Crops Analysis | February 16, 2023

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Corn

Price action: March corn fell 1/4 cent to $6.76, nearer the session high.

Fundamental analysis: Corn futures traded lower throughout most of the session as a stronger U.S. dollar continued to cast a negative tone over grains, despite stable export activity as of late. However, after reaching its highest level since early January, the dollar reversed off its highs, easing the pressure on commodities into the close.

USDA reported weekly export sales of 1.025 MMT for week ended Feb. 9, which was 12% lower than the previous week, but 15% higher than the 4-week average. Net sales for the week were near the higher end of pre-report estimates which ranged from 600,000 MT to 1.2 MMT. Mexico was the top purchaser for the week at 269,000 MT, along with “unknown destinations” (247,300 MT) and China (126,000 MT).  

Parity between USDA’s most recent global corn production estimate and the International Grains Council’s (IGC) on Thursday has narrowed a bit, as the IGC trimmed its global corn estimates by 8 million tonnes to 1.153 billion tonnes. The cuts were made due to persisting weather anomalies in the U.S. and Argentina, which has curbed output. USDA currently estimates global production at 1.151 billion.

The Buenos Aires grains exchange noted on Thursday that Argentina could face early frosts in the coming days, with potential to affect Argentina’s already struggling crops in the country’s southern main agricultural region. Crops are set to face “cold and dry polar winds that will cause a remarkable drop in temperature, with unseasonably low temperatures and the risk of localized frost,” according to the grains exchange.  

Technical analysis: March corn traded a narrow 4-cent range, dipping below the 100-day moving average of $6.73 1/2 briefly during the session. Solid support remains around the 100-day moving average, along with the 40-day at $6.72 1/2, though a breach would find bears aiming for $6.71 and $6.66 1/2. Conversely, initial resistance stands at $6.80 1/2, then at $6.85 and $6.87 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 rose 3/4 cent to $15.26 1/4, marking a mid-range close, while new crop soybeans rose 8 3/4 cents to $13.83 3/4. March soymeal ended the session mostly flat, with a mere 50 cent gain to $491.60. March soyoil rose 66 points to close at 61.90 cents.

Fundamental analysis: Soybeans traded in a narrow, choppy range as the U.S. dollar weighed on commodities through much of the session, along with unenthusiastic export sales. Though, news of the Buenos Aries grains exchange’s plans to further trim its Argentine soybean production estimate due to continuing drought, buoyed the complex into the close. An updated forecast was not provided; however, the exchange’s current estimate is at 38 MMT and was 41 MMT just a month ago.

AgRural, a Brazilian consulting firm, cut their estimate of the Brazilian soybean crop to 150.9 MMT from 153 MMT. The revised estimate stems from cuts to yield due to the drought in the southern state of Rio Grande do Sul. Yields in other states, such as Mato Grasso and Goiás, are projected to overperform, just not enough to make up for drought-stricken areas.

Rainfall in Brazil is expected to continue for the next couple weeks with the exception of Rio Grande do Sul, according to World Weather Inc. Rainfall continues to delay the first soybean harvest throughout key growing areas. Better weather is expected towards the end of the month.

USDA reported weekly export sales of 512,800 MT for the week ended Feb 9, which was on the lower end of expectations that ranged from 400,000 to 800,000 MT. This is an increase of 37% from the previous week, but still down 35% from the four-week average. China was the lead buyer at 283,600 MT.

Technical analysis: March soybeans traded in an 11 3/4 cent range in an inside day following yesterday’s selloff. Most of the trading occurred between the 10- and 20- day moving averages. $15.16 1/2 remains support with selling likely to accelerate from there. Further support comes in at the 40-day moving average of $15.10 1/2. Bulls are looking to overcome the 10-day moving average at $15.29 to ultimately retest resistance at $15.50. Bulls continue to hold the near-term technical advantage.

