Crops Analysis | March 27, 2024
Price action: May corn extended 5 3/4 cents lower to $4.26 3/4, marking a more than three-week low close.
Fundamental analysis: A gap lower at the overnight open set the tone for today’s price action, while outside market pressure added insult to injury to the corn market. A general risk-off tone ahead of USDA’s Prospective Planting and Grain Stocks Reports continued to hover over the grain and soy complexes as traders position ahead of their release. The data could prove bearish given a number notably above the average analyst estimate of 91.776 million acres, according to a Reuters poll, which reflects a 3% drop from 2023. Though it’s worth noting the common producer typically sticks to a rotation, which would make a consecutive year of large corn acres quite unusual. Meanwhile, the government’s quarterly Grain Stocks update could negate or exacerbate planting data, though price direction is typically garnered from a surprise in one or the other. USDA will also release its weekly export sales data Thursday morning, a day early, due to the Good Friday holiday. Traders are expecting sales to have ranged from 800,000 MT to 1.3 MMT during the week ended March 21.
Earlier today, the Energy Information Administration reported weekly ethanol production, which averaged 1.054 million barrels per day (bpd) during the week ended March 22, which rose 8,000 bpd (0.8%) from the previous week and 49,000 bpd (5.1%) from a year-ago. Ethanol stocks increased 83,000 barrels to 26.092 barrels.
Technical analysis: May corn bears were able to hold a close below initial support at $4.29 1/4 for the first time since March 6, with a low-range close suggesting more of the same overnight and into Thursday morning. Initial support will now serve at $4.26 1/4, with further support at $4.20 1/2 and the Feb. 26 low of $4.08 3/4. Potential buying efforts following Thursday’s government reports will face initial resistance at today’s failed support level, then at 20- and 10-day moving averages of $4.35 1/4 and $4.36 1/4. From there, resistance stands at $4.43 3/4, with little standing between this particular area and the 100-day moving average of $4.64 3/4.
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 6 1/2 cents before settling at $11.92 1/2, nearer session lows. May meal futures dropped 80 cents to $339.0. May bean oil futures slipped 75 cents to 47.67 cents, nearer session lows.
Fundamental analysis: Soybeans faced mild selling pressure though closed off session lows as traders positioned for tomorrow’s USDA reports. Reports of impressive yields for late planted soybeans likely dampened bullish attitudes in the soy complex today, though traders are looking towards tomorrow’s reports, which will likely dictate the coming direction of the soy complex. A Reuters poll estimated soy stocks at 1.828 billion bushels, which would be a two-year high and up 8.4% from a year ago. A surprise there is less likely than corn and wheat, as much of soy use is tightly tracked, as most soy use is crushed or exported. Reuters acreage poll averaged 86.53 million soy acres, which was just shy of our findings of 86.75 million acres in our acreage survey. That would be down from USDA’s projection of 87.5 million acres in this year’s Outlook Forum, though sharply up from 83.6 million acres in 2023-24. The lowest estimate in the poll pegged acres at 85.35 million acres while the highest estimate was 88.0 million acres.
Weather in Argentina remains favorable for crop development in the next couple of weeks, World Weather Inc notes. The nation will see a healthy mix of rain and sunshine, with breaks between rounds of rain allowing fieldwork to advance. Soil moisture is sufficient to continue to carry crops to maturation in dry areas. The forecast turns dry in the second week of April, which will leave some regions in need of more rain, the forecaster says.
USDA is also set to release their weekly export sales report tomorrow morning. Traders expect sales between 300,000 and 700,000 MT. Last week, USDA reported export sales of 494,028 MT.
Technical analysis: May soybeans closed lower for the second consecutive session though traded within Monday’s range. Bulls continue to hold the short-term technical advantage, though bears are challenging a month-long uptrend. Bulls are seeking to close prices back above the 40-day moving average at $11.96 1/2, which is quickly backed by the psychological $12.00 mark. Report driven strength finds additional resistance at $12.12, $12.17 1/2, then last week’s high of $12.26 3/4. Support at the 20-day moving average, currently at $11.89 1/2, capped losses today. Further selling would find support at $11.85 1/2, $11.81, $11.75 then $11.61.
May meal futures saw little volatility today, though closed nearer session lows. Prices are caught between 20-day moving average support and 40-day moving average resistance. That resistance comes in at $342.6, which is backed by $344.3 then last week’s high of $347.6. Meanwhile, 20-day moving average support stands at $338.2, which is backed by $336.6, then $334.4.
