Crops Analysis | February 13, 2024

Crops Analysis
Crops Analysis
(Pro Farmer)

Corn

Price action: March corn futures rose 1/4 cent to $4.30 3/4 and near mid-range. Prices Monday hit a contract low.

Fundamental analysis: The corn futures market continues to languish in a price downtrend. Today’s “risk-off” trading mentality in the general marketplace scared off potential speculative buyers in the corn market. The U.S. consumer price index came in warmer than expected, which all but dashed hopes of an interest rate cut from the Federal Reserve early this spring. The rally in the U.S. dollar index today to a three-month high was a bearish outside market force working against the grain markets.

Pro Farmer’s South American crop consultant Dr. Michael Cordonnier has cut his Brazilian corn crop estimate by 3 MMT to 112 MMT. Cordonnier also lowered his Argentine corn estimate 2 MMT to 54 MMT. He now expects South American corn production to fall 5.1 MMT (2.9%) from year-ago. World Weather Inc. today said Argentina will see drier weather resume later this week and some areas will be dry biased for nearly 10 days, “but sufficient rain has occurred recently to support crops through most of that period of time.” Southern Brazil is expecting rain that will bolster soil moisture and remove concern over declining soil moisture and rising crop stress. “Most of Brazil and Argentina will be in good shape during the next two weeks to support crop development and general farming activity,” said the forecaster.

Corn traders are looking ahead to the USDA annual Ag Outlook conference Thursday and Friday, at which time the agency will report new supply and demand projections for the major grains.

Technical analysis: The corn futures bears have the solid overall near-term technical advantage. There are no early clues to suggest a market bottom is close at hand. 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 $4.50. The next downside target for the bears is closing prices below chart support at $4.25. First resistance is seen at last Friday’s high of $4.37 and then at $4.40. First support is at the contract low of $4.27 3/4 and then at $4.25.

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 fell 6 3/4 cents to $11.86 1/4, while March soymeal fell $4.10 to $344.80. Both notched low-range closes. March soyoil rose 40 points to 47.30 cents.

Fundamental analysis: Soybean futures favored the downside today, though nearby March futures held an inside day in consolidative trade. Technical pressure continued to curb buying along with forecasts of mostly favorable weather across Brazil and general risk-off sentiments across the marketplace. However, improving conditions may have come too late for some growing crops in South American crop consultant Dr. Michael Cordonnier lowered his Brazilian soybean production forecast by 2 MMT to 147 MMT, amid frustratingly low yields in Mato Grosso and Mato Grosso do Sul, Parana and Tocantins. Cordonnier also lowered his Argentine production forecast by 2 MMT to 50 MMT, noting last week was very difficult for soybeans in core production areas due to extreme temps over a ten-day period, which has likely trimmed soybean yields in these areas by “10-20% or more.” Despite the reductions, Cordonnier still expects South American production to rise 12.2 MMT (6.1%) from last year, bud did note a neutral to lower bias going forward for both Brazil and Argentine crops going forward.

World Weather Inc. notes Mato Grosso and to Minas Gerais and Esprito Santo will see little rain and improving to favorable conditions for fieldwork into Wednesday before regular rounds of showers and thunderstorms slow fieldwork across Thursday through Feb. 23. Most of the remainder of Brazil and Paraguay will see a mix of rain and sunshine that will allow for fieldwork to advance while soil moisture and expected rains should allow for most crops to develop favorably.

Technical analysis: March soybeans’ test to the 10-day moving average of $11.95 1/2 ultimately proved futile as bears sought to verify they remain in full control. However, a consecutive test of the area could ignite short-covering efforts towards the 20-day moving average of $12.06 3/4, with additional resistance serving at the 40-day, currently trading at $12.44 3/4, with notable resistance serving at the 100- and 200-day moving averages of $13.01 1/4 and $13.07 1/4.

March soymeal ended the session below initial support at $345.00, handing bears a bit more leverage for the coming session. However, an extension lower will face additional support at last week’s low of $341.00 and again at $335.60. Conversely, overhead resistance at the 10- and 20-day moving averages of $354.60 and $356.30 continue to curb buying efforts, with bulls desperately requiring an extended move above the area to spur collective buying efforts. From there, resistance serves at the 40-day moving average of $368.80, then at the 200- and 100-day moving averages of $386.40 and $388.80.

