Crops Analysis | February 16, 2024

Crops Analysis
Crops Analysis
(Pro Farmer)

Corn

Price action: December corn futures fell 1 1/4 cents to $4.16 1/2, marking a 12 1/2 cent loss on the week.

5-day outlook: Corn futures continue to get beat down, posting just two days of corrective buying early in the week before trending lower once again, ending the week near contract lows. Prices neared similar oversold levels, with the relative strength index at 20.67, any reading under 30 is considered oversold. Funds remain relentless sellers despite continuous futures reaching the lowest level since Dec. 2020. While some corrective buying is possible over the coming week, the path of least resistance remains lower and it will take a significant catalyst to reverse the recent downtrend. Funds are likely to maintain, if not add to, their short position as it has proved quite profitable. It will likely take a large fundamental shift in order to spark buying interest.

30-day outlook: Conflicting reports over safrinha plantings in Brazil leaves a lot of uncertainty over Brazilian corn production. Planting continues at a rapid pace, as does soybean harvest, and a healthy mix of rain and sunshine allows ample time for fieldwork for harvest of first crop and planting of safrinha corn to continue. Dr. Michael Cordonnier lowered his Brazilian corn crop estimate 3 MMT to 112 MMT citing lower plantings for first crop and expected smaller safrinha seedings. Meanwhile, AgRural raised its safrinha corn production estimate 4.9 MMT to 91.2 MMT, citing producers will plant more area than previously expected. That brings AgRural’s overall estimate to 119 MMT. Little other than time is likely to determine who is closer, though one can gather that a lot of uncertainty surrounds acreage at this juncture.

90-day outlook: USDA’s Economic Outlook Forum gave a look into the most recent projections for the 2024-25 balance sheet this week. Chatter surrounded the USDA acreage projection at 91.0 million acres, with many attendees quoting the figure as too low, as noted in this week’s rendition of the Pro Farmer Newsletter. While that may prove true, no updates are expected until Prospective Plantings are released at the end of March. We will be conducting our own acreage survey, which you will receive in about ten days. Last year, our acreage estimate was on par with USDA figures, so your participation is greatly appreciated as it enables us to do the best job we can. Fair weather last fall allowed for a quick harvest and enabled producers to apply record amounts of anhydrous, which locks acres in for corn and supports rumors that actual acreage will come in higher. If acres do prove light, it could help reverse persistent weakness, though acres coming in even higher will likely further cushion the balance sheet, keeping pressure on prices barring a significant shift in demand.

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 soybeans rose 10 cents to $11.72 1/4 but lost 11 1/4 cents on the week. March soymeal rallied $6.10 to $345.60 but fell $1.20 week-over-week. March soyoil fell 41 points to 45.59 cents on the day and 167 points on the week. 

5-day outlook: Soybean futures faced short covering into the long weekend following three days of selling. Soymeal gains led the complex higher after reaching new contract lows Thursday, though looming overhead resistance and easing global supply concerns continued to limit buying across the complex. President’s Day will be recognized on Monday, Feb. 19, with markets and government offices closed for the day. Volume and volatility will likely increase next week, especially as China returns to the market following the weeklong Lunar New Year holiday. However, into next week, traders will continue to monitor weather and harvest progress throughout Brazil. AgRural reported harvest progress in Brazil was 23% complete as of last Thursday, ahead of the five-year average of 19.6%.

30-day outlook: With several unknowns still revolving around the size and quality of the South American soybean crop, the marketplace will continue to closely monitor projections over the next month. The range of estimates is from 135 MMT to 158.3 MMT, leaving the average estimate at 147.7 MMT, notably below USDA’s current estimate of 156 MMT. Meanwhile, improved year-over-year weather conditions in Argentina could offset Brazil’s production, though unknowns still hover over the size of that crop as well, following a recent period of extreme temps and dry conditions. Currently, South American crop consultant, Dr. Michael Cordonnier estimates Brazilian and Argentine production at 147 MMT and 50 MMT, respectively and indicated a neutral to lower bias toward both crops.

90-day outlook: U.S. soybean demand and crush pace will continue to hold trade attention as the marketing year progresses. As of late, U.S. exports have dwindled notably as importing countries look to South America for fresh supplies, which is not uncommon. Meanwhile, U.S. crush has consistently notched records, though crush pace could certainly wane amid a larger Argentine crop.

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.

