Crops Analysis | November 10, 2023

Crops Analysis
Crops Analysis
(Pro Farmer)

Corn

Price action: December corn futures fell 4 cents to $4.64, marking a 13 1/4 cent loss on the week.

5-day outlook: December corn futures continued Thursday’s post-report slide despite resurgent strength in soybeans and soaring risk assets. December corn made new lows, falling to the lowest level in over two years. This slide is likely to continue, with the most likely time for a harvest low coming at the end of November. The increase in U.S. production, paired with lagging demand, is likely to continue to weigh on prices, alongside the bearish technical posture. Bears are targeting the psychological $4.50 mark, with little support on the way apart from today’s low of $4.61 3/4. Bulls need to close prices above $4.80 to signal a seasonal bottom, though additional resistance at $4.74 and $4.70 will be tough to overcome on the way.

30-day outlook: USDA increased nearly each of the demand lines of the balance sheet on Thursday. This is largely due to what USDA refers to as “using economics” to balance the balance sheet. They understand that demand is likely to improve, but they may not quite know exactly where the bulk of the increase is likely to come from. Total commitments for exports have increased, especially from September’s depressed figures. The U.S. need more diverse buyers, as the bulk of recent purchases have been to Mexico. Sorghum has replaced nearly all of Chinese export demand, substituting nearly 2.0 MMT (78 mil bu.) of corn. The lower quality U.S. crop also increases feed use, which USDA continues to peg as lower than average, even despite the recent increase.

90-day outlook: As winter progresses, attention will turn even more towards South American production. USDA has been slow to make adjustments to Brazilian corn production as too much uncertainty lies ahead, especially as nearly three-quarters of their production comes from second-crop (safrinha) corn. Central and northeastern Brazil will remain unfavorably hot and dry through at least the next ten days, increasing stress on crops in those areas. Temperatures are also warm to hot in those areas, with several days in the forecast reaching over 100 degrees Fahrenheit, leading to rapid evaporation and further stressing crops. This will likely lead to more soybeans needing to be replanted, pushing back safrinha plantings past the ideal window following the soybean harvest.

What to do: Get current with advised sales.

Hedgers: You should be 50% sold in the cash market on 2023-crop.

Cash-only marketers: You should be 35% sold on 2023-crop production.

 

 

Soybeans

Price action: November soybeans rose 4 cents to $13.47 1/2 but gave up 4 1/4 cents on the week. December meal fell 50 cents to $449.40 but rose $7.30 from a week-ago. December soyoil rose 75 points to 51.20 cents, which represented a 184-point week-over-week gain.

5-day outlook: Soybean futures seemingly stabilized today following Thursday’s post-report selloff, with support at the 100-day moving average curbing selling. Traders will continue to weigh USDA’s production estimates and monitor weather in Brazil. Earlier today, World Weather Inc. reported heat wave and low humidity warnings are currently in effect for northern Brazil crop areas and will likely be in effect most days for the next full week to nearly nine days. The forecaster notes the highest temps will occur in Brazil’s key center-west, center-south and northeastern crop areas, which have faced persistently dry conditions, delaying planting. Meanwhile, southern Paraguay into Rio Grande do Sul, southwestern Parana and Santa Catarina will see frequent rain through Nov. 18, stalling fieldwork, with more flooding likely in Rio Grande do Sul and Santa Catarina.

30-day outlook: As South America’s growing season progresses market participants will closely watch for potential changes in Brazil and Argentine production estimates. Crop consultant, Dr. Michael Cordonnier currently estimates Brazil’s soybean production will total 160 MMT but indicated a neutral to lower bias going forward. Cordonnier noted below normal rainfall during the growing season could still be enough to produce an average crop if the timing is right, however, central Brazil’s soils have poor water holding capacity and a week without rain during pod filling could result in moisture stress and reduced yield potential. Cordonnier estimates Argentina’s soybean crop at 50 MMT, with a neutral bias going forward amid improved weather over the past few weeks. On Thursday, the Buenos Aires Grains Exchange noted that producers could increase soybean plantings due to more favorable weather conditions, as rainfall arrived too late for earlier planted crops, such as corn and sunflowers in the north and western parts of the country.

