Crops Analysis | April 14, 2023
Price action: May corn futures closed 14 cents higher at $6.66 1/4, 22 3/4 cents higher on the week.
5-day outlook: Corn futures surged today to a new high on the week. Price struggled against stiff resistance at $6.55 overnight until this morning’s open, but then surged and closed above the 200-day moving average for the first time since Feb 22. It is imperative that corn bulls follow through early next week, or a bearish “double-top” could transpire, compared to the April 3 high. Today’s technical breakout should be enough to carry corn prices higher over the next week.
30-day outlook: The USDA reported the second flash sale of the week this week, with China purchasing an additional 382,000 MT of corn, 246,000 MT of which was old-crop, with the remaining 136,000 MT for delivery during the 2023/2024 marketing year. That brings this week’s total in flash sales up to 437,000 MT for the 2022/2023 crop year and 272,000 MT for the 2023/2024 crop year, for a solid 709,000 MT in total. The demand side of the corn market has shifted over the last month as the export market has picked up. China took advantage of the March pullback and seemingly waited for prices to fall again before making additional purchases. However, as prices have proven resilient over the past few weeks, China finally caved and began their purchases once again. While the USDA opted to delay updating their export forecast in this week’s Supply and Demand report, it is apparent that adjustments need to be made in the future.
90-day outlook: Weather will be the key determining factor of where corn prices go over the next quarter. Not only does the U.S. kick off the growing season, Brazil’s late planted safrinha corn crop will require precipitation beyond the normal seasonal rains. So far, the Brazilian crop has had plenty of rain, but as seasonal rains come to and end and the potential of an early frost rise, weather could play a key factor in how large the projected record crop ends up, as safrinha corn makes up 75% of Brazilian production. Fieldwork is not likely to begin until mid-May in the Red River Basin, delaying planting as the soil has to undergo extensive drying following flooding that is beginning and expected to worsen over the next week. Just how many of the acres returning from prevent plant last year that will get planted this year is up for question and could shock the market come the June report.
What to do: Get current with advised sales. Be prepared to make additional sales on a corrective price rebound.
Hedgers: You should be 65% sold in the cash market on 2022-crop production. You should have 15% of expected 2023-crop production sold for harvest delivery.
Cash-only marketers: You should be 65% sold on 2022-crop production. You should have 15% of expected 2023-crop production sold for harvest delivery.
5-day outlook: Soybeans extended Thursday’s selling efforts but were able to gain late-session spillover support from grains, rebounding from earlier lows. While government supply and demand updates earlier in the week estimated U.S. soybean supplies weren’t quite as tight as traders thought, leaving ending stocks unchanged from March, Bloomberg reported late Thursday afternoon the U.S. will import soybeans from Brazil for the first time since 2021. This, combined with China’s plans to implement a three-year plan to reduce soymeal use in animal feed in an attempt to reduce its reliance on soybean imports, provided adequate fodder for bears to push prices back below the 40- and 100-day moving averages during the session. Near-term trade will largely be guided by technicals as traders prepare for U.S. planting efforts to expand in earnest.
30-day outlook: As temperatures warm across the U.S., traders will become increasingly focused on weather throughout the Corn Belt. Progress in the Delta and the southeast has taken off to a relatively sluggish start amid cooler-than-normal temperatures and a wetter weather pattern. World Weather Inc. indicates the two-week outlook for the area will continue to be wetter. The forecaster notes that while much of the Midwest has seen favorable weather for fieldwork over the past week, today’s forecast is a little less favorable during the next two weeks than originally advertised, as rain through late next week is expected to be heavier and temperatures will be cooler late next week into the following weekend.
90-day outlook: Traders will continue to focus on exports to gauge not only demand, but also the global economy. While U.S. soybean exports have recently faded as importing countries seek fresh South American supplies to serve their needs, in week ended April 6, USDA reported net sales of 364,500 MT, which was noticeably higher than the previous week and up 17% from the four-week average. Soymeal exports have recently increased amid lacking global supplies following a severe drought in number-one exporter, Argentina. Net sales for the week totaled 255,200 MT, up 4% from the previous week and 6% from the four-week average.
