Crops Analysis | February 8, 2024

Crops Analysis
Crops Analysis
(Pro Farmer)

Corn

Price action: March corn fell 1 cent to $4.33 1/4, a contract-low close.

Fundamental analysis: March corn marked a fresh contract low following USDA’s update, which was bearish against expectations, but remained relatively poised despite selling across the wheat and soy complexes. Helping limit losses were surging crude oil futures amid rising concern of a broadening conflict in the Middle East after Israel rejected a ceasefire offer from Hamas. Meanwhile, USDA reported a daily sale of 200,000 MT to Columbia during 2023-24 and steady weekly export sales for the week ended Feb. 1. Net sales during the week totaled 1.22 MMT, which rose 1% from the previous week and 25% from the four-week average. Sales were near the upper end of the pre-report range from 600,000 MT to 1.3 MMT.

In its monthly World Agricultural Supply and Demand Report, USDA raised corn carryover by 10 million bu. from last month to 2.172 million bu., which would be the highest since 2018-19. The only change was a 10-million-bu. cut to projected food, seed and industrial use. Global carryover was pegged at 322.1 MMT for 2023-24, down 3.2 MMT from last month, but up 21.8 MMT from year-ago.

Earlier this morning, Brazilian crop estimating agency Conab lowered its corn crop forecast 3.9 MMT to 113.7 MMT, down 13.8% from a year ago, with 3.1 MMT of the decline due to a smaller outlook for safrinha production. February is the first month Conab incorporates field observations into its safrinha crop forecast. Conab also reduced its 2023-24 export projections by 3 MMT to 32 MMT.

World Weather Inc. reports central Buenos Aires has received 3 days of rain, which has steadily improved the summer crop, though other areas of the country have not received much significant rain recently and warms have been very warm to hot. The forecaster indicates rains will become better organized in the southwest today and Friday before advancing to the northeast during the weekend and into early next week.

Technical analysis: March corn forged a fresh contract low following USDA’s monthly update and ended the session at contract low close. Initial support will remain at $4.31 1/2, backed by $4.28 3/4, $4.25, $4.15 and $4.00. Conversely, initial resistance stands at $4.38, then at the 10- and 20-day moving averages of $4.46 3/4 and $4.49 1/4. Additional resistance serves at the 40-, 100- and 200-day moving averages of $4.62 3/4, $4.81 1/2 and $5.06 1/2.

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.

 

 

Soybeans

Price action: March soybeans rose 4 cents on late-session buying to $11.93. March soymeal fell $4.10 to $347.10, nearer session lows. March bean oil surged 121 points to 47.97 cents, settling near session highs.

Fundamental analysis: Soybean futures quickly reversed overnight gains as USDA reports proved to be more bearish than expected, though bulls underpinned prices into the close. Ending stocks surged above the highest analyst estimate in a Bloomberg poll that estimated ending stocks at 285 million bushels to 315 million bushels. USDA left production unchanged, lowered exports 35 million bushels to 1.72 billion bushels and raised seed use marginally. USDA increasing seed use ahead of next week’s Outlook Forum leads us to believe that USDA is likely raising their 2024-25 planted acreage estimate. That would be in line with our expectations, as recent price action favors the soy market, as does the robust demand in crush and forecast of increasing demand on that front.

The main market mover today was South American production. Conab slashed its Brazilian soybean crop forecast by 5.9 MMT from last month to 149.4 MMT, reflecting a 7.7% drop in production from a year ago. USDA came in well above Conab at 156 MMT, down just 1 MMT from a month ago. USDA adjusted 2022-23 Brazilian production 2 MMT higher to 162 MMT, the third adjustment higher in the past five months. That sent a bearish tremor through the market as Brazilian supplies continue to be more ample than previously thought. USDA raised expected Argentine soybean production 2 MMT to 50 MMT a month ago. That would be double last year’s drought-ridden crop at 25 MMT. The combination of stronger than expected Brazilian production and increased Argentine production boosted expected 2023-24 world ending stocks to 116.03 MMT from 114.6 MMT in January, well above 103.57 MMT in 2022-23.

USDA reported soybean sales of 340,800 MT during the week ended Feb. 1, up notably from the previous week but down 24% from the four-week average. Sales were shy of pre-report expectations of 400,000 MT to 1.0 MMT.

USDA made no changes to soymeal and soyoil aside from expected price, reducing the average price of soyoil 3 cents to 51.00 cents.

