Crops Analysis | January 23, 2024
Price action: March corn futures closed up 3/4 cent at $4.46 1/2 though nearer the session low.
Fundamental analysis: It was another lackluster trading session for the corn market today, as traders are awaiting fresh fundamental inputs. Outside markets today leaned negative for corn, which limited the upside. The U.S. dollar index was higher and crude oil prices were lower.
Pro Farmer’s South American crop consultant, Dr. Michael Cordonnier, left his Brazil corn production estimate unchanged at 115 MMT but maintained a lower bias going forward. Cordonnier left his Argentine corn crop estimate unchanged at 56 MMT.
World Weather Inc. today said Brazil corn-region weather continues to look favorable despite a few pockets of drying. Most crop areas will get rain at one time or another to support development. No excessive heat is expected and temperatures in the south will be cooler than usual for a while this coming week. Meantime, Argentina corn weather will continue to dry down in the coming week. There will be a need for widespread rain sooner than later as both the far northern and southern parts of the nation experience moisture stress. Weather in this first week may offer a little concern, but no change in production potential is likely. It will be more important that rain develops in early February, said the forecaster.
Technical analysis: The corn futures bears have the solid overall near-term technical advantage. Prices are in a 2.5-month-old downtrend on the daily bar chart. The next upside price objective for the bulls is to close March prices above solid chart resistance at $4.75. The next downside target for the bears is closing prices below chart support at $4.25. First resistance is seen at last week’s high of $4.51 1/4 and then at $4.60. First support is at $4.40 and then at the contract low of $4.36 3/4.
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 rose 15 1/4 cents $12.39 1/2 and marked the highest close since Jan. 9. March soymeal rose $5.30 to $361.10, ending high- range, while March soyoil gained a marginal 5 points, ending the session at 48.21 cents.
Fundamental analysis: Nearby soybeans were able to breach the 10-day moving average for the first time since late December amid follow-through corrective buying. Soymeal strength largely underpinned the complex, though strong gains in the U.S. dollar capped gains as swap markets discounted the chances of a Fed rate cut at the March FOMC meeting.
In Brazil, weather will continue to look favorable for its summer crops, despite a few pockets of drying, notes World Weather Inc, though most crop areas will get rain at one time or another to support development. No excessive heat is expected and temps in the south will be cooler than usual during the coming week. South American crop consultant Dr. Michael Cordonnier indicates, however, the expected rains in northern and central areas will slow soybean dry-down and harvest and noted that harvest thus far has been pushed along due to a shortened growth cycle for early maturing soybeans and lower yields. Cordonnier left his Brazilian soybean production estimate unchanged at 149 MMT but maintains a neutral to lower bias for the crop. Meanwhile, his Argentine production estimate was also unchanged at 52 MMT and maintains a neutral-to-higher bias for the crop, though forecasts of warmer- and dryer-than-normal weather, namely in southern areas could increase stress as the crops are entering their reproductive phases.
Technical analysis: March soybeans notched increased buying interest into the close, settling above the 10-day moving average, currently trading at $12.26 3/4 for the first time since mid-December. The high-range close suggests follow-through buying towards the 20-day moving average of $12.57 1/4, with additional resistance serving at the 40-, 200- and 100-day moving averages of $12.96 1/2, $13.14 1/2 and $13.27 1/4. Meanwhile, initial support will now serve at the 10-day moving average, then at $12.13 3/4, $12.03 1/2 and $11.97 1/2.
March soymeal edged higher amid corrective buying and was able to end the session with a high-range close. The 10-day moving average of $362.10 will serve as initial resistance, with further resistance serving at $365.30, and again at the 20-, 40-, 200- and 100-day moving averages of $372.60, $387.70, $389.80 and $394.00. Conversely, initial support lies at $355.00, then at $352.10, $348.50 and $345.50.
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 futures closed unchanged on the day at $5.96 1/2, though settled nearer session lows. March HRW futures rallied 10 1/2 cents to $6.17 1/2, settling near the session’s mid-point. March spring wheat fell 1 1/2 cents to $6.99.
Fundamental analysis: SRW wheat futures failed to maintain overnight and early session gains, ultimately falling on the session as traders sought to sell the rally. It was a relatively quiet trading day across the marketplace as U.S. equities based near all-time highs, front-month crude oil futures rebounded from early morning lows and the U.S. dollar index traded higher on higher interest rates. This morning, Farm Futures released their acreage estimates from their January survey. They pegged wheat acres at 47.994 million acres, which includes winter wheat plantings of 37.262 million acres, above USDA at 34.425 million acres. We maintain a more pessimistic outlook on acres at 47.500 million acres, adopting the USDA outlook for winter wheat, which coincidentally was in line with our pre-report estimate. U.S. wheat acres are seen as falling across the board, at this point it is a matter of by how much.
Weather conditions in Australia have allowed for a much more bountiful harvest than previously anticipated. El Niño historically causes dry and hot conditions in Australia, which led many analysts to cut production estimates. This year, that has not been the case, as the driest three month stretch on record from August to October turned into what many producers say is the greenest summer in memory. Australian production is seen as reaching as high as 30 MMT according to Ole Houe at IKON Commodities in Sydney, up from the current USDA estimate at 25.5 MMT. Much of Australian production areas are slated to receive precip this week before the forecast trends drier in the second week, World Weather Inc says.
Technical analysis: March SRW futures failed to overcome downtrend resistance. Bears retain control of the near-term technical advantage, defending resistance at $5.99 today. Further resistance stands at the 40-day moving average, currently at $6.05, then $6.10 3/4. Bulls are seeking to hold support at $5.96 1/2 on further selling pressure, with backing from $5.91 1/4, then $5.82.
March HRW futures showed relative strength today. Bears continue to control the technical advantage, though prices are nearing the upper end of the recent downward sloping channel. The recent bounce also stems from the November low, marking a potential double bottom. Bulls are targeting resistance at $6.20 with backing from $6.29 3/4, while bears are looking to break below support at $6.15, $6.12 1/2, then the psychological $6.00 mark.
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 fell 23 cents to 84.60 cents but still ended high-range.
Fundamental analysis: March cotton futures paused in the wake of a string of gains which led the natural fiber to a multi-month high on Monday. Outside- market pressure limited any extended gains, though solid underlying technical support ultimately curbed profit-taking efforts.
World Weather Inc. reports cotton areas in India are experiencing a good finish to the harvest season, with little to no rain likely for a while, while eastern Australia cotton areas may get significant rain late this week into next—at least in Queensland and possibly northeastern New South Wales, if Tropical Cyclone Seven intensifies and move inland as advertised. The forecaster notes there is potential for some damage from torrential rain and damaging wind speeds, but the areas impacted will be few, while the moisture will ultimately be beneficial to areas that are too dry.
Technical analysis: March cotton ended the session marginally lower in consolidative trade after marking solid gains in the previous five sessions. A move higher will battle initial resistance at Monday’s session high of 84.99, and again at 85.37, 85.90 and 86.82 cents. Meanwhile, initial support will remain at 83.92 cents, then at the 100-day moving average of 83.55 cents and again at 83.00 cents and the 10-, 20-, and 40-day moving averages of 82.25, 81.32 and 80.73 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.
