Crops Analysis | March 8, 2024
Price action: May corn futures rose 1 3/4 cents to $4.39 3/4, marking a 15-cent gain on the week and the second consecutive week of gains.
5-day outlook: Following a weaker overnight session, bulls took the opportunity to buy the dip, with accelerated buying following this morning’s USDA reports. Little change was expected in the demand outlook from USDA, and USDA ultimately left everything unchanged aside from reducing their expected farm-price a nickel to $4.75. Ending stocks remained unchanged at 2.172 billion bushels, though we continue to have a more optimistic view on demand than the current estimates. USDA economists opted to kick the can down the road on decisions over robust ethanol use and light feed use, likely awaiting the Quarterly Grain Stocks Report at the end of the month. This morning’s reversal from overnight lows shows continued strength in prices, impressive given the lack of catalysts in this morning’s report, as USDA opted to leave Brazilian production unchanged at 124 MMT and even increased expected Argentine production by 1 MMT to 56 MMT. Still, global carryover is down 2.4 MMT from a month ago to 319.6 MMT. May corn futures retested the 20-day moving average overnight and closed above the level for the second consecutive session, which has not happened since December. That strength is likely to encourage additional fund short covering, continuing to boost prices, as funds consider moving averages as a technically sufficient measure of momentum.
30-day outlook: USDA opted to leave the balance sheet unchanged today, heightening the focus on the government’s Quarterly Grain Stocks Report at the end of the month, which will show how domestic use is stacking up. That paired with the March Prospective Plantings Report is likely going to dictate much of the price action into the summer months. There are conflicting views among analysts, as some believe that corn acres will stay high, with producers opting for higher input/risk, higher profit-potential corn to “out yield” poor prices. Record anhydrous applications last fall support this and a mild spring thus far points to this being a possibility. Still, other analysts see crop rotations as surely lowering corn acres and increasing bean acres, narrowing the gap between the two closer to four million acres, a far cry from over 11 million acres this past year.
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 rallied 17 3/4 cents to $11.84, marking the highest close since Feb. 1 and gaining 32 3/4 cents on the week. May soymeal rose $7.00 to $341.40 and picked up $9.10 week-over-week. May soyoil slid 18 points lower to 46.17 but rose 101 points from a week ago.
5-day outlook: Soybeans remained subdued ahead of USDA’s March supply and demand update as traders positioned ahead of the data, though buying began to pick up an hour ahead of the report, with a notable increase following its release. Making the move rather interesting was USDA’s lack of changes to the U.S. balance sheet from February, while global ending stocks were lowered to 114.3 MMT, down 1.8 MMT from February but still within pre-report expectations. USDA made a modest 1 MMT reduction to its Brazilian soybean production forecast to 155 MMT, which remains well above most private crop forecasts. Meanwhile, the Argentine soybean crop estimate was left unchanged from last month at 50 MMT. Today’s post-report and end-of-week price action suggest additional short-covering next week amid a friendlier technical posture. However, a move higher could be preceded by a corrective pullback early in the week ahead of Conab’s production updates on Tuesday, March 12. Last month, the Brazilian crop agency lowered its 2023-24 Brazilian soybean crop projection to 149.4 MMT, down from 155.2 MMT in January.
30-day outlook: USDA’s Prospective Planting Report will muster market attention over the next month as traders prepare the government release, due out March 28. USDA will also release its Quarterly Grain Stocks report. However, immediately following the reports, U.S. weather will become the focus as planting begins to pick up across the country. Earlier today, World Weather Inc. reported that confidence is rising over a quick El Nino transition to La Nina. In the past, there has been a tendency for quick El Nino to La Nina transitions to result in a significant decline in central U.S. precip and rise in temps during the summer, with the forecaster indicating there is potential for that again this year.
90-day outlook: U.S. soybean export sales continue to prove persistently tepid, as Brazil continues to dominate the global market. In February, Brazil exported the largest volume of soybeans on record for the month, with China being the country’s largest customer, according to final official customs data. Brazil’s soymeal exports in February also hit an all-time high for the month. However, USDA reported weekly soybean sales of 613,500 MT during the week ended Feb. 29, which were up noticeably from both the previous week and four-week average and above pre-report estimates. A recent pullback in the U.S. dollar, combined with looming production unknowns around the Brazilian crop could heighten prospects for an increase in U.S. sales activity over the coming months.
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 rose 9 1/4 cents to $5.37 3/4 and nearer the daily high after setting a contract low early on. For the week, May SRW lost 20 cents. May HRW wheat futures gained 14 cents to $5.88 3/4 and near the session high. For the week, May HRW rose 24 1/4 cents. May spring wheat rose 8 cents to $6.62 3/4 and rose 19 cents on the week, notching the first weekly gain in six weeks.
