Crops Analysis | February 2, 2023

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Corn

Price action: March corn fell 5 3/4 cents to $6.75 1/4, ending the session just above the session low and 100-day moving average.

Fundamental analysis: Corn was led lower by weakness in crude oil futures, which fell to their lowest level since January 11 as pressure from a slightly stronger U.S. dollar weighed on commodities in general. Crude prices are likely carrying over the previous session’s weakness as crude inventories were reported unexpectedly higher, to their highest level in 19 months. 

Solid weekly export sales did little to excite the corn market, though net sales exceeded top-end pre-report estimates by nearly 400,000 MT. USDA reported net sales of 1.593 MMT for week ended Jan. 26, which was up 75% from the previous week and up noticeably from the 4-week average. Increases were primarily for “unknown destinations” (423,100 MT) and Mexico (323,600 MT, including decreases of 78,000 MT). Corn exports have been tepid at best so far in the marketing year, though weekly export sales in recent weeks have shown a glimmer of hope for the remainder of the marketing year.

Argentine weather remains a concern with all crops in northeastern portions of that nation expected to receive little to no rain for ten days to nearly two weeks and the ground is already critically dry, states World Weather Inc. Recent rains in western parts of the nation should carry crops through the first week of dry weather, but rain will be needed after that to limit crop stress and help maintain a better outlook for crop development. The forecaster notes weather in the second half of February will be of critical importance to Argentina crops because of the drying coming in the next ten days and the low soil moisture already present in the northeast part of the nation.

Technical analysis: March corn traded an 11 1/2-cent range, dipping below the 10-day moving average of $6.77 1/2 for the third straight session and marking a session low at the 100-day moving average of $6.74 1/2. Further attempts to the downside would encounter additional resistance at the 20-day moving average of $6.71 3/4, then at $6.69 1/4 and the 40-day moving average of $6.64 3/4. A turn higher, however, would face resistance first at the 10-day moving average, then at $6.84 1/4, $6.87 3/4 and $6.93 1/2. The contract is rangebound between the $6.87 3/4 and the 100-day moving average of $6.74 1/2, with a breach of either level likely inducing enhanced buying or selling efforts.

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 rose 14 cents to $15.34 1/4 and near the session high. March soybean meal gained $7.10 to $491.80, nearer the session high and hitting a contract high. March bean oil closed up 15 points at 60.94 cents and nearer the session high.

Fundamental analysis: The soybean and meal markets continue to be the strongest in the grain futures complex. The meal market remains on fire as nearby March futures are closing in on the $500.00 mark. Look for the meal market to continue to be the leader for daily price action in the soy complex.

South American soybean-growing weather remains friendly for prices. World Weather Inc. today reported “hot, dry, and stressful conditions for crops occurred from central to western Rio Grande do Sul and parts of southern Paraguay Wednesday.” Much of Mato Grosso and Goias were also dry, with rain reported from much of Parana and southern Mato Grosso do Sul to Sao Paulo. Meantime, much of Brazil outside of northeastern and a few far southern areas will see regular rounds of showers and thunderstorms through the next two weeks that will bring enough rain to favorably support crop development while slowing soybean harvesting.  The U.S. dollar index fell to a nine-month low today before rebounding a bit. The still-weak greenback is also supportive for the soybean market.

USDA this morning reported 736,000 MT of U.S. soybean sales for week ended Jan. 26, which was down 36% from the previous week and 18% from the 4-week average. Net sales were at the low end of trade expectations.

Technical analysis: The soybean futures bulls have the solid overall near-term technical advantage. A 3.5-month-old price uptrend is in place on the daily bar chart. Next near-term upside technical objective for the soybean bulls is closing March prices above solid resistance at the contract high of $15.72 1/4. The next downside price objective for the bears is closing prices below solid technical support at the January low of $14.65. First resistance is seen at this week’s high of $15.43 3/4 and then at the January high of $14.48 1/2. First support is seen at today’s low of $15.22 1/2 and then at this week’s low of $15.10 3/4.

The meal futures bulls also have the solid overall near-term technical advantage. The next upside price objective for the meal bulls is to produce a close in March futures above solid technical resistance at $500.00. The next downside price objective for the bears is closing prices below solid technical support at $465.00. First resistance comes in at today’s contract high of $493.60 and then at $500.00. First support is seen at today’s low of $484.90 and then at Wednesday’s low of $479.00.