March soyoil was clear the victor of the soy complex today, but also remained subdued by looming overhead technical pressure at the 40-day moving average of 47.76 cents. A move above the area, however, would likely face more concerted buying efforts towards the 100-day moving average of 50.38 cents, while the 200-day moving average stands at 53.29 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 futures settled unchanged on the day at $5.97 1/2, though deferred contracts closed lower. March HRW futures slipped 4 1/4 cents to $5.94 1/2. March spring wheat fell 10 3/4 cents to $6.71 3/4.

Fundamental analysis: Wheat futures continue to lack much direction as choppy, sideways trade continues. March continues to show relative strength, trading over two cents stronger than deferred contracts today. The market has taken all carry out until July, as SRW futures trade within a penny of each other. This continues to point to uncertainty in the outlook as is doing little to encourage storage of wheat, though continuously downtrodden prices are also doing little to encourage farmer selling. The next catalyst for the wheat market is the upcoming USDA Outlook Forum, which begins on Thursday and continues through Friday. Wheat acres are seen as falling to 47.5 million acres, down 2.1 million acres year-over-year. Despite the drop in acres, production is seen as rising to 1.892 billion bushels, up from 1.812 billion bushels in 2023-24. Ending stocks are seen as rising to 720 million bushels, above the current 2023-24 estimate at 658 million bushels.

Not much precipitation is forecast in the coming week in HRW acres in the U.S., though some rain is expected in the second week of the outlook, says World Weather Inc. Some cold weather will limit early season greening that has been occurring, though temperatures are expected to be more unusually warm than unusually cold, the forecaster says. Winter crops in the U.S. are still in good shape, apart from some potential winterkill that may have occurred in the northwestern Plains.

Technical analysis: March SRW saw relative strength though still face directionless trade on the daily chart. Bulls are seeking to close prices above bunched resistance levels at $5.98 1/2 and $6.01 1/2, which mark the 20-day and 40-day moving averages. Further resistance lies at $6.13 1/4. Meanwhile, support stands at $5.90 1/4, $5.88 1/2, then $5.82 1/2.

March HRW futures continue to face relative weakness, falling below SRW levels. Bears retain control of the technical advantage. Bulls are seeking to overcome resistance at the psychological $6.00 mark then the 10-day moving average at $6.08. Support stands at today’s low of $5.91 1/4, $5.93 then $5.86 3/4.

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 rose 99 points to 91.52 cents, a near mid-range close, while December cotton rose 31 points to 83.61 cents.

Fundamental analysis: March cotton reached a fresh near-term high amid continued buying following mild profit-taking on Monday. The natural fiber was able to continue its recent string of gains, largely disregarding heavy selling across equities and strength in the U.S. dollar. A stronger-than-expected Consumer Price Index (CPI) shook the marketplace today despite the annual inflation rate falling back to 3.1% in January following an increase to 3.4% in December. Pre-report expectations, however, indicated analysts were expecting inflation to have declined to up 2.9%. Compared to the previous month, CPI rose 0.3%, which was the most in four months and above forecasts of 0.2%. Annual core inflation also held steady at 3.9%, compared to expectations it would slow to 3.7%. Meanwhile, a persisting rally in crude oil futures helped bolster gains in cotton futures amid OPEC’s optimistic global demand for 2024 and 2025. The group is projecting growth of 2.25 million barrels per day (bpd) and 1.85 million bpd, respectively and made upward revisions for its economic growth forecasts for these years, anticipating a positive trend that could further boost oil demand.

World Weather Inc. reports U.S. planting moisture is looking good for most areas, while rains later this week in South Texas will bolster topsoil moisture for better planting and early season cotton development in March, although follow up rain will still be needed. Portions of the Delta and southeastern states are too wet today, but seasonal warming in March will likely help the moisture profile improve for planting.

Technical analysis: March cotton notched the highest intraday level since mid-August of 2022, but ultimately faded from session highs into the close. However, the natural fiber gained back Monday’s losses, nonetheless. Initial resistance will now serve at today’s high of 92.50 cents, then at 92.78 cents and 93.90 cents. Meanwhile, initial support continues to serve at 89.40 cents, then at the 10-day moving average of 88.47 cents, then the 20-, 100- and 40-day moving averages of 86.35 cents, 83.49 cents and 83.31 cents.

What to do: Get current with advised sales.

Hedgers: You should be 80% priced in the cash market for 2023-crop production. You should have 10% of expected 2024-crop production sold for harvest delivery.

Cash-only marketers: You should be 80% priced on 2023-crop production. You should have 10% of expected 2024-crop production sold for harvest delivery.

 

 

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