Crops Analysis | January 19, 2024
Price action: March corn futures rallied 1 1/2 cents to $4.45 1/2, though traded as high as $4.49 1/2. Prices lost 1 1/2 cents on the week.
5-day outlook: Corn futures struggled to maintain early session gains despite robust export sales, sending March futures to close near session lows. Prices failing to overcome technical resistance at the $4.50 mark and falling back below $4.47 could cast a bearish omen for trade next week, as it increases the likelihood of sustained weakness over the coming week as technical selling continues to target significant support at $4.25. Corn futures struggled to maintain gains despite a weaker U.S. dollar index and a surging equity market that posted a fresh all-time high this afternoon.
30-day outlook: As February nears, attention will continue to be focused on Brazilian corn production. USDA lowered Brazil’s estimated production 2 MMT to 127 MMT, though that remains well above most private analysts, as highlighted in the most recent Pro Farmer Newsletter. Crop consultant Dr. Michael Cordonnier lowered his Brazilian corn estimate to 115 MMT from 117 MMT previously and retains a lower bias still. He noted that Conab lowered their estimate to 117.6 MMT based on first crop losses alone, which is already well below USDA. As safrinha corn begins to be planted over the coming month, there will be more certainty in just how many acres are being planted, which continues to provide a lot of uncertainty in the market. Every analyst in Brazil is expecting safrinha corn acreage to fall year-over-year, the question is by how much. That uncertainty is likely to continue the recent volatility seen in corn futures and could add some risk premium back into the market.
90-day outlook: The coming quarter will provide much needed clarity on South American production, but before too long attention will turn back to the domestic situation and the U.S. balance sheet. Today’s USDA export sales report showed a much-needed boost to export demand. USDA reported net corn sales of 1.251 MMT for the week ended Jan. 11, up notably from the previous week and 61% from the four-week average. Increases came primarily for Mexico and Colombia. Sales came in above expectations of 500,000 MT to 1.2 MMT. March will bring the USDA March Prospective Plantings Report. The weakness to multi-year lows in corn and continued relative weakness to soybeans is not doing much to buy U.S. corn acres. When paired with highest corn acreage since 2013-14, it is nearly certain that acres will be dropping year-over-year. High inputs are likely to limit fringe acres, which will have a significant impact on production, and thus the U.S. balance sheet. If corn continues to flounder, it could imply that acres will be falling sharply and provide a much-needed boost to the market.
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 fell 1/4 cent to $12.13 1/4 and gave up 11 cents on the week. March soymeal closed $1.30 lower on the day and $5.90 on the week at $356.20. March soyoil fell 61 points to 47.40 cents, representing an 85-point loss on the week.
5-day outlook: Soybeans attempted to recoup a portion of early-week losses over the past two sessions amid corrective buying, though looming overhead technicals continued to limit a move beyond the week’s high. Lending some optimism was USDA’s early-morning report of the first daily soybean sale in a month, a whopping 297,000 MT to China for 2023-24. Easing risk-off tensions also aided commodities at the end of the week as the Senate approved a measure to avert a partial government shutdown. Next week could bring technical buying, though traders will continue to eye weather in South America, with expectations of timely rains to continue over the next two weeks through much of Brazil and Paraguay.
30-day outlook: Over the next month, traders will continue to focus on South American production estimates and harvest progress to gain a firmer grasp on supply. Government and independent analysts alike have recently trimmed Brazilian production estimates in the wake of hot, dry weather early in the growing season, though the range of guesses is extensive, leaving many questioning the exact size of the crop.
South American crop consultant Dr. Michael Cordonnier trimmed his Brazilian soybean production by 2 MMT estimate earlier this week to 149 MMT. He noted that he expected rains that began several weeks ago might stabilize the crop by improving later developing soybeans but is losing confidence in that thought as reports from almost every state in Brazil indicate early soybean yields are lower than expected. Meanwhile, improving weather conditions in Argentina have heightened Cordonnier’s production expectations by 2 MMT to 52 MMT. He indicates a neutral to higher bias going forward as forecasts continue to look favorable.