90-day outlook: U.S. exports will serve as the long-term market focus as traders use the data to gauge demand and the global economy. This week, daily export sales gathered seasonal strength, with soybean sales totaling 2.852 MMT. Thursday’s daily sale of 1.044 MMT to China was the thirteenth largest ever, while the combined 662,500 MT to “unknown destinations,” also reported Thursday, constituted to seventh largest daily sale. Meanwhile, USDA reported net weekly sales of 1.08 MMT during week ended Nov. 2, which remained steady over the previous week, rising 7%.

What to do: Get current with advised sales.

Hedgers: You should be 55% priced in the cash market on 2023-crop production. You should have 10% of expected 2024-crop production sold for harvest delivery next fall.

Cash-only marketers: You should be 50% priced on 2023-crop production. You should have 10% of expected 2024-crop production sold for harvest delivery next fall.

 

 

Wheat

Price action: December SRW wheat futures fell 5 1/2 cents to $5.75 1/4 and for the week rose 2 3/4 cents. December HRW wheat futures fell 7 1/4 cents to $6.40 today and for the week lost 3 1/2 cents. December spring wheat fell 4 cents to $7.30 1/2 but gained 9 1/2 cents on the week.

5-day outlook: The wheat market bulls were showing some spunk Wednesday but exited the week with a whimper, following the weakening corn futures market that today saw December corn hit a two-year low. Look for the wheat markets to continue to take their daily price direction from corn futures. World Weather Inc. today said most U.S. HRW wheat areas will be dry over the next week or so, with rain needed in the west-central and southwestern Plains.

30-day outlook: This week’s USDA monthly WASDE report showed an unexpected increase in projected U.S. wheat carryout. Wheat futures prices have slightly outperformed corn lately, but improved U.S. winter wheat condition ratings suggest wheat futures prices will continue to languish in the coming weeks. The nine-to-10-month period before U.S. hard red spring wheat supplies will be replenished likely accounts for HRS’s better price performance versus the winter wheat markets.

90-day outlook: Canadian wheat stockpiles did not fall as much as expected and the U.S. dollar remains overall strong. These bearish elements combined with anemic export demand for U.S. wheat will also likely keep wheat futures price rallies limited in the next few months. Wheat markets will likely need a solid rally in corn futures to help ignite sustained price uptrends in wheat.

What to do: Get current with advised sales.

Hedgers: You should be 50% sold in the cash market on 2023-crop production.

Cash-only marketers: You should be 50% sold on 2023-crop production.

 

 

Cotton 

Price action: December cotton rose 80 points to 77.32 cents but fell 230 points on the week.

5-day outlook: Cotton futures were able to notch followthrough corrective gains following the sharp selloff since the end of October. A move higher transpired Thursday, following an extended period of being technically oversold, with the natural fiber repelling USDA’s bearish production data late morning. Today’s extension higher was likely underpinned by strength in equities and crude oil futures in addition to a pause in the U.S. dollar following gains over the past four sessions. Look for corrective gains to extend into next week, with outside markets providing additional influence.

30-day outlook: With 57% of the U.S. cotton crop harvested, weather will continue to be of significance as producers wind down harvesting. World Weather Inc. reports a mostly good harvest environment is expected in West Texas over the next ten days, though rains are expected in the Delta next week which will set back fieldwork for a little while and may discolor some of the unharvested cotton fiber. The forecaster notes rain is also expected in the southeastern corner of the U.S. this weekend and again a week later. Meanwhile, moderate to locally heavy rain in Coastal Bend areas of Texas and a part of South Texas with lighter rain the Blacklands will be useful for planting in 2024.

90-day outlook: Demand for U.S. cotton will continue to serve as the longer-term focus as traders attempt to grasp the state of the global economy. Earlier in the week, USDA reported net weekly sales of 395,200 RB for the week ended Nov. 2, which were down 14% but up noticeably from the prior four-week average. Top purchasers for the week included China (260,000 RB), Vietnam, (54,500 RB) and Pakistan (27,200 RB). However, shipments for the week reached a marketing-year low at 90,600 RB, down 31% from the previous week and 18% from the four-week average. Top destinations included China, Vietnam and Bangladesh.

What to do: Get current with advised sales.

Hedgers: You should have 60% of 2023-crop production forward sold in the cash market.

Cash-only marketers: You should have 60% of 2023-crop production sold.

 

 

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