Crops Analysis | February 10, 2023

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Corn

Price action: Corn closed 9 3/4 cents higher to $6.80 1/2, ending the session above 10-, 20- and 100-day moving averages and is up 3 cents on the week.

5-day outlook: Corn futures surged as crude oil futures rose back toward $80.00 as Russia announced plans to reduce oil production next month after the West imposed price caps on the country’s oil and oil products. The country announced plans of reducing its crude oil production in March by 500,000 barrels per day, or about 5% of output. Strength in SRW wheat also pulled corn higher as trader focus returned to the Black Sea grain deal. Nearby direction will continue to stem from crude oil and SRW wheat prices along with the U.S. dollar.

30-day outlook: Snug supplies will keep traders closely tuned into South American weather as Brazil has received consistent rains which have slowed the harvest pace of soybeans and ultimately the planting of the second safrinha corn crop. Pro Farmer South American crop consultant Cordonnier notes nearly two-thirds of the crop will be planted outside the ideal window of mid-February. Conversely, persisting hot, dry weather in Argentina has trimmed the nation’s crop, with further cuts likely once the crop is harvested. Earlier in the week, USDA forecast Argentine corn production down to 47 million MT, which was a 5 million MT, or 10%, decrease from previous estimates. In a similar move, Argentina’s Rosario grains exchange reduced its expected output to 42.5 million MT, down from 45 million MT previously.  

90-day outlook: USDA’s prospective plantings report along with weather in the U.S. Corn Belt and U.S. exports will be the major focus over the next few months. USDA will release its first official, survey-based estimates for the 2023-24 crop on March 31, though active acreage buying efforts are already occurring in the market and will continue through the spring months. USDA’s acreage estimates are based on surveys from nearly 73,000 producers across the U.S. and are conducted during the first two weeks of March.

U.S. corn exports continue to be of concern, with the current pace of export sales trailing the previous year by 41.4%, largely due to a higher U.S. dollar and shrinking domestic supplies. However, USDA reported Thursday net sales totaling 1.16 million MT for week ended Feb.2, which was just shy of top-end pre-report estimates of 1.2 million MT and up from the previous 4-week average by nearly 20%.   

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 soybean futures rose 23 1/4 cents to $15.42 1/2, near the daily high and posted an eight-month high close. For the week, March beans gained 10 1/2 cents. March soybean meal futures closed up $3.90 to $499.40, near the session high and hit a contract high. On the week, March meal rose $2.90. March soybean oil rose 150 points to 60.54 cents and on the week rose 148 points.

5-day outlook: Soybean and meal futures finished off the trading week in strong fashion, including technically bullish weekly high closes in nearby futures. That sets the stage for follow-through technical buying early next week. Focus next week will remain on dry weather patterns in South American soybean-growing regions. Argentine production forecasts continue to be lowered. World Weather Inc. today reported Argentina soybean regions will get some relief from dryness in the coming week, and so will Brazil. “Even though drought- busting rain is not likely, there will be some improvement to crop conditions,” said the forecaster, adding, “some relief from dryness is expected for a little while, but follow-up rain will be needed.”

30-day outlook: Bullish soybean traders brushed aside USDA this week boosting its 2022-23 soybean carryout forecast by 15 million bu. and ongoing expectations Brazil will produce a record soybean crop. Key for soybeans in the coming weeks will be the performance of the soybean meal futures market, which in recent months has shown keen resilience on any price setbacks that have been seen as buying opportunities. Nearby meal futures hovering around $500.00 reflects the tight domestic supply situation and the recent Argentine drought sharply reducing meal sales for that country, which is the world’s largest meal exporter. There are no early technical clues to suggest the meal futures market is close to a market top.

90-day outlook: USDA this week reported U.S. soybean export sales of 459,400 MT for week ended Feb. 2, which were 38% below the previous week and down 49% from the prior four-week average. If U.S. soybean sales abroad start to sputter, the upside for soybean and meal futures, already at elevated price levels, will be limited. However, market watchers remain optimistic that China’s reopening after a multi-year lockdown will in the coming months improve soybean demand prospects for the world’s second-largest economy.

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 surged 28 3/4 cents to $7.86, marking the highest close since Dec. 30 and is up 29 1/4 cents on the week. Hard red wheat ended the session up 30 cents at $9.09, while March spring wheat rose 13 3/4 to $9.31.

5-day outlook: Wheat futures climbed higher as trader focus returns to global supply following Russian criticism of Black Sea grain deal. Russia’s ambassador to the United Nations stated earlier today that Moscow has not been able to export any grain under the Black Sea agreement due to Western obstacles. Russia has also recently opposed a Ukrainian proposal to increase the minimal tonnage of ships which carry grain and vegetable oil from the country, and Ukraine’s accusations of slowing ship inspections. News headlines also indicate the war is escalating as Russia struck power facilities across Ukraine.

30-day outlook: U.S. weather conditions will play an important role in the market as several hard red winter wheat growing areas continue to endure dry conditions. World Weather notes there will be opportunities for precipitation in the region again starting Monday and then continuing into the second week of the outlook. Southeastern areas are likely to be most favored for significant moisture. However, some precipitation is expected in the west as well which will be important. The west will continue to need much more precipitation for the upcoming growing season.

90-day outlook: U.S. exports and will be the longer-term focus as the marketing year progresses. USDA reported Thursday weekly export sales of 131,400 MT for week ended Feb. 2, which was a 4% drop from the previous week and 56% lower than the previous 4-week average. Commitments are currently 6% behind a year ago. A continued bounce in the U.S. dollar could further hinder exports, putting U.S. supplies at a premium to global competitors. Though prospects for increasing demand as the world shakes off pandemic- induced inflation could bolster U.S. exports in the coming months.

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 closed down 23 points to 85.27 cents and nearer the session high. For the week, March cotton fell 16 points.

5-day outlook: Since mid-November the cotton futures market has chopped in a sideways trading range. Look for more of the same next week as traders look for fresh fundamental developments that may push prices out of the trading range. Focus for cotton traders has been and likely will continue to be the key outside markets that include the U.S. dollar index, crude oil and the U.S. stock indexes. Those markets are presently a mixed bag for cotton, which are contributing to the choppy trading conditions. The recent strong rebound in crude oil futures will limit selling interest in cotton futures next week. However, on the negative side for the natural fiber is the stock market becoming wobbly late this week.

30-day outlook: As springtime draws closer, cotton traders will pay closer attention to weather patterns in cotton country. World Weather Inc. today reported west and south Texas precipitation will be restricted over the next two weeks, although some moisture will occur briefly. Wet field conditions will remain in the U.S. Delta and southeastern states while conditions in the far western U.S. are expected to change very little. “Australia needs significant rain to improve dryland production conditions, especially in western Queensland’s crop region,” said the forecaster.  Cotton planting in Brazil is still behind the usual pace, but progress is being made and it should accelerate over the coming week. Wednesday, February 22 is first notice day for March cotton futures.

90-day outlook: This week’s USDA monthly supply and demand report suggests U.S. cotton carryover will exceed previous forecasts. On the positive side, U.S. export sales at 262,800 bales this week reached a marketing year high. With China’s economy expected to shift into a higher gear in 2023, better U.S. cotton demand abroad in the coming months to push prices above the recent trading range, does not seem out of the question.

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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