Crops Analysis | March 1, 2023
Price action: May corn futures rose 5 1/2 cents to $6.35 3/4, near the session high.
Fundamental analysis: Short covering and perceived bargain hunting were featured today after May corn futures prices hit a six-month low in overnight trading. Today’s high-range close suggests the bears may now be exhausted. However, Thursday trade will be more telling. Good follow-through buying interest and a solidly higher close on Thursday would begin to suggest prices today put in a near-term bottom. A lower U.S. dollar index today was a supportive outside market element for corn.
The Environmental Protection Agency today proposed a rule that would allow expanded sales of gasoline with higher ethanol blend in certain Midwest states, which was a friendly development for the corn market. Also a bit friendly for corn futures, U.S. ethanol production for the week ended Jan. 24 fell 26,000 barrels per day (bpd) to an average of 1.003 million bpd. U.S. ethanol stocks fell 813,000 barrels to 24.78 million barrels.
Thursday morning’s weekly USDA export sales report is expected to show U.S. corn sales of 500,000 to 1 million MT in the 2022-23 marketing year and sales of zero to 100,000 MT in the 2023-24 marketing year.
Technical analysis: The corn futures bears still have the overall near-term technical advantage amid the recent steep downdraft. The next upside price objective for the bulls is to close May prices above solid chart resistance at this week’s high of $6.52 1/4. The next downside target for the bears is closing prices below chart support at today’s low of $6.22 1/4. First resistance is seen at $6.40 and then at Tuesday’s high of $6.46 3/4. First support is at $6.30 and then at $6.25.
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.
Fundamental analysis: Soybeans were able to post a moderate rebound with soyoil futures leading the complex higher. Torrential rains in Malaysia over the next five days are propping up vegoils, along with India’s removal of a duty-free imports quota for 2 million MT of sunflower oil. Trade focus has turned to Malaysian weather, as the second-largest palm oil producer is forecast to experience heavy rains through the end of the week. World Weather notes flooding in the country will induce more damage to infrastructure and personal property than to agriculture, but there is potential to affect low-growing crops. The forecaster notes the region has potential to end up with 15 to 20 inches of moisture before the stormy period is over.
New data from Argentina reflects the parallel between this year’s drought and that of 2009, a year when the drought did not ease until late in the autumn season, according to World Weather Inc. The forecaster notes that while there is no opportunity for rain in central or southern Argentina during the next ten days, relief from the drought is expected much sooner than May, though May 2009 was the month of greatest changed that eased drought that particular year.
USDA reported soy crush in January totaled 191 million bu., up from December 187.4 million bu., but below 194.3 million bu. a year ago. Traders were expecting a figure around 189.6 million bu., according to a Bloomberg survey.
USDA will release its weekly export sales for week ended Feb. 23, with traders expecting net sales between 300,000 and 850,000 MT for the week. Sales for the previous week totaled 544,900 MT, which were up 20% from the previous week, but down 18% from the prior four-week average.
Technical analysis: May soybeans traded an 18-cent range, briefly testing initial resistance at $15.09 1/4. Extended efforts above the area will encounter additional resistance at the 40-day moving average of $15.16, with stronger resistance around the 10- and 20-day moving averages of $15.23 1/2 and $15.26, respectively. Conversely, a turn lower will find additional support at Monday’s low of $14.89 1/2, then $14.80, with solid support at the 100-day moving average of $14.72 1/2.
May meal traded a $6.40 range, dipping below the 40-day moving average in the process, though the area will continue to serve as initial support. A push lower, however, will find further support at $461.50 and $455.80. Upside attempts will face initial resistance at $477.50, $487.80 and $493.50.
May soyoil traded a 108-point range, maintaining a range between the 20-day moving average of 60.96 cents and initial support at 59.71 cents. Extended upside efforts will face additional resistance at 61.19 cents, with strong resistance near the convergence of the 10- and 40-day moving averages around 61.60 cents. On the contrary, further support lies at 59.37 and 58.94 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.
Price action: May SRW wheat rose 4 1/2 cents to $7.10, near mid-range and hit a contract low. May HRW wheat gained 3 1/2 cents at $8.16 1/4, nearer the session high. Spring wheat futures fell 3 1/4 cents to $8.63 1/2.
Fundamental analysis: Tepid short covering was featured in the winter wheat futures markets today, both HRW and SRW pausing after recent selling pressure. A lower U.S. dollar index today also worked in favor of the wheat market bulls. Also a bit friendly for wheat prices today, India is expected to see hotter- and drier-than-normal weather conditions the next two weeks, which may threaten the country’s wheat crop. Also, early estimates for Australia’s winter crop for 2023-24 are for lower production due to the high odds an El Nino effect will appear later in the year and produce hotter and drier weather for that country. Meantime, World Weather reports dry conditions remain a concern for production potential in portions of U.S. HRW wheat country.
Traders are closely watching for fresh developments regarding an extension of the Black Sea grain-shipping deal that is set to expire March 18. The Ukrainian government says its request to the U.N. and Turkey to start negotiations on an extension of the deal have so far gotten no response.
Thursday morning’s weekly USDA export sales report is expected to show U.S. wheat sales of 150,000 to 600,000 MT in the 2022-23 marketing year and sales of zero to 100,000 MT in the 2023-24 marketing year.
Technical analysis: Winter wheat futures bears have the solid overall near-term technical advantage. SRW bulls' next upside price objective is closing May prices above solid chart resistance at $7.50. The bears' next downside objective is closing prices below solid technical support at $7.00. First resistance is seen at this week’s high of $7.24 and then at $7.35. First support is seen at $7.00 and then at $6.85. The HRW bulls' next upside price objective is closing May prices above solid technical resistance at the February high of $9.09 3/4. The bears' next downside objective is closing prices below solid technical support at $8.00. First resistance is seen at this week’s high of $8.37 1/4 and then at $8.50. First support is seen at this week’s low of $8.07 3/4 and then at $8.00.
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.
Price action: May cotton rose 163 points to 85.66 cents, ending the session above the 20- and 40-day moving averages and posting the highest close since Feb.14.
Fundamental analysis: Cotton edged higher as the U.S. dollar faded and China reported stronger-than-expected manufacturing activity. At its fasts pace in over a decade, China’s manufacturing purchasing managers index (PMI) surged to 52.6 in February up from 50.1 the previous month, marking the second straight month of growth in the factory sector. PMI for the month not only exceeded expectations, but it was also the highest reading since April 2012, suggesting people are going back to work following the country’s easing of its Covid-19 restrictions.
Traders will now shift their focus to USDA’s weekly export data for week ended Feb. 23, set for release Thursday morning, which will provide more insight on U.S. demand. Sales for the previous week were reported at 425,300 RB, a marketing year high, were up 96% from the previous week and 97% from the previous four-week average, indicating solid demand.
Technical analysis: May cotton traded a 228-point range, gaining technical traction above resistance at 84.84 and 85.65 cents into the close. Extended bull efforts will face additional resistance at 86.32 cents and then the Feb. 7 high of 87.80 cents. Thwarted efforts, however, will face initial support at the 40-day moving average of 84.79 cents, then the 20-day moving average of 84.58 cents, with solid support around 83.36 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.
