Crops Analysis | December 22, 2023
Price action: March corn futures closed 1/2 cent higher to $4.73, though they lost 10 cents on the week.
5-day outlook: Corn futures traded in a tight range throughout the session, ultimately trading most of the day near unchanged. Limited volatility was expected and fulfilled ahead of the long weekend, volume was light and is expected to remain light for the time being as traders are away from their desks. Technicals are likely to continue driving price action over the coming week. March futures’ bulls defended downtrend line support stemming from the May lows. Prices have since bounced from that level and light holiday trade is unlikely to break the significant support. While prices could drift slightly lower, significant downside is unlikely in the coming week.
30-day outlook: South American weather has been a driving factor in soybean prices for the better part of two months. As first crop beans are harvested, that attention will turn to corn. Early reports note slow fertilizer purchases by Brazilian farmers, accentuating recent talks of sizeable cutbacks in safrinha corn plantings. When paired with El Nino’s effect on Brazilian precipitation thus far this year, safrinha acres could fall more than most anticipate, including USDA. The forecast in Brazil has recently become more favorable, though this year’s seasonal rains have yet to really kick off. Continued weather issues and concerns over Brazilian production could be a leading factor in the corn market over the coming month.
90-day outlook: A Union Pacific press release today noted that the El Paso and Eagle Pass interchanges are to reopen today. The rail company noted they would restore normal operations as soon as possible to work through the five-day backlog of shipments crossing into Mexico. This will allow as little disruption as possible for grains heading into Mexico, the largest U.S. corn purchaser. This bodes well for the greatest question mark on the demand side of the balance sheet, exports. Despite a lackluster start, export sales have been above the 1.0 MMT mark for seven weeks in a row now. USDA has been quick to increase the export forecast over the past few months as they have increased production (which will once again be estimated in the January Crop Production Report), and recent increases in weekly sales give those increases credibility. If the U.S. can continue to export a significant amount of corn, it will support prices, though ending stocks crossing above the 2 billion bushel mark could limit buyers interest.
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: March soybean futures rallied 4 1/2 cents to $13.06 1/4, marking a 25 1/4-cent loss on the week. Nearby January futures rose 2 1/2 cents to $12.99 3/4. March meal futures rose $4.70 to $391.1, losing $5.50 on the week. March bean oil futures dropped 31 points to 49.02 cents, losing 113 points on the week.
5-day outlook: March soybeans saw corrective buying ahead of the holiday weekend, but efforts did little to break the recent bearish trend. January futures’ options went off the board today. Heavy open interest at the $13.00 strike pinned prices to that mark for the latter half of this week, which likely had considerable effect on the strength seen in bean spreads this week. While additional corrective buying is possible, light holiday volume is unlikely to break the downtrend stemming from the November high over the coming week.
30-day outlook: Production will be the main market focus in the next month, as USDA gives an update on domestic crop production in their January 12 reports. Production prospects will also be better realized in South America, namely Brazil, who continues to see reduced precipitation paired with high temperatures. Dr. Michael Cordonnier continues to lower his Brazilian soybean crop estimate, this week lowering his estimate 2 MMT to 155.0 MMT, maintaining a neutral-to-lower bias. While recent rains have helped the crop, it is hard to say how much damage was done after an extended period of hot weather with little precipitation. Adjustments to both U.S. production and Brazilian production are likely to have a heavy hand on price action over the coming month.
90-day outlook: Last week’s string of daily soybean sales sparked some buying interest in futures, though lack of buying interest this week sent prices sharply lower. Similar to Brazilian production, U.S. soybean remain a large question mark, and are also largely dependent on Brazilian production. Outstanding sales were historically poor at the start of the crop year but have since made up some ground. We currently believe that exports could end up outpacing the current USDA estimate, and with ending stocks leaving little cushion, prices are doing little to deter further buying. The first quarter of the year is generally bullish for soybeans and our analog study with 2014 further reinforces that, leading us to believe that the downside is likely limited in the coming quarter.
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.
5-day outlook: It was a quieter trading session in the grain markets today as traders focused on the upcoming holiday season. Markets are closed Monday for the Christmas holiday. When traders return next Tuesday, the updated weather outlooks for global wheat-producing regions will be near the front burner. World Weather Inc. today said recent precipitation and that coming over the next few weeks in the U.S. hard red winter wheat region “will prove favorable in helping to improve 2024 production potentials, if timely rain occurs in the spring and late winter.” There is need for greater moisture in the U.S. Pacific Northwest, northern Plains and parts of Canada’s Prairies. Meantime, Argentina’s heavy rain recently has raised concern over head sprouting since winter crops are maturing and being harvested in Buenos Aires and La Pampa, where the greatest rain fell.
30-day outlook: USDA Thursday reported net weekly U.S. wheat export sales of 322,700 MT for 2023-24, down 78% from the previous week and 51% from the four-week average. There were no wheat sales to China this week after its recent buying. On the positive side for key outside markets, the U.S. dollar index is trending lower. If the USDX continues to depreciate on the foreign exchange market in the coming weeks, U.S. wheat priced on the world market would become more competitive and would likely draw some better demand for foreign buyers.
90-day outlook: Wheat traders and grain traders, in general, will in the coming weeks and months pay close attention to price action in the crude oil futures market. Crude is arguably the leader of the raw commodity sector. Oil prices are presently in downtrend on the daily bar chart and the bears have the near-term technical advantage. Any rallies in the wheat market will remain limited as long as crude oil prices are in a downtrend.
What to do: Get current with advised sales.
Hedgers: You should be 60% priced in the cash market for 2023-crop. You should also have 10% of expected 2024-crop production sold for harvest delivery next year.
Cash-only marketers: You should be 60% priced for 2023-crop. You should also have 10% of expected 2024-crop production sold for harvest delivery next year.
Price action: Cotton bulls couldn’t sustain the mid-morning surge to a one-week high but did manage a significant daily advance. March futures rallied 63 points to close at 79.76 cents/pound. That marked a weekly decline of 17 points.
5-day outlook: As has seemed rather common lately, Friday’s cotton advance seemed to track a similar move in Chinese cotton futures. We don’t expect the recent tendency to move in concert to change in the near future. Traders view the Chinese market in general, and Chinese import buying in particular, as being big keys to the U.S. outlook since so much domestically produced fiber is exported. Traders are also being encouraged by the ongoing equity market rally and U.S. dollar decline triggered by the Fed’s dovish shift at its December meeting. Both of these developments also point toward improved apparel demand.
30-day outlook: Traders seem likely to continue relying on the Chinese cotton market and outside markets indicative of the economic outlook in trading over the next two weeks. They’ll then turn their eyes to the USDA’s January 12 Crop Production report for the department’s “final” estimate of the 2023 U.S. cotton crop. The simultaneously released Supply & Demand report might also affect the market, since it will contain USDA’s latest take on international cotton trading.
90-day outlook: Late-January cotton trading will reflect the mid-month USDA data, as well as ongoing developments in the cotton export market. Equity markets and the U.S. dollar will also influence fiber prices. The industry will then turn its eyes to the annual U.S. cotton acreage estimate published by the National Cotton Council in the wake of its February 16-18 meeting. Winter weather developments, especially rainfall, or the lack thereof, over the Southern Plains could affect the outlook, with trader attention later focusing upon the March 28 USDA Prospective Plantings report.
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.
