Crops Analysis | February 7, 2023
Corn
Price action: March corn futures fell 5 cents to $6.74 and near the session low.
Fundamental analysis: The corn market saw position evening featured today, ahead of USDA’s Supply and Demand report Wednesday morning. A sell off in the U.S. stock market and a rebound in the U.S. dollar index at midday helped push corn futures to session lows. Remarks from Fed Chairman Powell at an economic club meeting in Washington, D.C. pressured stocks and boosted the greenback. Powell said the inflation fight is far from over and that more rate hikes for longer may be necessary if U.S. economic data continues stronger, such as that seen in last Friday’s jobs report.
USDA’s supply and demand report on Wednesday is expected to show minor adjustments to its U.S. balance sheet. U.S. corn ending stocks are expected at 1.266 billion bu., up from 1.242 billion bu. in the January report. Traders will be closely watching the U.S. corn exports forecast, as well as the ethanol production numbers from USDA’s data. Brazil’s Conab is also out Wednesday with their new monthly crop estimates.
World Weather Inc. today reported Argentina corn regions will be hot and mostly dry through Saturday and then get waves of rain and experience cooler temperatures next week. Southern Brazil, Paraguay and Uruguay will also experience dry-biased weather through the weekend, with relief likely next week.
Technical analysis: The corn futures bulls have the overall near-term technical advantage. The next upside price objective for the bulls is to close March prices above solid chart resistance at the January high of $6.88 3/4. The next downside target for the bears is closing prices below chart support at the January low of $6.48 1/4. First resistance is seen at $6.80 and then at $6.85. First support is at last week’s low of $6.71 1/2 and then at $6.66.
What to do: Get current with advised sales. Wait to make additional 2022-crop sales.
Hedgers: You should have 50% of 2022-crop sold in the cash market.
Cash-only marketers: You should have 50% of 2022-crop sold.
Soybeans
Price action: March soybeans fell 6 cents to $15.15 1/4, ending the session below the 10- and 20-day moving averages. March meal dropped $7.60 to $481.40 and March soyoil surged 158 points to 60.89.
Fundamental analysis: Soybeans rebounded off their lows at midmorning as soyoil strength, led by a rally in crude oil, offered mild spillover support. However, weakness in meal futures stemming from prospects of additional rains in Argentina over the weekend into the coming week ultimately cast a negative tone. Traders are also anticipating USDA’s updated supply and data tomorrow, which is holding futures in a sideways, consolidated pattern.
World Weather notes Argentina will see hot temperatures and little rain this week leading to significant crop stress in the drier areas of the north while most other areas should have enough soil moisture to prevent serious stress from occurring right away. Two rounds of important rain will occur Saturday into Monday and Feb. 14-16, with the period being closely monitored as a larger part of Argentina should be dry enough by then that crop stress could quickly increase if these events falter.
South American crop consultant, Dr. Michael Cordonnier cut his Argentina crop forecast by 1 MMT to 38 MMT, saying “the estimate could easily move lower with an extended period of hot, dry weather.” Cordonnier kept his Brazilian crop estimate at 151 MMT.
Technical analysis: March soybeans traded a 19 1/2-cent range, dipping below the 10-day moving average near $15.23 1/4, the 20-day moving average of $15.16 and support at $15.13 1/2. The 10- and 20-day moving averages will now serve as resistance with the contract ending the session below both levels. A sustained attempt to the downside would encounter additional support at $15.05 3/4 and at the 40-day moving average around $15.01 1/2. Conversely, a move higher would face resistance at the 20- and 10-day moving averages, along with $15.32 1/4 and $15.43 1/4.
March meal futures traded an $11.00 range and ended the session below the 10-day moving average of $483.20. Support will continue to lie at $479.50, then the 20-day moving average of $477.50 and $471.70. Attempts higher, however, would face resistance first near the 10-day moving average, then at $490.20 and $496.90.
March soyoil traded a 218-point range, reaching as high as 61.48 and ending the session above resistance at 59.83, 60.35 and the 10-day moving average of 60.66. Additional resistance stands at the 20-day moving average of 61.68 as well as the 40-day moving average of 62.62. A turn lower will find support at former resistance at the 10-day moving average, 60.35 and 59.3 as well as 58.61.
