Crops Analysis | March 22, 2024
Price action: May corn fell 1 1/2 cents to $4.39 1/4 but rose 2 1/2 cents on the week.
5-day outlook: Corn futures saw minimal volatility this week, generally caught between soybeans and wheat, which both saw more extended moves. Prices were largely consolidating in sideways trade, likely building for a greater move next week following USDA’s Prospective Plantings and quarterly Grain Stocks reports. The 40-day moving average, currently at $4.41 3/4, limited this week’s gains, and has since prices initially tested the mark on Mar. 11. The downside was limited by support at the 10-day moving average this week, which currently stands at $4.38. Those two levels are going to continue to converge and a daily close on either side of these levels will likely determine the coming move in prices. USDA projected planted acres of 91.0 million acres in their Outlook Forum last month. Our survey indicated that was a little pessimistic, with our estimate coming in at 91.8 million acres. The reports on Thursday are likely going to dictate much of the price action next week, with positioning driving trade in the first half of the week.
30-day outlook: USDA has been slow to adjust their ethanol and feed use numbers so far this year. Ethanol continues at a pace well above a year ago and an adjustment is warranted at this juncture. Feed use is estimated at the lowest mark since 2018-19 (as a percentage of total supply) and warrants an increase as well. USDA has opted to kick the can down the road on both of these use categories, which made up 78% of total use last year. Exports have continued to be robust as well, as sales have topped the 1 MMT mark for four-consecutive weeks. This morning, USDA reported daily sales of 263,000 MT of corn for delivery to Mexico. Of the total, 173,000 MT is set to be delivered during the 2023-24 marketing year and the remaining 90,000 MT is for delivery during the 2024-25 marketing year. While a contraction of the balance sheet is warranted from current USDA inflated levels, stocks are likely to remain above 2 billion bushels, a far cry from 1.36 billion bushels that were left at the end of the 2022-23 marketing year.
90-day outlook: South American production estimates continue to vary widely from firm to firm. The coming quarter is likely to provide a lot of clarity in just how much grain is coming out of South America – Brazil in particular. A kickoff to the U.S. growing season is likely to begin weighing heavily on prices as well. Already, reporters and analysts alike are posting drought monitors comparing the last several years, as much of the Corn Belt remains in need of moisture. If corn acres do come in lower as many analysts expect and this spring provides challenges in planting, it will not take much to add weather premium into new crop futures, which remain within a quarter of two and a half year lows.
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 19 1/2 cents to $11.92 1/2 and closed 5 3/4 cents lower on the week. May soymeal fell $5.20 to $339.10 but rallied $4.40 from a week ago. May soyoil plunged 115 points to 47.64 cents and lost 178 points on the week.
5-day outlook: Soybeans ended the week under pressure, giving up a notable portion of mid-week gains as traders took profits into the weekend. With next week comes USDA’s Prospective Planting and Grain Stocks Reports, which are sure to heighten volatility for the soy complex. In its Annual Agricultural Outlook, USDA projected soybean acres to rise 4.7% from 2023 to 87.5 million acres, though next week could bring a surprise as results will be survey-based. While the government’s grain stocks update will provide important market information, historically, acreage figures have had a greater influence on post-report price moves in soybean futures. Look for consolidative trade ahead of Thursday’s reports, which will come ahead of the Good Friday holiday.
30-day outlook: Production updates from South America and U.S. weather will have the greatest market impact for soybeans over the next month. Many questions loom over the size of the Brazilian crop in particular as estimates to date prove to be rather wide. South American crop consultant Dr. Michael Cordonnier notes acreage estimates in Brazil have been notoriously difficult given that agricultural expansion is occurring in relatively remote regions of the country. Moreover, he states final acreage is usually unknown in Brazil until it can be “backed into” by using final export, domestic disappearance and carryover numbers divided by the nationwide yield, which can also be ambiguous.
Meanwhile, planters across the U.S. will soon begin rolling in earnest, making weather an increasing market factor over the next several months. World Weather Inc. notes the Delta and southeast will see frequent and sometimes heavy rain through Wednesday that will stall fieldwork in much of the region while some local flooding may occur. The heaviest rain is expected Monday into Tuesday from the Delta into northern Alabama. The forecaster notes the Midwest will see regular rounds of rain and snow during the next two weeks with moisture welcome in many western areas. While fieldwork will be slowed at times, much of the precip should not be great enough to cause excessively muddy conditions in most areas. Soil moisture is low in many areas from eastern South Dakota to Iowa and eastern Nebraska and significant precip is needed before planting season.
90-day outlook: U.S. soybean exports have proven tepid as of late as fresh South American supplies fill the global marketplace. However, USDA’s export sales data for the week ended March 14 reflected a 31% week-over-week increase, with soybean sales rising 86% above the four-week average.
