.
Earlier today, the Energy Information Administration reported ethanol production of 1.033 million barrels per day (bpd) during the week ended Feb. 2, a 42,000 bpd (4.2%) increase from the previous week and 3.3% above the same week last year. Ethanol stocks rose 509,000 barrels to 24.779 million barrels.
The Census Bureau also released its December trade data today, which showed corn exports totaled 190 million bu. during the month, up from 141 million in November as well as 144 million in December 2022, and was the most for the month since 2007. The totals were similar to 2020-21 levels, with only 10% of the volume to China.
In addition to weekly export sales data, USDA will also produce its monthly supply and demand update. Traders are anticipating net sales to have ranged between 600,000 MT and 1.3 MMT during the week ended Feb. 1. Meanwhile, only minor changes are expected to U.S. ending stocks, though South American production figures will garner more attention. A Reuters poll indicates analysts expect Argentine corn production to increase slightly, while Brazilian production is expected to decline more that 2.6 MMT. Moreover, Conab will also update Brazilian production numbers a few hours before USDA’s update at 11 a.m. C.T.
Technical analysis: March corn ended the session near today’s fresh contract low with bears securing a firm grasp on the near-term technical advantage. However, selling was limited by support at $4.33 1/2, while additional support lies at $4.28 3/4, then again at $4.25, $4.16 and $4.00. Conversely, resistance begins at $4.40 3/4, then at the 10- and 20-day moving averages of $4.44 and $4.46 1/4, then at $4.50, and the 40- and 100-day moving averages of $4.59 1/4 and $4.79 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 fell 10 1/2 cents to $11.89, near mid-range and hit an eight-month low. March soybean meal dropped $7.60 to $351.20 and nearer the session low. March bean oil closed up 82 points at 46.76 cents.
Fundamental analysis: The soybean and meal futures market saw technical selling pressure today and were also pressured by a drop March corn futures prices to a new contract low. Soybean oil was supported today by short covering and by spreaders selling meal and buying bean oil.
The soybean bulls got no traction today from reports Argentina’s core zone soybean crops are expected to have a 20% to 30% decline in yields in early sown areas due to last week’s extreme heat. World Weather Inc. today said Argentina soybean regions received significant rain the past two days in central Buenos Aires with relief to dryness. However, “extremely warm to hot temperatures in other areas of Argentina and very short topsoil moisture coupled with declining subsoil moisture have increased crop stress and is threatening production potential. Rain in this coming week will be extremely important for Argentina crops,” said the forecaster. Meantime, Brazil’s rising crop stress in the southwest “has not reached a critical point yet and there may be timely showers later this week and into next week to protect production potential,” said the forecaster, adding greater rain should fall in southern Brazil Feb. 15-21.
Thursday morning’s weekly USDA export sales report is expected to show U.S. soybean sales of 400,000 to 1 million MT for the 2023-24 marketing year, and sales of zero to 50,000 MT in the 2024-25 marketing year.
Traders today were also positioning ahead of Thursday morning’s USDA February supply and demand report. A Reuters poll showed analysts anticipate U.S. soybean ending stocks of 284 million bu., which would be a 4 million bu. increase from January’s estimate. Analysts expect Brazil’s soybean production to decline from January’s estimate of 157 MMT to 153.15 MMT. Argentina’s production is anticipated by the trade to rise 840,000 MT to 50.84 MMT.
Technical analysis: The soybean bears have the solid overall near-term technical advantage. A 2.5-month-old downtrend is in place on the daily bar chart. The next near-term upside technical objective for the soybean bulls is closing March prices above solid resistance at $12.50. The next downside price objective for the bears is closing prices below solid technical support at $11.50. First resistance is seen at this week’s high of $12.05 1/2 and then at last week’s high of $12.23. First support is seen at today’s low of $11.79 1/4 and then at $11.65.
The soybean meal bears have the solid overall near-term technical advantage. A 2.5-month-old downtrend is in place on the daily bar chart. The next upside price objective for the meal bulls is to produce a close in March futures above solid technical resistance at $380.00. The next downside price objective for the bears is closing prices below solid technical support at $325.00. First resistance comes in at $358.00 and then at this week’s high of $362.60. First support is seen at the January low of $346.20 and then at $340.00.
