Crops Analysis | February 9, 2024
Price action: March corn fell 4 1/4 cents to $4.29, marking a weekly decline of 13 3/4 cents.
5-day outlook: March corn futures traded on either side of unchanged before falling to a fresh contract low close. The rally in wheat futures did little to dissuade corn bears from continuing to sell corn lower. The Goldman roll continues, a week marked with heavier than average volume as funds roll futures from nearby contracts to deferred contracts. Despite that, volume was the lowest in four sessions. Open interest across the curve has decreased consistently since Feb. 2, indicating much of the recent selling pressure is former longs exiting their positions, which has forced losses nearly every day since. Nearby futures are oversold on both a daily and weekly basis. The most recent reading for the relative strength index (RSI) reads the lowest level since May 2023 on a weekly basis, which sparked an impressive rally throughout the summer. While the long-term trend remains downward, recent oversold conditions and funds heavily short positioning could insight some profit-taking over the coming week.
30-day outlook: Safrinha planting continues in Brazil in the fastest pace since AgRural started keeping track. Earlier this week, Brazilian crop estimating agency Conab lowered its crop forecast down 3.9 MMT to 113.7 MMT, down 13.8% from a year-ago. Most of that decline can be attributed to smaller safrinha production, as the February estimate is the first that incorporates field observations into its safrinha crop forecast. Conab lowered their estimate for 2023-24 corn exports 3 MMT to 32 MMT. If that proves correct, it will shift the majority of that demand to the U.S. USDA was not as pessimistic about Brazilian production, cutting their forecast 3 MMT to 124 MMT. History suggests that CONAB is often too pessimistic, so the crop could prove better off than they anticipate, though many unknowns remain, as low corn prices and expensive inputs have dissuaded producers from planting corn and have even led to more Brazilian farmers than usual declaring bankruptcy, as noted in this week’s Pro Farmer Newsletter. More clarity on South American corn production is likely to dictate much of the price action over the coming month.
90-day outlook: Next week’s USDA Outlook Forum will give the first look into expectations for the 2024-24 crop. Most analysts currently see corn acres falling and soybeans increasing, though expectations vary widely firm to firm. March will bring the Prospective Plantings report, giving the first in-depth look into farmers’ intentions for new crop. Corn continues to do a poor job in bidding for acres, especially fringe acres, though a relatively painless and quick harvest allowed for the highest amount of fall anhydrous applications on record, which essentially locks those acres in for corn. Despite soybeans relatively expensive to corn, producers have shown a reluctance to shift their plantings, which will favor corn acres and ultimately continued expansion of the balance sheet, barring any unexpected crop problems over the next couple of months in South America. Upcoming acreage reports are likely to help drive price action in the coming months, though current signs point to the potential of continued weakness.
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 cents to $11.83 1/2 and gave up a nickel on the week. March soymeal fell 30 cents to $346.80 and lost $10.00 week-over week. March soyoil fell 68 points to 47.26 cents, gaining 253 points on the week.
5-day outlook: Soybeans edged sideways in consolidative trade, largely pressured by firm technical pressure and spillover from USDA’s data dump on Thursday. Meanwhile, weather conditions in Brazil continue to prove mostly favorable, with drier conditions in southern areas of the country good for maturation and harvest progress, while rain continues to fall in northern areas of Mato Grosso into Bahia. Into next week, soybeans will likely face pressure amid mostly favorable weather conditions while harvest progresses. However, basing action this week appears a floor is being forged after nearby March futures have given up more than $2.00 since mid-November. A move higher could prove tricky for bears given looming technicals, though short-covering efforts could turn into noteworthy rally amid fund managers’ heavy short position.
30-day outlook: USDA will conduct its annual Economic Outlook Forum next week, providing insight into 2024-25 production, and will ultimately release its Prospective Planting Report on March 28. Moreover, the spring crop insurance price is being averaged through the month of February, which could largely dictate what crops ultimately get planted. The current corn-to-soybean ratio is at about 2.46, with a ratio over 2.4 historically favoring soybeans to corn. Our studies suggest soybean acres could rise 4.7% from 2023 to around 87.5 million acres.