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 futures rose 15 1/2 cents to $6.82 1/2, near the session high, gaining 7 cents on the week. May HRW wheat futures surged 33 1/2 cents to $8.78 3/4, and for the week rose 14 1/4 cents. Spring wheat futures rose 26 3/4 cents to $8.76 1/4.
5-day outlook: The technically bullish weekly high closes in wheat futures markets today set the table for follow-through technical buying early next week. Short covering and bargain hunting were featured in the wheat markets today. Forecasts for the possibility of very cold weather at the end of next week helped to boost wheat futures today. World Weather Inc. reported frost and freeze potentials may be on the rise for the central U.S. Plains and Midwest April 21-23, “but how significant that may or may not be is still up for great debate; cooling is likely, though,” said the forecaster. Hard red winter wheat will be more vulnerable to frost and freezes because of recent warm to hot temperatures and another bout of the same that is expected during mid-week next week. Meantime, U.S. west-central and southwestern Plains are still being impacted by significant drought and no relief is expected in the southwestern Plains for at least a week.
30-day outlook: The Russian grain-shipping deal that looks shakier by the day supported the wheat markets late this week and is likely to keep a floor under prices in the coming weeks. The West still has time to remove “obstacles” hindering the implementation of the Black Sea grain deal before a deadline on May 18, senior Russian diplomat Mikhail Ulyanov said. Russia has been increasing its rhetoric that the grain deal won’t be extended unless its demands are met.
90-day outlook: The U.S. dollar index today hit a 2.5-month low. Continued greenback weakness may provide support to the wheat markets in the coming months, but U.S. harvest pressure is likely to limit any sustained price rallies. On a positive note for HRW, the drought-stricken HRW crop is likely to produce higher-protein grain, which is likely to reduce the price advantage of HRS wheat this summer.
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 49 points to 82.86 cents, ending the week below the 100-day moving average and losing 34 points on the week.
5-day outlook: Cotton ended the week on a largely neutral note, spending the session within Thursday’s range, as the U.S. dollar made a notable rebound from earlier lows and crude oil strength was mild at best. Weaker-than-expected Consumer Price Index (CPI) data and more dovish Fed comments earlier in the week spurred a retreat in the dollar, lending the natural fiber the needed momentum to inch higher. Traders will continue to closely monitor outside markets in addition to key economic data to grasp the overall global health of the economy which will ultimately determine demand for textiles.
30-day outlook: Invariably, planters are beginning to roll across the U.S. as temperatures warm and the calendar turns to a point which indicates a fresh growing season. Though many key cotton-growing areas are experiencing less-than-favorable planting conditions. World Weather Inc. continues to forecast minimal precip over the next two weeks in western Texas and southwestern Oklahoma, with significant rain still needed to improve conditions for planting. The forecaster notes, however, today’s forecast is wetter for the Blacklands, Coastal Bend and south Texas where daily shower through Tuesday through the following Sunday will help to preserve and, in some cases, increase soil moisture while causing temporary interruptions to fieldwork. The Delta and southeast will continue to experience wetter conditions overall during the next two weeks, but good planting progress is expected as drying time between rounds of rain should allow fieldwork to advance, especially in the Carolinas and southern Virginia.
90-day outlook: The state of the global economy will be the main market driver, in addition to growing weather, in the coming months. U.S. exports will provide a weekly look at global demand as recession fears linger despite stronger GDP projections for top importer China following the country’s easing of its strict zero-Covid policies at the end of last year. In its most recent Weekly Export Sales Report, USDA reported net sales of 143,200 RB in week ended April 6. Net sales for the week were down 11% from the previous week and 41% from the four-week average. Top purchasers included China, Turkey and El Salvador. However, shipments in the same week reached a marketing-year high of 8,900 RB, with China being the top destination (6,200 RB).
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.
