Crops Analysis |February 6, 2023
Corn
Price action: March corn rose 1 1/2 cents to $6.79 after trading below the 20- and 100-day moving averages that have converged around $6.74 1/4.
Fundamental analysis: Corn futures succumbed early to U.S. dollar strength along with weakness in the soy complex as traders monitored political tensions between the U.S. and China and news regarding the size of the South American crop. A selloff in crude oil futures since the end of January has also cast a negative tone over the market as traders analyze China’s reopening and global economic growth prospects. However, crude seemingly found a market bottom midmorning, which spurred moderate buying, and ultimately lifted corn into positive territory. The International Energy Agency expects half of this year’s global oil demand growth to come from China, further indicating the importance of the country’s recovery from its zero-Covid strategy.
World Weather Inc. notes Argentina will see hot temperatures and little rain his week, which will lead to significant crop stress in the drier northern areas while most other locations should have enough soil moisture to prevent serious stress from occurring right away. The forecaster notes, however, that a timely increase of rain will occur Saturday into next Monday, with the period to be closely monitored as a larger part of Argentina should be dry enough by then that crop stress could quickly increase if the rain event falters.
USDA reported corn export inspections of 480,205 MT (18.9 million bu.) for the ended Feb. 2. Inspections were down 62,784 MT from the previous week and are running 32.7% behind a year ago. Traders carved a pre-report range of 440,000 to 800,000 MT.
Technical analysis: March corn traded a narrow, 7-cent range, dipping below the convergence of the 20- and 100-day moving average around $6.74 1/4 and making a session low at $6.72 1/4, just below additional support at $6.72 1/2. Further attempts to breach these levels will find bears encountering support at $6.67 3/4 and $6.64. Conversely, initial resistance stands at the 10-day moving average of $6.79 1/4, then at $6.81 1/4, $6.84 3/4 and $6.89 1/2.
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 10 3/4 cents to $15.21 1/4. March soymeal dropped $7.50 to $489.00. March soyoil firmed 25 points to 59.31 cents.
Fundamental analysis: Traders took profits out of the long side of the markets in both soybeans and soymeal today, while they also unwound long meal/short soyoil spreads in corrective trade to kick off the week. Uncertainty with U.S./China relations after the balloon incident caused traders to take a cautious approach, despite forecasts calling for stressful conditions across Argentina and southern Brazil this week. Additional corrective trade is possible on Tuesday as traders prepare for USDA’s February crop reports Wednesday.
Traders aren’t expecting much change to the U.S. balance sheet this month, with the average estimate for ending stocks at 211 million bu. versus 210 million bu. last month. Changes to the global balance sheet will be driven by South American production, with traders anticipating USDA will lower its Argentine crop estimate and cut ending stocks around 1.5 MMT. Traders don’t anticipate much if any change to the Brazilian soybean crop estimate.
Brazil’s early soybean harvest continues to run behind year-ago but that’s potentially more of a concern for safrinha corn acreage than soybeans. But some soybean quality issues could arise in the wettest areas the longer the harvest delays persist.
Weekly soybean export inspections totaled 1.83 MMT (67.2 million bu.). That lowers the required pace to hit USDA’s current export forecast of 1.990 billion bu. to an average of 17.2 million bu. for the remainder of the marketing year. While U.S. soybean exports tail off significantly the second half of the marketing year as Brazil’s new-crop supplies hit the world market, it appears USDA made too big of cut to exports last month.
Technical analysis: March soybeans remain technically bullish, holding well within the uptrend from the summer lows. Initial support extends from the 10-day moving average at $15.20 1/2 to the 40-day average at $15.00 3/4. Key support is the last reaction low at $14.78 1/4. Near-term resistance extends from the 5-day average near $15.29 to the January high at $15.48 1/2.
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 fell 6 1/2 cents to $7.50 1/4, ending the session below the 10- and 40-day moving averages, while March HRW rose 3 cents to $8.76 and March spring wheat dropped 4 cents to $9.17 1/2.
Fundamental analysis: SRW wheat futures lacked buying interest as the U.S. dollar marched higher, making the U.S. less competitive in the global market while Russian wheat prices tumbled in the wake of a record harvest and stocks. Subsequently, Russia marked near-record export levels in January, with SovEcon estimating shipments totaling 3.8 MMT for the month. A Russian ag ministry official says the country could export 30 MMT to 35 MMT of grain (mostly wheat) in the second half of the 2022-23 marketing year.
U.S. hard red winter wheat areas were advertised wetter today for early next week, according to both the American and European forecast models as a disturbance moves out of the Southern Plains and into the Midwest. Though, western hard red winter wheat areas are unlikely to receive substantial precipitation over the next two weeks and temperatures will be warm early this week and again briefly early next week, according to World Weather Inc.
Export inspections for week ended Feb. 2 totaled 536,355 MT (19.7 million bu.), which was up 90,628 MT from the previous week and above the top end of pre-report estimates at 525,000 MT. Shipments are running 2.1% behind a year-ago.
Technical analysis: March SRW futures traded a 21-cent range, breaching the 40-day moving average of $7.52 1/2, the 10-day moving average at $7.51 3/4 and making a session low just above support of $7.46 1/4. Additional support stands at the 20-day moving average near $7.45 1/4, $7.35 1/2, and $7.20 1/4. A turn higher, however, will face resistance first at former support around the 10- and 40-day moving averages, along with $7.71 3/4, $7.87 and $7.97 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 futures ended low-range at 83.25 cents, down 216 points on the day.
Fundamental analysis: Concerns about fallout from the U.S. downing of the Chinese surveillance balloon over the weekend triggered selling in the cotton market today. U.S. cotton export sales have picked up in recent weeks and China has been the biggest buyer. While the balloon situation may not change China’s buying of U.S. cotton, it was enough to trigger cautionary trade today.
Additional pressure came from a sharp rise in the U.S. dollar index, which was a continuation of price action late last week.
Traders are also gearing up for USDA’s report data on Wednesday. The average pre-report estimate signals a modest cut to U.S. ending stocks after a 700,000-bale increase last month. Global carryover is expected to rise slightly.
Technical analysis: The technical posture is neutral as March cotton futures remain in the three-month broad, sideways trading pattern. But the contract has rolled over from the top of that range, suggesting a potential short-term momentum shift to bears. Followthrough selling would point to a test of the lower end of the range in the 80.00-cent to 78.00-cent area.
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.
