Crops Analysis | January 18, 2024
Price action: March corn rose 1 3/4 cents to $4.44, near the session high after notching a fresh three-year low early on.
Fundamental analysis: Corn futures extended to a fresh contract low and three-year low in early trading but were able to make a mild rebound, led by corrective strength in soybeans. Solid gains in crude oil futures were also price-supportive as U.S. crude stockpiles fell more than expected last week on strong demand from refineries. Meanwhile, the Energy Information Administration reported ethanol production averaged 1.054 million barrels per day (bpd) during the week ended Jan. 12, down 8,000 bpd from the previous week but up 46,000 bpd (4.6%) from the same week last year. Ethanol stocks during the week rose 1.324 million barrels to 25.695 million barrels, the most since the week ended March 17, 2023.
Traders will continue to closely monitor weather in South America over the next several weeks as soybean harvest progresses and safrinha planting efforts emerge. World Weather Inc. reports northern Brazil will be wettest Sunday through Feb. 1 and fieldwork will be slowed by rain while many areas see increases in soil moisture that will be beneficial for safrinha corn. The forecaster notes Argentina will see a restricted rainfall pattern through the next ten days, increasing the need for rain in many areas to prevent crop stress from quickly increasing. Rain may fall Jan. 29-31, though confidence for this event is low and a close watch on the period warranted.
USDA will release its weekly export sales data, delayed a day due to Monday’s government holiday. Traders are expecting net sales to range from 500,000 MT to 1.2 MMT. Last week, USDA reported net sales of 487,600 MT, which were up 33% from the previous week but down 52% from the four-week average.
Technical analysis: March corn slipped below initial support at $4.38 3/4 early this morning but was able to end the session high-range and above initial resistance at $4.43 1/2. Additional resistance serves at $4.47, then $4.51 3/4 and again at the 10-, 20-, 40- and 100-day moving averages of $4.53 1/2, $4.62 1/2, $4.72 3/4 and $4.87 1/4. Initial support will continue to serve at $4.38 3/4, then at $4.35 1/4, $4.30 1/2, $4.25 and $4.00.
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: March soybeans saw corrective buying, rallying 7 3/4 cents before settling at $12.13 3/4, nearer session highs. March soymeal rallied $2.60 to $361.30, settling nearer session highs. March bean oil dropped 8 points to 47.62 cents, settling near the mid-point of today’s session.
Fundamental analysis: Soybean futures saw action on both sides of unchanged before prices made a fresh for-the-move low, though seller interest subsided as the session went on and volume was low. There is a lot of uncertainty in the marketplace surrounding interest rates. Fed funds futures are pricing in less rate cuts than just a couple of weeks ago. A lot of that change can be attributed to persistent inflation in the US, EU and UK, showcased in inflation data in the past couple of weeks. That uncertainty has limited risk appetite in the general marketplace, which could limit speculation in the grain markets in the coming weeks.
Weather in Brazil is expected to remain largely favorable over the coming ten days. All of Brazil is forecast to get rain, which will be a relief of recent dryness in Mato Grosso do Sul, Parana, southern Goias and southern and western Mato Grosso, World Weather Inc says. Rain will be favorable for crop development but also allow dry periods for fieldwork.
USDA releases its weekly export sales report tomorrow morning for the week ended Jan. 11, delayed a day due to the holiday on Monday. A poll of Reuters analysts estimated export sales between 400,000 and 900,000 MT. Last week, sales totaled 280,398 MT.
Technical analysis: March soybean futures made a fresh-for-the move low before bouncing into the close. Bears still retain full control of the technical posture. Bulls are seeking to hold support at $12.05 3/4, $12.01, then $12.93 1/2. Meanwhile, resistance stands at $12.20 3/4, $12.24 1/4, then the 10-day moving average at $12.37.