Technical analysis: March soybean futures gave up most of the overnight gains and sold sharply lower following today’s USDA report, though bulls underpinned the market into the close, closing prices higher on the close. Bulls defended Wednesday’s for-the-move low, though bears continue to maintain the technical advantage. Resistance stands at $11.94 1/2 then $12.02 1/2, which capped gains today. Further buying targets the 10-day moving average at $12.17 1/2. Bulls are seeking to hold support at $11.88 1/2, with backing from $11.82 then $11.79 1/4.

March soymeal futures fell despite late session strength in soybeans. Bears continue to hold full control of the technical advantage. Resistance stands at $349.0, quickly backed by the psychological $350.0 mark, then the 10-day moving average at $356.6. Meanwhile, support stands at $346.2, $343.5 then $340.0.

March soyoil futures showed relative strength throughout the session. Bears continue to hold full control of the technical advantage, though the impressive string of gains the last four sessions is weakening that hold. Resistance stands at 48.25 cents, with further backing from 49.65 cents then the psychological 50.00 cent mark. Bulls are seeking to hold support at 46.90 cents, backed by 46.87 cents, then 46.02 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.

 

 

Wheat

Price action: March SRW wheat fell 13 1/2 cents at $5.88 1/2. March HRW wheat closed down 17 1/4 cents at $6.01. Prices closed nearer their session lows and hit three-week lows today. March spring wheat fell 12 1/2 cents to $6.83 3/4.

Fundamental analysis: Today’s monthly USDA supply and demand report for February leaned a bit bearish. The agency raised U.S. wheat carryover by 10 million bu. from last month, with the only change being a 10-million-bu. cut to projected food use (to 960 million bu.). Traders expected ending stocks to be trimmed 1 million bushels. USDA left its 2023-24 average on-farm cash price forecast at $7.20.

In the key “outside markets” today, a firmer U.S. dollar index was offset by solid gains in the crude oil market.

USDA this morning reported U.S. wheat export sales of 378,400 MT during the week ended Feb. 1, up 17% from the previous week, but down 6% from the four-week average.

World Weather Inc. today said U.S. wheat crops “remain a concern due to cold weather in early January – especially in the northwestern Plains.” Most other areas in the Pacific Northwest, central Plains and Midwest are expected to come into spring with good production potential, despite cold weather in early January. Precipitation in Canada is likely to translate into better spring planting conditions, although much more moisture will be needed, said the forecaster. 

Technical analysis: Winter wheat futures bears have the firm overall near-term technical advantage. SRW bulls' next upside price objective is closing March prices above solid chart resistance at $6.25. The bears' next downside objective is closing prices below solid technical support at the contract low of $5.56 1/4. First resistance is seen at $6.00 and then at last week’s high of $6.11 1/2. First support is seen at the January low of $5.73 1/4 and then at $5.60.  The HRW bulls' next upside price objective is closing March prices above solid technical resistance at the January high of $6.41. 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 today’s high of $6.19 and then at last week’s high of $6.34 1/2. First support is seen at $5.86 3/4 and then at $5.75.

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.

 

 

Cotton 

Price action: March cotton futures surged 63 points before ending the day at 89.10 cents, marking the highest close since Sept. 28.

Fundamental analysis: Cotton futures rallied as ending stocks are seen as tightening both domestically and globally. Prices surged on the anticipation of higher exports, most of which will likely be heading to China. This morning, USDA reported export sales of 293,600 RB, below a week-ago though still running above average, impressive given the relatively small crop. That encouraged USDA to increase expected cotton shipments 200,000 RB to 12.3 million RB in 2023-24. This offset a 150,000 RB cut to domestic mill use, sending expected use to the lowest level we have on record. While the increase in export demand is good to see, falling domestic use is concerning for producers, as prices are almost entirely dependent on export demand with China, something that is known to be highly volatile, especially if supplies are available elsewhere. The combination of higher exports, lower mill use and steady production led to the balance sheet tightening 100,000 RB to 2.8 million RB, below expectations of 2.86 million RB.

World ending stocks for 2023-24 tightened to 83.7 million RB from 84.38 million RB previously on lower beginning stocks, lower production and higher expected use. No analyst expected global stocks falling below 84.0 million RB, which helped support prices following the report. Australia is seen as producing marginally less cotton, which could send more demand for U.S. exports.

Technical analysis: March cotton futures continue to show impressive strength. Bulls continue to hold full control of the technical advantage, though some profit-taking is possible as the upside has become extended in recent days. Bulls are seeking to close prices above resistance at the psychological 90-cent mark, with further resistance standing at 90.29 cents, then 90.75 cents. Meanwhile, support stands at 88.47 cents, 87.11 cents then the 10-day moving average at 86.83 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.

 

 

 

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