Soybean oil futures bears have the overall near-term technical advantage. Prices are in a five-week-old downtrend on the daily bar chart. The next upside price objective for the bean oil bulls is closing March prices above solid technical resistance at 65.00 cents. Bean oil bears' next downside technical price objective is closing prices below solid technical support at the December low of 58.50 cents. First resistance is seen at 62.00 cents and then at this week’s high of 62.46 cents. First support is seen at the January low of 59.90 cents and then at 59.00 cents.

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 rose 1 1/4 cents to $7.61 after reaching its highest level since Jan. 4, while March HRW and spring wheat each fell 3 1/2 cents to $8.80 3/4 and $9.22 1/2, respectively. 

Fundamental analysis: The wheat complex spent most of the session in negative territory after trading mostly higher overnight, though SRW futures were able to end the session mildly positive. A firmer U.S. dollar today cast a mild shadow over commodities in general, but wheat gained a double dose of negativity with the government’s weekly export sales release which proved lackluster. For week ended Jan. 26, USDA reported net U.S. sales of 136,400 MT for 2022-23, which was down 73% from the week prior and 51% below the 4-week average. Increases were primarily for Egypt (60,000 MT switched from “unknown destinations”), Jamaica (22,000 MT) and Singapore (22,000 MT switched from Thailand.)

Weather continues to be a focus in U.S. hard red wheat growing regions, with net drying expected into Tuesday with warming temperatures, according to World Weather Inc. The forecaster notes morning lows will be cold enough to prevent any serious wheat development from occurring, though a little greening may occur in some of the south. There is some potential for a precipitation event late next Tuesday through Wednesday, with the greatest moisture expected in southeastern production, possibly raising soil moisture. However, an ideal situation would be if this precipitation occurred farther to the northwest, which is not as likely. 

Weather conditions for winter crops in both Ukraine and Russia are looking mostly favorable but potential risks must be monitored, with some early concerns starting to appear in Russia, according to SovEcon. Though country’s wheat crop is acceptable overall, fields in the central federal district have reportedly seen ice crust issues, while dry weather has persisted in the south of the country, which is one of the main producing regions.  

Technical analysis: March SRW traded a 20 1/4-cent range, dipping briefly below the 40-day moving average of $7.51 1/2, which will continue to serve as support. Additional support stands at the near convergence of the 10- and 20-day moving averages of $7.47 1/4 and $7.44 1/2, respectively, and at $7.37 1/2. Upside efforts will continue to encounter resistance near $7.66 ½, $7.73 1/2 and $7.84 1/2.

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 78 points at 86.39 cents and near mid-range.

Fundamental analysis: The choppy and sideways price action in the cotton futures market continues, as it has for over two months. The market was buoyed today by another big rally in the U.S. stock market after the Federal Reserve hinted on Wednesday that its interest rate increases will likely end sooner rather than later as inflationary price pressures have eased. The cotton market’s price action on Friday may be influenced by the monthly U.S. jobs report, which is expected to show a modest rise in the U.S. workforce payrolls.

USDA in its weekly export sales report this morning showed U.S. cotton net sales of 171,200 running bales (RB) for 2022/2023 were down 20 percent from the previous week, but up 28 percent from the prior 4-week average. Increases were primarily for China (119,800 RB), Turkey (44,000 RB) and Indonesia (8,800 RB).  Net sales of 20,200 RB for 2023/2024 were reported for Turkey (18,000 RB) and Thailand (2,200 RB). Exports of 212,200 RB were up 21 percent from the previous week and 41 percent from the prior 4-week average. The destinations were primarily to China (59,200 RB), Pakistan (45,300 RB) and Turkey (24,400 RB).

Technical analysis: Cotton futures bulls and bears are on a level overall near-term technical playing field. There are stiff chart resistance levels that lie just overhead and have turned back the recent rally. The next upside price objective for the cotton bulls is to produce a close in March futures above technical resistance at the November high of 89.92 cents. The next downside price objective for the cotton bears is to close prices below solid technical support at the January low of 80.47 cents. First resistance is seen at this week’s high of 87.40 cents and then at 88.00 cents. First support is seen at this week’s low of 84.50 cents and then at 84.00 cents.

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.

 

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