90-day outlook: USDA’s Prospective Planting Report, due out March 28, will gain market attention, while traders continue to eye U.S. export demand and ultimately weather forecasts as U.S. producers gear up to plant the 2024-25 crop. Over the past month, daily export activity has slowed quite notably and could continue to wind down as fresh South American supplies hit the global market. However, an increase in rain could slow harvest efforts in Brazil and ultimately continue to affect crop quality and exportability.
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 7 3/4 cents to $5.93 1/4 and near mid-range. For the week, March SRW fell 2 3/4 cents. March HRW wheat rose 2 3/4 cents to $6.08 and nearer the session low. On the week, March HRW lost 7 1/4 cents. March spring wheat rose 8 cents to $6.96 and gained 3 cents on the week.
5-day outlook: Winter wheat futures traders continue to look to the corn market for daily price direction. However, still-bearish technicals suggest that next week the path of least resistance for wheat prices will remain sideways to lower. Wheat bulls did find a bit of encouragement today when USDA reported U.S. wheat sales of 707,600 MT for the week ended Jan. 11, up noticeably from the previous week and the four-week average and above pre-report expectations.
Weather in U.S. wheat country and major growing regions of the world will remain near the front burner for wheat traders in the coming week. World Weather Inc. today said the new surge of bitter cold coming into the U.S. this weekend “should not induce a new threat of damage since most of the coldest temperatures will be in snow-covered areas.” Warming next week will begin to melt snow from the central Plains and Midwest, “but there will be no other periods of extreme cold for a while.” Meantime, the forecaster said, concern over crop conditions in the CIS remains low because of sufficient snow cover during the coldest weather in the past couple of weeks.
30-day outlook: This week Russia said there is no prospect of reviving the Black Sea grain deal. Traders will continue to monitor the Russia-Ukraine war developments in the coming weeks, just as they have over the past two years. However, the grain markets have become numb to the Russia-Ukraine conflict and have factored the ongoing war and its implications for world grain trade into markets prices. Now, it’s only the big surprises in the war that will have a significant impact on grain markets’ prices.
90-day outlook: In early spring grain traders will remain focused not only on weather in wheat country but also on the late-March USDA planting intentions report. Last week USDA pegged U.S. HRW seedings over 1.0 million acres below trade estimates, which looks supportive of the wheat markets’ prices outlook in the coming months, although wheat stocks exceeded trade expectations.
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 rallied 144 points to 83.95 cents, a 264-point week-over-week gain.
5-day outlook: Cotton surged to a two-and-a-half-month high in early trade and notched gains for the fourth straight session amid U.S. dollar weakness, a rally in equities and robust export demand. Meanwhile, general risk-off sentiments were largely shaken amid the Senate’s passing of a measure to avert a partial government shutdown. Next week, traders will continue to closely eye outside markets and economic data which could provide demand clues and insight into when the Federal Reserve might begin to trim interest rates.
30-day outlook: The National Cotton Council will conduct its annual meeting February 16-18, which will provide the first look in to 2024-25 U.S. cotton acres. Weather will then become driver as planters begin to roll across the southernmost portions of the country. World Weather Inc. maintains West Texas will continue to dry out for at least another few days and South Texas precip will be restricted as well. West Texas may experience a few bouts of light rain starting mid-week next week and continuing into the following weekend. Meanwhile, the forecaster reports most other southern U.S. crop areas have favorable soil moisture with little change likely. The Texas Blackalnds and Coastal Bend as well as the Delta will turn much wetter next week. Southern California and southwestern desert areas are waiting for additional moisture, and it may occur periodically in the next couple of weeks, though early indications suggest it will be light for a while.
90-day outlook: Over the past few months, traders have been leery of drop in U.S. export demand as the Chinese economy sputters amid a battle with looming deflationary conditions. However, USDA’s weekly export sales data has continued to prove consistent, while shipments have set new records in three of the last five reports, remaining strong at more than 200,000 bales in all five. Earlier today, USDA reported weekly export sales for the week ended Jan. 11, which showed net sales totaled 420,000 RB during the week, which rose 60% from the previous week and 85% from the four-week average. Shipments of 257,700 RB notched a marketing-year high and were up 13% from the previous week and 15% from the four-week average. China, Vietnam and Pakistan were both the top purchasers and destinations for the natural fiber during the week.
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.