Soybean oil bears have the solid overall near-term technical advantage. Prices are in a 2.5-month-old downtrend on the daily bar chart. The next upside price objective for the bean oil bulls is closing March prices above solid technical resistance at 50.00 cents. Bean oil bears' next downside technical price objective is closing prices below solid technical support at the contract low of 44.49 cents. First resistance is seen at 47.50 cents and then at 48.00 cents. First support is seen at today’s low of 45.33 cents and then at this week’s low of 44.51 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 rose 7 cents to $6.02, closing above the 10- and 20-day moving averages, while HRW fell 1/4 cent to $6.18 1/4. March spring wheat rose 3 cents to $6.96 1/4.
Fundamental analysis: Wheat futures extended Tuesday’s corrective gains, though overhead resistance continued to curb upside momentum. A weaker U.S. dollar lent support, though weak demand for U.S. supplies continues to hover over the complex. Meanwhile, market participants are waiting for USDA’s monthly supply and demand updates, Thursday morning, though little changes are expected for both U.S. and world ending stocks.
USDA will also produce weekly export sales data for the week ended Feb. 1 ahead of Thursday’s open. Traders are expecting net sales to range from 275,000 to 550,000 MT. Last week, net sales totaled 322,516 MT, down 29% from the previous week and 9% from the four-week average.
World Weather Inc. reports occasional shower activity is expected in HRW areas, with some pockets of enough precip for a rise in soil moisture, though temps will continue to be unusually warm most often, which will further warm the soil and reduce winter hardiness for crops. The forecaster notes beneficial precip is expected to impact the northern portion of the northern Plains today through Thursday which will provide some needed moisture and greater snow cover, while precip will be limited in the south.
Technical analysis: March SRW ended the session above the 20- and 10-day moving averages of $5.97 ½ and $5.99 1/2 but was ultimately limited by the 100- and 40-day moving averages of $6.03 1/4 and $6.06 3/4. A move above the area, however, will face additional resistance at $6.20, then at the Dec. 6 high of $6.49 1/2. Conversely, initial resistance will now serve at the 10- and 20-day moving averages, then at $5.89 1/2, $5.84 and $5.80.
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 93 points to 88.47 cents, nearer the session high and hit a four-month high.
Fundamental analysis: The cotton market saw more buying interest amid the booming U.S. stock market that saw the major indexes hit record highs again today. Technical buying was also featured amid bullish charts.
World Weather Inc. today said a lack of precipitation in West Texas “has yet to prove to be a problem, although there is need for timely rain in the spring to support planting.” Wet conditions remain in the Texas Blacklands as well as the Coastal Bend region. The U.S. Delta and southeastern states are also “plenty moist,” said the forecaster. Argentina cotton crops have been stressed by excessive heat and dryness and relief is not likely for a few more days. However, some relief is expected beginning this weekend and lasting through next week, which should improve crop conditions.
Traders are awaiting Thursday morning’s weekly USDA export sales report, which has shown overall solid U.S. cotton sales the past few weeks. Then comes the midday release of the USDA monthly supply and demand report for February. Traders look for only minor changes in cotton numbers from the January report. Later this month comes the annual National Cotton Council meeting (Feb. 16-18), when U.S. acreage and production forecasts will be issued. Also, the USDA Ag Outlook conference starts next week (Feb. 15-16).
Technical analysis: The cotton futures bulls have the solid overall near-term advantage. Prices are in a six-week-old uptrend on the daily bar chart. However, the market is now short-term overbought and due for a corrective pullback soon. The next upside price objective for the cotton bulls is to produce a close in March futures above technical resistance at the September 2023 high of 90.29 cents. The next downside price objective for the cotton bears is to close prices below solid technical support at 85.00 cents. First resistance is seen at today’s high of 88.68 cents and then at 89.00 cents. First support is seen at today’s low of 87.21 cents and then at this week’s low of 86.51 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.