March meal futures traded in a narrow $4.80 range. Similar to soybeans, prices were largely capped by the 10-day moving average and supported by the 20-day. Bulls want to keep prices above the 20-day moving average, else selling is likely to accelerate to further support at $478. Initial resistance comes in at the psychological $500 level then the recent high of $508.2.

March soyoil was the strongest in the soybean complex today, trading in a 115-point range and nearing resistance at 62.00 cents. It appears soyoil has posted a reversal and technicals are becoming more bullish. Resistance remains at the 40-day moving average of 62.35 cents with more resistance coming in at the psychological level of 63.00 cents. Support comes in at 61.10 cents and 60.72 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 fell 4 1/4 cents to $7.65, ending the session below the 10-day moving average, while March HRW and March spring wheat each rose 4 cents to $8.98 1/2 and $9.28 3/4, respectively.

Fundamental analysis: SRW wheat futures posted losses for the third consecutive session as a stronger U.S. dollar and Black Sea supply uncertainty looms. USDA’s weekly export sales data for week ended Feb. 9 also proved uninspiring. Net sales of 209,800 MT for 2022-23 were reported for the week, and though it was a 60% increase from the previous week, sales lagged the four-week average by 32%. The figure was towards the low end of the pre-report range of 150,000 to 450,000 MT.

Several areas in the Midwest and central U.S. Plains are forecast to receive precipitation over the next several days. World Weather notes the U.S. northern Plains and part of the upper Midwest will get snow mid- to late-week next week, while the Midwest, Delta, Tennessee River Basin and interior southeastern states will receive sufficient precip to either maintain or improve soil moisture, according to World Weather Inc. The forecaster notes the central Plains will receive snowfall varying from 2 to 7 inches, with the moisture being of great use to wheat when temperatures turn warmer and melt, though more precipitation is still seriously needed to break drought conditions.  

Technical analysis: March SRW traded a 9 1/4 cent range, pivoting around the 10-day moving average of $7.82 1/2. Initial support remains at $7.78 1/2, then at $7.72, with solid support at the near convergence of the 20- and 40-day moving averages of $7.70 1/4 and $7.68 3/4, respectively. A breach of the area would then find bears looking towards $7.60 1/2 and the Jan. 23 low of $7.23. However, an extension of the bull camp’s nearly month long run higher, will find resistance first at $7.96 1/2, then $8.08 and $8.14 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 fell 130 points to 81.25 cents. May cotton dropped 87 points at 82.00 cents and nearer the session low, also hitting a five-week low.

Fundamental analysis: Technical selling pressure was evident in the cotton futures market again today, following Wednesday’s solid losses. Weaker U.S. stock indexes and a hot U.S. producer price index report today were bearish outside market elements for the natural fiber. The hotter PPI report suggests the Federal Reserve will keep U.S. interest rates higher for longer in order to successfully tamp down inflation. That also likely means less demand for apparel in the coming months.

USDA today reported weekly net U.S. cotton sales of 216,900 running bales (RB) for 2022/2023 were down 18 percent from the previous week, but up 1 percent from the prior 4-week average. Increases primarily for Vietnam (67,700 RB), China (61,600 RB) and Pakistan (23,200 RB). Net sales of 23,900 RB for 2023/2024 were reported. Shipments of 186,400 RB were down 11 percent from the previous week and 5 percent from the prior 4-week average. The destinations were primarily to Pakistan (47,900 RB), China (45,900 RB) and Vietnam (19,200 RB).

Technical analysis: May cotton futures prices this week have seen a bearish downside breakout from the trading range of the past four weeks. Cotton bears have the overall near-term technical advantage. The next upside price objective for the cotton bulls is to produce a close in May futures above technical resistance at the January high of 89.31 cents. The next downside price objective for the cotton bears is to close prices below solid technical support at the January low of 80.46 cents. First resistance is seen at today’s high of 84.20 cents and then at Wednesday’s high of 85.90 cents. First support is seen at today’s low of 81.21 cents and then at 80.46 cents.

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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