 

 

Wheat

Advice: We advise wheat hedgers and cash-only marketers to sell another 10% of 2023-crop to get to 70% priced in the cash market. We also advise selling another 10% of expected 2024-crop production to get to 20% forward priced for harvest delivery.

Price action: March SRW wheat futures fell 6 1/2 cents to $5.60 1/2, nearer the daily low and hit a 2.5-month low. For the week, March SRW lost 35 3/4 cents. March HRW wheat futures fell 8 1/2 cents to $5.67 1/4, nearer the daily low and hit another contract low today. For the week, March HRW fell 34 1/4 cents. March spring wheat fell 3 1/4 cents to $6.54 3/4 and gave up 29 1/2 cents on the week.

5-day outlook: It was a dreadful week for the winter wheat futures market bulls, as SRW and HRW saw new for-the-move lows that included technically bearish downside “breakouts” and weekly low closes today. That sets the stage for chart-based follow-through selling pressure early next week. Once again, wheat traders will look to the corn futures market for direction, with corn also sliding this week and hitting a new contract low today.

30-day outlook: Wheat traders will continue to monitor weather conditions in the Northern Hemisphere in the coming weeks and heading into springtime. World Weather Inc. today said not much has changed recently. Wheat in China is still rated in good shape as is much of the crop in Europe and many areas across the United States, except possibly the northwestern Plains where winterkill may have occurred in January. Minor northern CIS wheat areas are still vulnerable to spring flooding. None of the recent bitter cold in Russia threatened dormant winter crops because of deep snow cover in the coldest areas. Europe soil moisture is improving for spring crop development and planting, said the forecaster.

90-day outlook: The U.S. dollar index this week hit a three-month high and the USDX has been trending higher since late December. The appreciating greenback that shows no signs up pulling back will likely continue to be a drag on the wheat markets in the coming weeks, making U.S. wheat prices on the world markets even less competitive. U.S. wheat exports very likely need to improve for the wheat futures markets to see sustained price recoveries in the coming months.

What to do: Get current with advised sales.

Hedgers: NEW ADVICE -- Sell another 10% of 2023-crop to get to 70% priced in the cash market. Also sell another 10% of expected 2024-crop production to get to 20% forward priced for harvest delivery.

Cash-only marketers: NEW ADVICE -- Sell another 10% of 2023-crop to get to 70% priced. Also sell another 10% of expected 2024-crop production to get to 20% forward priced for harvest delivery.

 

 

Cotton 

Price action: March cotton fell 76 points to 93.87 cents but gathered 209 points on the week.

5-day outlook: Cotton futures edged lower on profit taking into the long weekend after notching a fresh near-term high in early trade. Stronger-than-expected U.S. producer price data reported this morning affirmed expectations the Federal Reserve will hold off the start of its interest rate-cutting cycle to the middle of the year, or even later. The news supported the U.S. dollar, though gains eased as the session progressed, simultaneously easing price pressure across commodities. With Monday’s federal holiday, and the return of Chinese markets following the Lunar New Year holiday could bring additional fireworks to the natural fiber, which has rallied steadily since mid-January, though overbought conditions could tempt extended profit-taking. However, the National Cotton Council’s weekend release of 2024 projected planted acres will likely be the main price market driver next week.  

30-day outlook: Weather in key growing regions over the next month will continue to hold trade attention. World Weather Inc. notes U.S. planting moisture in March is looking good for most areas, while rain tonight into Saturday in South Texas will bolster topsoil moisture for better planting and early season cotton development in March, though follow up rain will still be needed. Portions of the Delta and southeastern states are too wet, but seasonal warming next month will likely help the moisture profile improve for planting. Meanwhile, West Texas still needs more moisture, but planting does not begin in the region until May.

90-day outlook: Demand for U.S. cotton will persist as a price driver as the marketing-year progresses. Export sales have remained quite strong despite looming uncertainties around the global economy. For the week ended Feb. 8, USDA reported net sales of 160,500 RB, which were down 44% from the previous week and 49% from the four-week average. China was the main purchaser for the week, followed by Turkey and Pakistan. Meanwhile, shipments during the week rose 11% from the previous week to 276,100 RB and were 6% above the four-week average.

What to do: Get current with advised sales.

Hedgers: You should be 80% priced in the cash market for 2023-crop production. You should have 10% of expected 2024-crop production sold for harvest delivery.

Cash-only marketers: You should be 80% priced on 2023-crop production. You should have 10% of expected 2024-crop production sold for harvest delivery.

 

 

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