5-day outlook: Today’s short-covering gains in winter wheat futures, that included a technically bullish weekly high close in May HRW wheat and a potential “key reversal” up in May SRW, begin to offer some hope for the bulls that wheat futures markets are near price bottoms. This week’s solid gains in corn futures are another clue the grain markets are close to putting in at least near-term lows.
Also encouraging for the wheat market bulls today is that traders shrugged off another SRW sales cancellation from China. USDA reported SRW sales cancellations from China of 110,000 MT during 2023-24, marking the second straight day of cancellations and bringing the two-day tally to 240,000 MT.
USDA in its monthly supply and demand report today raised old-crop U.S. wheat ending stocks 15 million bu. from last month to 673 million bushels. The only change was a 15-million-bu. cut to exports, which are now projected at 710 million bushels. USDA lowered the 2023-24 average cash wheat price forecast by 5 cents to $7.15.
30-day outlook: Weather in global wheat-growing regions will be closely monitored by traders in the coming weeks. World Weather Inc. today said damage done to the wheat crop in the northwestern Plains due to January and early March cold, with limited snow cover, “has largely been factored into the marketplace.” Rain and snow fell in northern and eastern U.S. hard red winter wheat areas Thursday and some additional moisture is possible in portions of the region during mid-week next week, although more moisture will be needed especially in the southwest. Most of the Midwest will get rain and Canada’s Prairies will experience some gradual melting of snow during the weekend and next week as temperatures trend warmer for a little while. Russia, China, most of Europe, the Middle East and parts of North America are seeing favorable or improving weather to support crops.
Spring wheat traders will closely examine the Canadian spring planting intentions on Monday, March 11. That will be followed by USDA’s Prospective Plantings Report on Thursday, March 28. U.S. spring acreage is uncertain at present.
90-day outlook: Another early, positive signal for the wheat markets is the recent downturn in the U.S. dollar index. Today the USDX hit a seven-week low. With the Federal Reserve likely leaning more dovish in its monetary policy in the coming months, the greenback is likely to remain under pressure against the major world currencies. Such a scenario makes U.S. wheat more price-competitive on the world trade markets.
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 the 400-point daily limit to 95.28 cents and gave up 29 points on the week.
5-day outlook: Cotton futures largely ignored USDA’s supply and demand data today as outside-market pressure ignited heavy selling. USDA reported 2023-24 ending stocks at 2.50 million bales, which would be the lowest since 2013-14 and is down from 2.80 million in February and below the average analyst estimate of 2.72 million bales. On the supply side, USDA lowered the 2023 crop estimate by 300,000 bales, which pulled down total supply by that amount. On the demand side of the balance sheet, the only change was a 40,000-bale increase in unaccounted use to -200,000 bales. Meanwhile, global ending stocks were pegged at 83.3 million bales for 2023-24, down 360,000 bales from last month but still 370,000 bales above year-ago. Extended selling across equities and crude oil next week would likely find the natural fiber under additional pressure, though corrective buying could certainly ensue.
30-day outlook: USDA’s Prospective Planting Report and U.S. weather will be the main market drivers over the next month. While USDA has historically increased volatility in the early season report, U.S. weather will quickly become the main focus following its release. World Weather Inc. reports South Texas will remain drier biased allowing for spring planting to progress quickly, though rain will be needed before too long. Meanwhile, wet weather in the southeastern U.S. may lead to a slower start to planting, although there is still time for improved weather later this month and into April. The moisture profile in far western U.S. crop areas is still rated favorably in irrigated areas of California, but there is need for more moisture in the southwestern desert areas.
90-day outlook: U.S. cotton sales will continue to serve as a market-driver over the next several months. A pullback in sales over the past several weeks has certainly gotten the market’s attention, though shipments continue to prove rather robust. For the week ended Feb. 29, USDA reported net upland sales of 52,000 RB, which were up 30% from the previous week but down 66% from the four-week average. Top purchasers for the week included Bangladesh, Vietnam and Turkey. Meanwhile, shipments during the week totaled 330,800 RB, up 24% from the previous week and 26% from the four-week average. Top destinations were China, Vietnam and Pakistan.
What to do: Get current with advised sales.
Hedgers: You should be 90% sold in the cash market on 2023-crop. You should also have 25% of expected 2024-crop production forward sold for harvest delivery.
Cash-only marketers: You should be 90% sold on 2023-crop. You should also have 25% of expected 2024-crop production forward sold for harvest delivery.