Further adding to the global export complexity, will be increased crush from top meal exporter Argentina as supplies are likely to rebound following last year’s historic drought, though a subpar Brazilian bean crop could heighten U.S. export prospects.
What to do: Get current with advised sales.
Hedgers: You should be 65% sold in the cash market on 2023-crop. You should have 10% of expected 2024-crop production sold for harvest delivery next fall.
Cash-only marketers: You should be 60% sold on 2023-crop. You should have 10% of expected 2024-crop production sold for harvest delivery next fall.
Price action: Winter wheat futures saw impressive buying into the weekend. May SRW futures rose 8 cents to $5.54 3/4, marking a weekly gain of 26 1/4 cents. May HRW futures rallied 8 3/4 cents to $5.90 1/2, up 24 1/4 cents on the week. May spring wheat rose 4 1/2 cents to $6.61 and gained 14 1/2 cents on the week.
5-day outlook: Wheat futures posted impressive strength today, ending the day at this week’s highs. Ag markets as a whole saw muted volatility for the most part this week, which is likely to continue early next week ahead of USDA’s Prospective Plantings and quarterly Grain Stocks reports. Our survey indicated little change in wheat acres as a whole. A catalyst is more likely to come from Grain Stocks. USDA has been slow to adjust their projected food and feed use in their monthly reports. Food use continues to pace well below year ago, which is historically a robust use category. If that continued in the third quarter of the crop year, an adjustment is likely to come in the April WASDE. Meanwhile, as wheat futures have been trading as feed, it remains to be seen whether there has been a significant uptick in feed use amongst livestock producers yet. The stocks report will give insight into how much feed use has increased, if at all, as prices have continued to sustain sharp selling pressure.
30-day outlook: The attention of the marketplace will turn to weather as winter wheat crops continue to exit dormancy across the Plains. Snowstorms in the upper Midwest and northern Plains are increasing soil moisture across the areas, which will be beneficial for spring wheat crops. Meanwhile, the area from the Texas panhandle into southwestern Kansas and southeastern Colorado are in need for greater moisture. USDA will release their initial nation-wide winter wheat crop ratings in the first week of April. Individual state ratings indicate that the national rating will be up from the fall and at the highest mark in several years. That contends with historically low demand, which has continued to pressure prices. As production prospects improve in the U.S., wheat will need to find added demand to offset the expanding balance sheet. Next week will give a look into whether or not feed use will return to historically higher levels, which would partially offset historically weak exports.
90-day outlook: The expanding balance sheet is likely to weigh on traders as the end of the marketing year nears. Stocks are seen as rising to 665 million bushels, which happens to be exactly the same as the average from 1990-91 to 2022-23. While stocks are average, stocks-to-use are seen as rising to 35.7%, up from the average at 32.7%. Exports are seen as falling to the lowest mark in over 50 years as the U.S. continues to face logistical challenges versus grain sold from the Black Sea and the EU. Barring any significant shift in the balance sheet, which should become clearer next week, wheat prices are likely going to continue to struggle to rally.
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 closed 68 points lower at 91.53 cents and marked a 241-point loss on the week.
5-day outlook: Cotton futures finished the week lower following a push to a one-month low amid persisting U.S. dollar strength and extended selling in crude oil futures. The dollar has notched notable gains since the conclusion of Wednesday’s FOMC meeting and was also supported by stronger U.S. economic data released on Thursday. Meanwhile, crude has faced pressure amid talks of a Gaza ceasefire agreement between Israel and Hamas. The natural fiber could continue to face sideways to lower price action into next week as traders prepare for USDA’s Prospective Planting Report, which is sure to ignite fireworks.
30-day outlook: Weather will be increasingly important over the next month as U.S. producers begin to plant the 2024-25 cotton crop. World Weather Inc. reports western Texas and southwestern Oklahoma will be dry through much of the next two weeks and fieldwork should advance well around some infrequent and mostly light showers. The Blacklands, Coastal Bend and south Texas will also be dry most often through the next two weeks with a couple rounds of rain that should not cause lasting delays to fieldwork. The forecaster states wet conditions in a part of the Delta and some southeastern states may induce some delay to early season planting.
90-day outlook: U.S. cotton sales have tailed off in the wake of the recent reach to the highest level in a year-and-a-half. During the week ended March 14, USDA reported net sales of 92,600 RB of upland cotton, which rose 8% from the previous week and 20% from the four-week average. Top purchasers included Turkey, Peru and Vietnam. Meanwhile, sales for 2024-25 totaled 40,500 RB. However, shipments of the natural fiber continue to remain steady, as exports during the week totaled 397,300 RB, which notched a marketing-year high. Top destinations included 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.