March soymeal futures surged late in the session to close higher on the day, though saw a limited trading range. Bears continue to maintain full control of the technicals, with bears seeking a break below support at $358.7, $353.4, then the psychological $350.0 level. Meanwhile, resistance stands at $362.2 then the 10-day moving average at $367.6. Bulls are ultimately targeting a close above resistance at $375.0 to signal a potential low is in place.
March bean oil continues to slowly bleed lower on the daily bar chart, with bears retaining the technical advantage. Support stands at 47.25 cents then the Jan. 8 for-the-move low at 46.30 cents. Meanwhile, bulls are targeting resistance at 48.00 cents, the 20-day moving average at 48.52 cents, then 49.50 cents.
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 rose 3 cents to $5.85 1/2, near the session high and hit a seven-week low early on. March HRW wheat gained 11 1/4 cents at $6.05 1/4, near the session high today and hit a contract low early on. Spring wheat futures rallied 7 3/4 cents to $6.88.
Fundamental analysis: The wheat futures markets today saw some tepid short covering and some support from modest gains in corn and soybean futures. A rally in the crude oil market today was a bullish “outside market” element for the wheat markets.
Ukraine grain shipments out of the Black Sea region are back near the front burner of the wheat markets. Reports said Ukraine’s ambassador to Turkey said “certain negotiations” are under way regarding the U.N.’s Black Sea grain export initiative that ended last summer. The ambassador said negotiations are ongoing to find a format for “possible assistance from international partners to Ukraine.”
In U.S. winter wheat country, World Weather Inc. today reported there is “concern over possible U.S. crop damage from the weekend bitter cold.” But until the damage is adequately assessed “the potential impact will be quite speculative,” said the forecaster. Weather conditions in the coming two weeks should be less threatening to the crops.
Traders are awaiting the weekly USDA export sales report, which is due out Friday morning and was delayed one day by the federal holiday on Monday. Traders expect U.S. wheat sales of 150,000 to 500,000 MT for the 2023-24 marketing year and sales of zero to 50,000 MT in the 2024-25 marketing year.
Technical analysis: Winter wheat futures bears have the solid overall near-term technical advantage. Prices are in downtrends on the daily bar charts. SRW bulls' next upside price objective is closing March prices above solid chart resistance at $6.25. The bears' next downside objective is closing prices below solid technical support at the contract low of $5.56 1/4. First resistance is seen at $6.00 and then at $6.15. First support is seen at today’s low of $5.73 1/4 and then at $5.60. The HRW bulls' next upside price objective is closing March prices above solid technical resistance at $6.50. The bears' next downside objective is closing prices below solid technical support at $5.50. First resistance is seen at this week’s high of $6.22 1/2 and then at $6.35. First support is seen at today’s contract low of $5.86 3/4 and then at $5.75.
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: March cotton futures rallied 81 points to 82.51 cents, the highest close since Dec. 7.
Fundamental analysis: Cotton futures continue to show relative strength compared to the overall ag complex, as prices surged to the highest level since early December. Cotton has performed well especially considering the recent volatility seen in the crude market, which has been plagued by choppy, sideways trade since the turn of the new year. The U.S. dollar index has also been unsupportive of the export dependent natural fiber, as the index is trading on for-the-move highs and is attempting to break above the 100-day moving average for the first time since November.
Exports remain in traders focus for cotton futures. Despite lackluster sales the last few weeks in grains, the reports have not been as meager in cotton. Outstanding sales remain well above a year ago, but traders will closely watch exports, which have been slow to accumulate so far this crop year.
Technical analysis: March cotton futures rallied for the third straight session as bulls continue to maintain full control of the technical advantage. Bulls’ next target is a daily close above the 200-day moving average, currently at 82.69 cents. Further resistance stands at the psychological 83.00 cent mark then the Dec. 8 high of 83.13 cents. Above that mark, little resistance remains until 84.50 cents. Meanwhile, support stands at 82.19 cents, with further backing from 81.70 cents, then 81.20 cents.
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.