90-day outlook: Midwest weather will be at the forefront of the marketplace as producers plant the 2024-25 crop, while a close eye will remain on export activity from South America along with U.S. crush. Argentina is shaping up to have much larger production, compared to last year’s drought-riddled soybean crop, which could in turn slow U.S. soymeal business as Argentine crushers resume operations after having been idle due to lacking soybean supplies throughout the country. Declining U.S. crush business could be the result after having notched records over the past several months. However, strong demand for soyoil for biodiesel will likely keep crush plants running at capacity.
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 rose 8 1/4 cents to $5.96 3/4, near mid-range and for the week down 3 cents. March HRW wheat futures rose 1/2 cent to $6.01 1/2, nearer the session low and for the week down 23 1/2 cents. March HRS rose 1/2 cent to $6.84 1/4 but lost 15 1/2 cents on the week.
5-day outlook: The wheat futures markets continue to languish in sideways, choppy trading at lower price levels. This could well be “basing” action that will put in market bottoms sooner rather than later. Massive gains in the cocoa futures market this week to a record high, with cotton futures prices also soaring, have no doubt caught the attention of grain market bulls, who have seen their markets beaten up badly the past several weeks. Still, it’s very likely corn prices will have to lead wheat on any sustained rallies. And today corn hit another contract low and closed at a technically bearish weekly low close.
Next week, USDA will hold its annual Economic Outlook conference, which will give insight into the growing season, including unofficial acreage, yield and production forecasts.
30-day outlook: Weather conditions in wheat country will continue to be closely monitored by traders. World Weather Inc. today said that in HRW country a weather disturbance late Saturday through Sunday will impact mainly southern production areas of the region with rain and heavy, wet snow. This will be a beneficial precipitation event, with the associated moisture likely to be of good use in the spring. Temperatures in the second week of the outlook will trend colder, and there is some potential of much colder temperatures later in the month or in early March due to another stratospheric warming event, said World Weather. Meantime, in the northern Plains, recent snow has been beneficial for increasing snow cover in the region. However, more snow cover will be needed due to a return of significant cold temperatures in the second half of this month. There will be some snow shower activity in the next seven days, but snow cover will remain thin or possibly absent in some areas.
90-day outlook: U.S. SRW export bookings have risen above year-ago levels and the pace needed to match USDA’s 2023-24 forecast. However, HRW sales have disappointed, with accumulated sales and shipments lagging. This week’s rise in the U.S. dollar index to a nearly three-month high will only make U.S. wheat less price-competitive on the world trade markets. U.S. wheat sales abroad will very likely have to improve in the coming months for sustained price recoveries to occur in the HRW and SRW 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 surged 268 points to 91.78 cents and notched a 467-point gain on the week.
5-day outlook: March cotton bulls carried the torch to a near 18-month high, with persisting optimism stemming from another day of record highs across equities. Inflation fears are seemingly easing across the marketplace amid keener risk appetite this week. However, near-term overbought conditions in the natural fiber could spur a correction, especially with China’s approaching Lunar New Year holiday, which begins this weekend. Chinese markets will be closed for several days next week for the annual holiday.
30-day outlook: USDA’s Prospective Plantings Report will be especially important after USDA cut ending stocks this week to the lowest level since 2016-17 after increasing projected exports 200,000 bales to 12.3 million bales. While the current rally bodes well for planted acres, mother nature will ultimately dictate production, and be at the forefront of trade in the coming months when the growing season commences.
90-day outlook: U.S. export sales continue to at a notable clip, with USDA reporting net sales of 284,100 RB during the week ended Feb. 1. Net sales were down 19% from the previous week and 8% from the four-week average. China was the primary purchaser during the week, followed by Vietnam and Bangladesh. Traders will continue to closely monitor export activity as a gauge of the global economy.
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.
