Crops Analysis | January 27, 2023

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Corn

Price action: March corn futures ended 1/2 cent higher at $6.83, which was up 6 3/4 cents for the week.

5-day outlook: Funds were buyers of corn this week, despite improved weather in Argentina, which helped fuel the modest weekly gains. South American weather, export demand and fund money flow will all be key to price action next week. But the flip of the calendar to February next week starts the price discovery process for the 2023 spring crop insurance price, which could add a new dynamic to the market. The current new-crop soybean/corn price ratio of 2.3 slightly favors corn.

30-day outlook: Argentina’s weather has improved and more rains are forecast for the first couple weeks of February. Soybean harvest delays in central Brazil due to persistently wet conditions aren’t overly concerning at the moment. But the ideal window for safrinha corn planting closes around mid-February. If soybean harvest delays persist past mid-month, there might be greater concern about potential impacts to safrinha acreage and yield prospects.

90-day outlook: Corn acres will increase this year, but early spring weather will determine whether the planting season gets off to a fast, normal or slow start. USDA’s Ag Outlook Forum Feb. 23-24 will give traders a first glance at USDA’s thinking on acreage for this year. The Prospective Plantings Report on March 31 will give traders a benchmark from which to add or subtract acres based on spring weather, market conditions and other factors.

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 14 cents to $15.09 1/2, ending the session below the 10-day moving average, but up 3 cents on the week. March meal dropped $3.60 to $473.50 and March soyoil fell 17 points to 60.62 cents.

5-day outlook: Soybeans ended mildly lower after making notable gains in the previous two sessions and on the week as traders assess the implications of persisting hot, dry weather and recent rains in Argentina. Near-term price direction will continue to be largely influenced by South American weather as harvest progress picks up in Brazil and traders gauge how much the Argentine crop will benefit from recent rains. World Weather Inc. notes much of Brazil will see regular rounds of showers and thunderstorms through the next two weeks that will bring enough rain to favorably support crop development while causing interruptions to soybean harvest and safrinha crop planting. The forecaster also predicts regular rains in Argentina through next Thursday with further improvements in crop and topsoil conditions, though a full restoration of yield potential will not occur as some crops were permanently damaged by hot and dry weather earlier in the season.

30-day outlook: Traders will continue to monitor U.S. exports as Brazil harvests an expected record crop in anticipation of top consumer China buying freshly reaped Brazilian soybeans. However, U.S. soybean exports have remained robust, even though sales have historically begun to shift southward by this time. USDA reported net weekly export sales on Thursday of 1.145 MMT for week ended Jan. 19. Sales for the week were up 16% from the previous week and 53% from the previous 4-week average. China was the main purchaser at 940,300 MT, which included 386,000 MT switched from unknown destinations and decreases of 75,600 MT. The slower pace of harvest in South America due to persistent rains could be underlying element that is supporting U.S. exports. Traders are likely not ruling out the possibility of cancellations of U.S. soybeans once harvest progresses in earnest in Brazil. 

90-day outlook: The market focus will shift toward U.S. planting and progress as spring inches closer. USDA will report planting intentions and quarterly stocks on March 31, which has historically proven to be a market mover. By that time, traders will have a firmer grasp of the South American crop and overall demand of U.S. soybeans, which will ultimately propel the market through the planting season. 

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 futures dropped 2 1/2 cents to $7.50, though that was a gain of 8 1/2 cents on the week. March HRW wheat firmed 4 1/2 cents to $8.69 1/4, which was up 21 1/4 cents for the week. March HRS futures rose 3 1/2 cents to $9.21 1/2 and finished 8 3/4 cents higher for the week.

5-day outlook: Bitter cold temps will move into the central U.S. during the weekend and the first part of next week. Damage to the winter wheat crop is expected to be limited as the coldest areas will be protected by snowcover. But this week’s price action in HRW futures signals traders are at least a little worried, as they covered some short positions ahead of the arctic blast. If temps get colder than forecast or the bitter temps drop further south than expected, it could fuel followthrough buying. Otherwise, wheat likely needs help from corn and/or soybeans to build on this week’s gains.

30-day outlook: Export demand for U.S. wheat has picked up a little, but the pace remains woeful. Unless there’s dramatic improvement, USDA’s export forecast of only 775 million bu. will need to be lowered. Without support from export demand, it will be difficult to find sustained buyer interest in wheat futures, especially if wheat continues to flow freely from the Black Sea region.

90-day outlook: The HRW crop went into dormancy in the worst shape ever. Portions of the Central and Southern Plains received moisture that should give the crop a boost when it breaks dormancy. But spring weather needs to be favorable. Even then, some wheat acres will be grazed or planted to other crops in the spring. Uncertainty toward this year’s HRW production and yield is high.

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 fell 61 points to 86.89 cents after trading as low as 86.11 cents. The contract finished 19 points higher on the week.

5-day outlook: Cotton futures notched slightly lower, though notable support was provided this week from stronger-than-expected U.S. economic data. However, crude oil futures tumbled, reversing earlier gains on profit-taking and indications of strong Russian oil supply. Though strength in equities is curbing liquidity demand for the dollar, limiting its upside near-term. Traders will continue to closely monitor the dollar and oil prices next week, which will largely drive cotton prices.

30-day outlook: Chinese demand will be a major focus as the country returns to normalcy after more than three years of being locked down in the wake of its zero-Covid policy. Traders anticipate an increase in exports as Covid-19 cases have reportedly dropped 72% from a peak early this month while daily deaths among Covid patients in hospitals have dropped 79% from their high, pointing to a normalization of the Chinese economy and boosting expectations of a recovery in demand for durable goods. USDA reported weekly export sales on Thursday at 213,700 running bales for the week ended Jan. 19, which was up 2% from the previous week and the highest level since early July. Increases were primarily for China (59,200 RB), Turkey (55,200 RB) and Vietnam (42,400 RB, including 3,500 RB switched from China and 200 RB switched from Japan.)

90-day outlook: Prices will take direction from spring planting conditions following USDA’s March 31 Prospective Plantings Report. Traders will likely have a tighter grip on U.S. export demand as the spring planting season nears, which will help drive price action along with weather. Persisting dry conditions in the Southern Plains could ultimately affect cotton acres. World Weather Inc. notes West Texas precipitation earlier this week and next will help to increase topsoil moisture, though more precipitation is needed for depleted subsoils. The forecaster stated further that South Texas needs some moisture too, as its planting season is about a month away.

What to do: Be prepared to extend 2022-crop sales.

Hedgers: You should be 70% sold in the cash market on 2022-crop production.

Cash-only marketers: You should be 70% sold on 2022-crop production.

 

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