What to do: Get current with advised cash sales. Be prepared to advance sales.
Hedgers: You have 70% of 2022-crop sold in the cash market. No 2023-crop sales have been advised.
Cash-only marketers: You have 70% of 2022-crop sold. No 2023-crop sales have been advised.
Wheat
Price action: March SRW wheat fell 1/2 cent to $7.49 3/4 and near mid-range. March HRW wheat closed up 9 3/4 cents at $8.85 3/4 and nearer the session high. March spring wheat futures posted a low-range close, slipping 1/4 cent to $9.17 1/4.
Fundamental analysis: The wheat markets saw some position evening in the SRW futures and short covering in the HRW futures ahead of Wednesday’s balance sheet updates from USDA. Solidly higher crude oil prices and a weaker U.S. dollar index today were bullish “outside market” forces working in favor of the wheat markets.
In Wednesday’s USDA monthly supply and demand report, traders are expecting an increase in U.S. wheat ending stocks to 576 million bu., from 567 million bu. reported by the agency in January.
World Weather Inc. today said concerns over U.S. hard red winter wheat will continue, “though no serious changes are likely this week. There is some potential for moisture next week, but it is only potential.” Meantime, Europe will dry down, whereas crops are dormant and do not need much moisture right now, said the forecaster. Western Russia and Ukraine crop areas are not likely to have much threatening weather for a while and China will see some moisture later this week that will help ensure good early spring moisture potential.
Technical analysis: Winter wheat futures bears have the overall near-term technical advantage. However recent gains begin to suggest market bottoms are in place. SRW bulls' next upside price objective is closing March prices above solid chart resistance at $8.00. The bears' next downside objective is closing prices below solid technical support at $7.00. First resistance is seen at this week’s high of $7.66 1/2 and then at last week’s high of $7.76 1/2. First support is seen at last week’s low of $7.42 and then at $7.30. The HRW bulls' next upside price objective is closing March prices above solid technical resistance at $9.00. The bears' next downside objective is closing prices below solid technical support at $8.00. First resistance is seen at the February high of $8.92 3/4 and then at $9.00. First support is seen at last week’s low of $8.59 1/4 and then at $8.50.
What to do: Wait on an extended price rally to increase cash sales.
Hedgers: You should be 85% sold in the cash market on 2022-crop. You should be 30% forward-priced on expected 2023-crop for harvest delivery next year.
Cash-only marketers: You should be 85% sold on 2022-crop. You should also be 30% forward-priced on expected 2023-crop production for harvest delivery next year.
Cotton
Price action: March cotton rose 236 points to 85.63, after trading as low as 83.27.
Fundamental analysis: Cotton futures surged higher as crude oil futures sustained a rally off a multi-week low with traders fearing a supply squeeze from increased Chinese demand. The market has seemingly shaken off geopolitical uneasiness from the previous session which came from the Chinese surveillance balloon that was shot down in U.S. air space. Additional strength likely came from short covering as traders take profits on short positions ahead of USDA’s updated supply and demand updates tomorrow. A slightly weaker U.S. dollar likely offered a bit of support as well.
Cotton ginnings will also be reported tomorrow, in conjunction with USDA’s WASDE.
Technical analysis: March cotton traded a 372-point range and ended the session above the 100-day moving average of 83.79, the 40-day moving average of 84.27 and the 20-day moving average of 85.17, which will now serve as support. However, a move higher will encounter additional resistance at the 10-day moving average of 85.87, as well as 86.51 and 87.42. Conversely, a turn lower will encounter support, in addition to the aforementioned support levels, at 82.36 and 81.45.
What to do: Get current with advised sales. Wait to extend 2022-crop sales.
Hedgers: You should be 70% sold in the cash market on 2022-crop production. You also should have 20% of expected 2023-crop forward sold for harvest delivery.
Cash-only marketers: You should be 70% sold on 2022-crop production. You also should have 20% of expected 2023-crop forward sold for harvest delivery.
