Crops Analysis | December 1, 2023
Price action: March corn futures rallied 2 cents before ending the day at $4.84 3/4, marking a 2 1/4 cent gain on the week.
5-day outlook: Corn futures struggled to hold onto midsession gains as soybeans faced selling into the close. Futures were boosted by a sinking U.S. dollar index, which turned lower following Fed Chairman Powell’s speech at Spelman College that traders took as dovish, with fed fund futures pricing in over 60% odds of a rate cut in March. The dollar weakness sent gold near all-time highs and risk assets higher, giving corn a boost. The bearish November seasonal has come to an end, with corn futures making a low in the final week of “harvest,” on par with the most common time for a seasonal low. Corn futures tend to rise in the month of December, though nearby technical resistance could limit gains as March futures have rallied nearly 20-cents from this week’s low. Technicals are likely to drive price action over the coming week, if bulls manage to close prices above $4.90 additional upside would likely be in play, but some profit-taking is possible as little catalyst remains to continue spurring buyers.
30-day outlook: Throughout the month of December, attention will remain on Brazilian beans and weather. Many producers opted to wait for seasonal precipitation to plant beans, which has yet to come and has led to late planting across the nation, which will ultimately lead to a delay in planting of safrinha corn- which makes up 75% of Brazilian corn production. While Brazilian weather has driven the bean market over the past month, the coming month will provide more clarity over how weather is and will impact Brazilian corn planting. Brazilian producers are expected to cut corn acres over adverse conditions and low prices, to the extent at which they will cut could become clearer over the coming month.
90-day outlook: Even with corn falling over 5 bushels from trend, the balance sheet is seen as rising well above the 2-billion-bushel mark, which is going to be hard to shake once attention turns from Brazilian weather. The expansion in the balance sheet has certainly weighed on prices over the past few months as prices have trended lower, though export demand has yet to pick up significantly over the period. This week’s export sales report did show net sales at the highest level this marketing year, but more will be needed to even hit the current USDA forecast. Prices are likely to continue to struggle garnering much bullish momentum over the coming quarter without a significant fundamental shift.
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.
Price action: January beans fell 16 3/4 cents to $13.45 1/2 but gained 14 3/4 cents on the week. January meal plunged $11.30 to $412.70 and gave up $21.40 from a week ago. January soyoil fell 81 points to 51.45 cents but gained 116 points week-over-week.
5-day outlook: Soybean futures ended the week in consolidative fashion as the near convergence of 10- and 100-day moving averages served as headwinds for bulls, while the 40- and 200-day moving averages barred a strong downside move. A push into near-term oversold territory could ignite corrective buying efforts into next week, especially if October’s crush pace proves to be a record. However, traders will keep a close eye on weather in South America, which will also drive prices.
Spillover soymeal selling into next week could also cast a shadow over the complex as Argentine soy acres are projected to rise as producers are expected to switch early corn acres to soybeans. Crop Consultant Dr. Michael Cordonnier reported earlier in the week approximately 70% of the country’s corn was yet to be planted and noted that if weather cooperates during the growing season, the 2023-24 Argentina soybean crop could end up being greater than his current estimate of 50 MMT. Prior to last year’s drought, Argentina had long been the world’s top exporter of soybean oil and meal.
30-day outlook: Global production forecasts will continue to provide market direction for the soy complex. While USDA will not update U.S. soybean production estimates this month, traders will be tuned into global production estimates, namely for South America. Minimal changes for domestic use are widely expected from the government on Dec. 8.
90-day outlook: U.S. exports will continue to be of importance as the marketing-year progresses into the new calendar year. Chinese purchases will be of particular note after a recent drop in the U.S. dollar and delayed soybean planting in Brazil due to erratic weather in much of the country. On Thursday, USDA reported weekly sales of 1.895 MMT during week ended Nov. 23, which were up 97% from the previous week and 10% from the four-week average. The total surpassed pre-report expectations of 850,000 MT to 1.5 MMT. China and “unknown destinations” were the top purchasers during the week.
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.
Price action: March SRW wheat futures rose 4 3/4 cents to $6.02 3/4 and near mid-range. For the week, March SRW rose 23 1/2 cents. March HRW wheat futures gained 3 3/4 cents to $6.46 3/4, nearer the session high, and for the week up 35 1/4 cents. March spring wheat rose 3/4 cents to $7.30 1/4 and gained 15 3/4 cents on the week.
5-day outlook: Friday’s technically bullish weekly high closes in winter wheat futures are one chart clue they have put in market bottoms. It will be important for the wheat market bulls to show follow-through strength next week, to better suggest wheat markets have bottomed out. Wheat traders will continue to look to the corn futures market for daily price direction. The good news is that corn also posted a technically bullish weekly high close today. Canada releases its crop production report on Monday, with results coming from farmer surveys. Traders will also closely examine next Friday’s monthly USDA supply and demand report, due out at 11:00 a.m. CST.
30-day outlook: Weather in major wheat-growing regions of the world will remain close to the front burner of the wheat markets. World Weather Inc. today said snow cover part of the U.S. central Plains is protecting winter crops, although there is no threatening weather coming and all the snow will soon disappear due to warm temperatures. Warming in December may bring some wheat out of dormancy once again in the central Plains and Midwest. Wheat conditions are rated favorably in China, India, much of the CIS and many areas in Europe. Australia’s harvest has been delayed recently by rain, but weather conditions are improving now. Crop conditions in Argentina are rated good for wheat, but there have been harvest delays at times due to rain.
90-day outlook: History shows that price trends in the currency markets tend to be stronger and longer-lasting than price trends in other markets. The recent depreciation of the U.S. dollar on the foreign exchange market saw the U.S. dollar index hit a 3.5-month low this week. Further depreciation of the greenback in the coming months would be a significantly bullish element for the U.S. wheat markets, making them more price-competitive on the world trade markets.
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.
Price action: March cotton fell 64 points to 79.42 cents and gave up 157 points on the week.
5-day outlook: Cotton futures ended the week in subdued trade, with bull efforts hemmed by overhead resistance despite a solid rally in equities and a weaker U.S. dollar. The possibility of increasing production in South America and crude oil weakness, despite the OPEC+ decision to cut another one million barrels per day of its collective crude oil production, has pressured the natural fiber. Strong technical resistance indicates cotton will continue to consolidate next week, though an extension lower is certainly possible as minimal support will lend bears an advantage.
30-day outlook: USDA’s production update on Dec. 8 will provide market direction for cotton. Analysts are largely anticipating an increase due to better-than-expected yields in key cotton-producing states as weather has proven mostly favorable throughout much of harvest, preserving crop quality. Global production will also be of importance as traders look to the data to gauge overall supply.
90-day outlook: U.S. export sales into to the new year will continue to be a market focus. Traders remain widely concerned over cotton exports as importing countries, namely China, has looked to Brazil and Australia to fulfill their demand. However, a recent selloff in the U.S. dollar could ignite larger purchases of U.S. cotton over the next several months. On Thursday, USDA reported net weekly cotton sales of 217,700 RB, down 32% from the previous week and 42% from the four-week average. Top purchasers included Vietnam, China and Guatemala.
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.
