Crops Analysis | March 8, 2023
Price action: May corn dropped 8 3/4 cents to $6.25 1/2, marking the lowest close since March 1.
Fundamental Analysis: Corn spent the morning slightly firmer in anticipation of USDA’s supply and demand updates which ultimately proved bearish, pressuring prices to the downside following its release. U.S. and global 2022-23 ending stocks were each higher than pre-report estimates as U.S. exports were trimmed by an additional 75 million bu., to 1.85 billion bu., “reflecting the poor pace of sales and shipments to date,” despite relatively competitive U.S. prices, with ending stocks projected at 1.342 billion bu. in comparison to the expected 1.308 billion bu. Global ending stocks for 2023 were also higher than pre-report estimates at 296.5 MMT, which was up 1.2 MMT from last month’s estimate and above the average pre-report estimate of 293.17 MMT. Global corn ending stocks are 9.2 MMT below the 2021-22 estimated level. However, USDA did make a large revision to its Argentine corn crop estimate, which was trimmed from 47.0 million MT to 40.0 million, a more robust cut that most traders were anticipating.
Trade focus will now shift to tomorrow’s weekly export sales for week ended March 2, due out ahead of the open. Pre-report estimates suggest a range of sales between 600,000 MT and 1.2 MMT. USDA reported net sales of 598,109 MT for the previous week, which was just above the low-end of the week’s estimated pre-report range.
Technical Analysis: May corn traded a 13-cent range, ending the session below support at $6.32, $6.29 3/4 and $6.26 3/4. Additional bear efforts will find further support at the March 1 low of $6.22 1/4, then at $6.17 1/2 and $6.13, with $6.00 serving as psychological support. Conversely, buying efforts will encounter resistance first at today’s failed support levels, then at the 10-day moving average near $6.38 3/4, then $6.40 3/4 and $6.43.
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: Traders eyed the USDA report today expecting it to ultimately decide a direction for this soybean market and were sorely disappointed. Ending stocks ended below expectations of 220 to 210 million bu., a cut of 15 million bu. from the February Supply and Demand Report. Changes came from an increase in exports by 25 mb and a decline in crush by 10 mb. This led to frantic buying off the number, a move that quickly faded as the market sold to near unchanged on the close. While it was not a particularly bearish report, bulls could not seem to maintain gains near Monday’s highs. The coming days will be more telling as traders digest the report.
The USDA released their updated South American soybean production estimates today as well, leaving their Brazil estimate at 153 MMT but cutting their Argentina estimate to 33 MMT from 41. Trade estimated a cut to 36.6 MMT, but many analysts in South America are cutting estimates below 30 MMT. Forecasts continue to show restricted rainfall over the next ten days in Argentina, with some showers in western and far southern regions, according to World Weather Inc. Crop conditions will benefit in this region, although it is getting late in the year to benefit the crops. Unirrigated crop areas in the remainder of the country expect very little rainfall to counter the worst crop conditions in decades.
The U.S. imported the highest amount of soybean meal ever in January, showing strong fundamentals behind the recent explosive move higher in the futures market.
USDA will release its weekly export sales for week ended March 2, with traders expecting net sales between 200,000 and 750,000 MT for the week. Sales for the previous week totaled 360,700, which were down 14% from the previous week and down 25% from the prior four-week average.
Technical analysis: May soybeans traded in a 22 3/4 cent range before closing near unchanged. Bulls were unable to follow through all morning and a flash higher in the minutes following the USDA report release. Despite midday weakness, bulls still maintain the near-term technical advantage. Bulls ultimately want a test and close above $15.45 for the first time since last summer. This has proved formidable resistance since December. Additional resistance comes in at today’s high, $15.33 3/4, and Monday’s high at $15.38 1/2. Bears want to keep pressure on price and test below the 100-day moving average at $14.89 1/4. Additional support is clustering just below the current price, from $15.16 to $15.11 2/4, without much below that until the bear’s target.
May soybean meal traded higher most of the day in a $10.30 range before settling near the low. Bulls continue to struggle to break above Monday’s high at $494.70, which will be the near-term target. May futures settled right on the prior contract high at $485.40, bulls will want a bounce off that support with additional support coming in at $482.00 and $470.30. Bears want a break and close below the 40-day moving average to show conviction that a top is in place, a feat that has not been achieved since November.
May soyoil traded in a 126-point range before closing in the middle of today’s trading range. Bears retain the near-term technical advantage and today’s rally looks like nothing more than a “dead-cat bounce”. Bulls want to close over the recent high at 62.15 cents to put in a higher high, with additional resistance coming in at 61.41 and 60.81 cents. Bears continue to target the December 12 low at 58.22 cents, with additional support coming in at today’s low of 58.51.
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 fell 10 1/2 cents to $6.87 1/2 and nearer the session low. May HRW wheat rose 1 cent to $8.00 1/4 and near mid-range. Both markets hit new contract lows in the May futures again today. May spring wheat fell 14 1/4 cents to $8.38 1/2.
Fundamental analysis: Today’s USDA March supply and demand report showed no major surprises for the wheat markets. The agency left its U.S. wheat ending stocks forecast unchanged. Traders expected a 5 million-bu. increase. USDA made no changes to its 2022-23 wheat balance sheet. The national average on-farm cash wheat price projection was unchanged at $9.00 a bushel.
The wheat markets continue to feel the pressure from traders expecting the Black Sea grain-shipping deal to be extended, even though Russia continues to complain about certain aspects of the agreement. A strong U.S. dollar index that hit a three-month high today is also a bearish outside market factor working against the wheat market bulls.
Thursday’s weekly USDA export sales report is expected to show U.S. wheat sales of 150,000 to 500,000 MT in the 2022-23 marketing year and sales of zero to 150,000 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 $6.50. First resistance is seen at $7.00 and then at this week’s high of $7.11. First support is seen at today’s contract low of $6.84 1/4 and then at $6.75. The HRW bulls' next upside price objective is closing May prices above solid technical resistance at $8.75. The bears' next downside objective is closing prices below solid technical support at $7.50. First resistance is seen at this week’s high of $8.20 and then at $8.32 3/4. First support is seen at today’s contract low of $7.89 3/4 and then at $7.80.
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 fell 15 points to 82.62 cents, ending the session below the 100-day moving average.
Fundamental analysis: Cotton futures extended the previous session’s weakness, as crude oil futures pressed lower and the U.S. dollar pushed mildly higher. USDA made no changes to the U.S. balance sheet in its March WASDE released earlier today. U.S. production was left unchanged at 14.68 million bales, along with carryover at 4.3 million bales. Global cotton carryover, however, was reduced to 91.2 million bales for 2022-23, reflecting a 2.1 million-bale drop from February, but is still up 5.1 million bales from last year.
Traders will turn a focus toward tomorrow’s pre-open weekly export sales report with data for week ended March 2. Last week, USDA reported 170,600 RB for the previous week, which was down 60% from the previous week and 37% from the four-week average. Census data showed 980,645 bales of cotton was exported in January, which was up 45% from December, with purchases increasing following China’s abolishment of its zero-Covid policies, though sales still trailed the previous year by 31%.
Technical analysis: May cotton traded a 132-point range, ending the session below the 100-day moving average of 82.91 cents. A push lower will face support at 81.90 cents, then 81.03 and 79.53 cents. Conversely, efforts to the upside will face initial resistance at the 100-day moving average, then at the near convergence of the 20- and 10-day moving averages around $83.95 and 84.27 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.
