Crops Analysis |February 23, 2024
Price action: March corn futures lost 6 1/4 cents to $3.99 3/4, settling nearer session lows. March futures lost 16 3/4 cents on the week.
5-day outlook: Corn futures slid to fresh contract lows and the lowest level since November 2020 on the continuation chart, marking the third consecutive day of losses. Bulls managed just one session of corrective gains this week despite prices traded at the most oversold level (using continuous futures and the relative strength index) since the summer of 2004. The comparison to 2004 does not stop there, as 2003-04 posted both a record yield and record production, saw relatively tight stocks before the balance sheet surged to over 2 billion bushels in 2004-05.
March options went off the board today, the high volume and open interest at the $4.00 mark pegged prices to that mark most of today’s session. The roll to May next week could provide an opportunity for corrective buying, though the path of least resistance remains lower.
30-day outlook: Brazilian production estimates are highly variable, though there is a consensus among most analysts that acres will be falling year-over-year. Much speculation persists over just how far acres will fall though. Safrinha planting continues at a rapid pace and weather conditions are going to remain mostly good over the coming two weeks. As noted in the most recent publication of the Pro Farmer Newsletter, 2024 saw a strong El Niño start, much like 2016, which ultimately led to a dry growing season for safrinha corn, sparking a rally in corn futures through much of the spring. The most bullish catalyst over the coming month will likely come from a South American production scare, which would likely lead to an increase in U.S. origin exports, giving the demand side of the balance sheet a much-needed boost.
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: May soybeans fell 10 3/4 cents to $11.41 3/4 and lost 34 1/2 cents on the week. May soymeal fell $3.40 to $328.00, marking a $10.90 week-over-week loss. May soyoil fell 20 points to 44.60 cents and gave up 148 points on the week.
5-day outlook: Soybean futures marked fresh contract lows amid weak U.S. export demand and fresh supply from South America as Brazil continues to face mostly favorable conditions for harvest. Earlier, USDA reported weekly export sales of 55,900 MT for the week ended Feb. 15, which is a marketing-year low. Net sales during the week declined 84% from both the previous week and four-week average, and fell short of the pre-report range of 300,000 to 800,000 MT. While futures have entered oversold territory, a fundamentally bearish undertone and overhead technical resistance continue to limit a profound upward move in the soy complex, giving bulls little reason to step in as buyers. Soybeans could continue to face pressure ahead of first-notice day on Feb. 29.
30-day outlook: Traders will continue to assess South American production estimates, which are broad among government and independent forecasts alike. Earlier in the week, South American crop consultant Dr. Michael Cordonnier lowered his Brazilian soybean crop estimate 2 MMT, to 145 MMT, noting a neutral-to-lower bias going forward as late-season yields are proving unable to compensate for low yields from early maturing varieties. Cordonnier left his Argentine estimate unchanged at 50 MMT, noting recent rains improved soil moisture, favoring crop growth, though he did indicate a neutral to lower bias for the crop going forward.
Meanwhile, USDA’s Prospective Planting Report, due out March 28, will provide traders greater insight into 2024-25 production. The report will feature results from a NASS survey to more than 6,000 producers across the northeastern U.S., with questions regarding types of crops they intend to plant in 2024 and how many acres the intend to plant, as well as the amount of on-farm storage. The survey was mailed on February 20.
90-day outlook: Traders will continue to focus on U.S. exports and crush pace as the marketing year progresses. U.S. export sales have waned over the past two months as Brazilian supplies enter the global market, combined with ramped up domestic soybean processing amid supportive renewable fuel policies. However, as fresh Argentine supplies come online, following nipped production due to historic drought, crush in South America is likely to ramp up amid strong expectations for the Argentine crop, comparatively.
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: May SRW wheat futures prices fell 10 1/4 cents to $5.69 and for the week gained 10 cents. May HRW wheat lost 6 cents to $5.65 1/2 and for the week rose 4 cents. May spring wheat futures fell 8 3/4 cents to $6.46 3/4 and fell 8 3/4 cents on the week.
5-day outlook: Today’s losses in the winter wheat futures markets that saw technically bearish weekly low closes and prices back down near their contract lows suggest more follow-through selling pressure early next week. Wheat market bulls cannot muster any confidence while observing corn futures continue to hit new contract lows, with nearby corn futures today hitting a more-than-three-year low.
More disappointing U.S. wheat sales abroad, reported today, will also limit buying interest in wheat next week. USDA reported U.S. wheat export sales of 233,500 MT during the week ended Feb. 15--down 33% from the previous week and 28% from the four-week average.
30-day outlook: Wheat traders will continue to monitor weather in major wheat-growing regions of the world. World Weather Inc. today said U.S. crop areas will face a short-term bout of much colder weather next week following unseasonably warm temperatures. “This may stress some of the wheat, with more of the central Plains crop experiencing a little greening before the cold arrives. Winterkill is not very likely, but temperatures will plummet below zero in the northern Plains after the region has been very warm for an extended period of time, said the forecaster. Winterkill is not expected to be a serious concern, although parts of the northern Plains may have already lost some wheat from the bitter cold in January.
90-day outlook: Solid price downtrends in corn and soybean futures prices are also undercutting the hard red spring wheat futures market. This also suggests a likely rise in spring HRS seedings as farmers will be likely be less inclined to plant corn and soybeans. However, January forecasts for reduced Canadian spring wheat plantings are likely to provide some background support for the spring wheat market in the coming few months.
What to do: Get current with advised sales.
Hedgers: You should be 70% priced in the cash market on 2023-crop. You should be 20% forward priced for harvest delivery on expected 2024-crop production.
Cash-only marketers: You should be 70% priced on 2023-crop. You should be 20% forward priced for harvest delivery on expected 2024-crop production.
Price action: May cotton fell 97 points to 93.49 cents and gave up 93 cents on the week.
5-day outlook: May cotton ended the week lower amid notable selling in crude oil futures, while a lower U.S. dollar and persisting strength in equities limited losses. Meanwhile, the 10-day moving average continued to serve up support, with a push into near-term oversold territory today likely limiting bear efforts into next week as the market attempts to secure 2024-25 acres.
30-day outlook: Weather across the U.S. will be increasingly important as planters begin to roll in earnest in major cotton-producing areas. World Weather Inc. reports weather conditions in U.S. cotton areas are mostly good, although rain is needed in West Texas and some increase in rain would be good for south Texas. Most other areas have had good moisture this winter and parts of the Delta are drying down and warming up along southern crop areas in the southeastern states. However, both the Delta and southeastern states are advertised to get more rain in the next two weeks. Planting will begin in early March in southern Texas and the desert southwest once soil temps warm to an optimum level.
90-day outlook: Traders will continue to monitor U.S. cotton exports as the marketing-year progresses. Upland cotton exports have proven mostly steady over the past several weeks, but fell slightly in USDA’s Weekly Export Sales Report, released prior to this morning’s open. Net sales of 130,550 RB were reported for the week ended Feb. 15, which were down 19% from the previous week and 48% from the four-week average. Top purchasers were Bangladesh, Turkey and Vietnam. Shipments during the week totaled 255,500 RB, which fell 8% from the previous week and 4% from the four-week average. Top destinations were China, Vietnam and Pakistan.
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.