May bean oil futures continue to consolidate in an apparent bull flag on the daily bar chart. Bulls are seeking to overcome resistance at 48.14 cents, the 10-day moving average. That is backed by 48.85 cents, then the psychological 90.00 cent mark. Initial support stands at the 20-day moving average, currently at 47.68 cents. That is backed by the 40-day moving average at 47.46 cents, then 47.25 cents.
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: May SRW wheat rose 4 cents to $5.47 1/2. May HRW wheat closed up 1 cent at $5.78 1/4. Prices closed nearer their session highs. May spring wheat futures rose 3 3/4 cents to $6.51.
Fundamental analysis: The winter wheat futures markets today saw some position evening and short covering ahead of Thursday morning’s important USDA planting intention and quarterly grain stock reports. All U.S. wheat planting intentions are expected to be slightly down from last year. Weekly U.S. wheat export sales are also out Wednesday and are expected between -100,000 to 300,000 MT in the 2023-24 marketing year, and 50,000 to 250,000 MT in the 2024-25 marketing year.
World Weather Inc. today said wheat production areas around the world “are still in mostly good shape. There may be a little concern over limited precipitation in Russia’s southern region and Ukraine, although those areas are not dry and have sufficient moisture to start planting.” Rain in Spain, Portugal, France and Morocco will improve short-term crop development. U.S. crop weather still looks favorable, although some winterkill has occurred this year in the northwestern Plains and possibly a little yield loss may have occurred in a few other areas – like the Tennessee River Basin from last week’s freezes. Freezes coming up next week should not have a big impact on Midwest or Great Plains crops, although it will be closely monitored, said the forecaster.
Technical analysis: Winter wheat futures bears have the firm overall near-term technical advantage. SRW prices are in a three-month-old downtrend on the daily bar chart. SRW bulls' next upside price objective is closing May prices above solid chart resistance at $5.80. The bears' next downside objective is closing prices below solid technical support at $5.00. First resistance is seen at Tuesday’s high of $5.57 1/2 and then at this week’s high of $5.67. First support is seen at today’s low of $5.38 1/2 and then at last week’s low of $5.27.
Recent sideways price action in HRW begins to suggest a near-term market bottom is in place. The HRW bulls' next upside price objective is closing May prices above solid technical resistance at $6.20. The bears' next downside objective is closing prices below solid technical support at the contract low of $5.51 1/2. First resistance is seen at Tuesday’s high of $5.90 3/4 and then at $6.00. First support is seen at today’s low of $5.72 1/4 and then at last week’s low of $5.63 1/2.
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 futures dropped 264 points before settling at 90.77 cents to mark the lowest close since Feb. 8.
Fundamental analysis: Cotton futures underwent heavy selling following corrective buying early this week, as little has fundamentally changed in regard to disappointing demand. Export sales of cotton have remained under the 100,000 bales mark for four consecutive weeks following explosive trading higher. Whether or not foreign buyers, namely China, have returned to the U.S. cotton market remains to be seen. Still, any catalyst driven by tomorrow morning’s export sales is likely to be short lived, as tomorrow’s USDA Prospective Plantings report at 11 a.m. CT is likely going to dictate price action in the latter half of tomorrow’s session. USDA projected cotton plantings at 11.0 million acres at the Outlook Forum in February, which would be above 2023-24 acres at 10.23 million acres. NCC estimated acres at 9.849 million acres in February, though their survey was before the price run up seen in late January and February. A Reuters poll estimated cotton acres at 10.906 million acres. That would keep supplies relatively tight. The greatest question is how much producers were encouraged to plant following the prices surge earlier this year. Many producers in Georgia and Texas could have been dissuaded by low row crop prices and opt to plant cotton, which could be a bearish surprise in tomorrow’s report.
Technical analysis: May cotton futures underwent heavy selling and settled at the lowest mark since early February. Bears now hold the near-term technical advantage in cotton futures. Bulls are seeking to reclaim support at the 40-day moving average, currently at 92.27 cents. Further buying would find resistance at 93.41 cents, then Tuesday’s high at 94.27 cents. Meanwhile, support stands at today’s low of 90.56 cents, which is backed by the psychological 90.00 cent mark, then 88.15 cents.
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.
