Crops Analysis | March 15, 2024
Price action: May corn futures ended the day 3 cents higher at $4.36 3/4 but marked a 3-cent loss on the week.
5-day outlook: Corn futures showed relative strength throughout the session though sellers reemerged midday near $4.40 resistance and forged a close well off session highs. While prices posted a weekly loss, bulls managed to keep the downside in check. The failure to close prices above 40-day moving average resistance further reinforced that bulls will be fighting an uphill battle in the coming week, though prices bouncing following Thursday’s selloff was encouraging, a sign that the low formed in late February could prove more than temporary. A two-week uptrend remains intact on the daily bar chart, which is likely to render another test of 40-day moving average resistance next week. A close above that mark, currently at $4.42 1/2, is likely to further encourage short covering by funds, which continue to maintain a hefty net-short position.
30-day outlook: USDA reports at the end of the month are going to garner a lot of attention and likely determine the trend into the spring growing season. USDA will release their Prospective Plantings Report alongside their quarterly Grain Stocks Report on March 28. A drop in corn acres is expected, though by how much varies widely from firm to firm. While most producers across the Corn Belt are likely to stick to their rotations, several producers who have opted for corn-on-corn acres for several years are opting to plant soybeans, which carry less risk than corn at this juncture. Meanwhile, the Grain Stocks Report is likely to force USDA’s hand on changing their Feed and Ethanol estimates, both of which we feel continue to be too low. While that will not reverse the course of the expanding balance sheet, it could help put a floor under prices for the time being.
90-day outlook: South American production estimates continue to vary widely from firm to firm. The coming quarter is likely to provide a lot of clarity in just how much grain is coming out of South America – Brazil in particular. A kickoff to the U.S. growing season is likely to begin weighing heavily on prices as well. Already, reporters and analysts alike are posting drought monitors comparing the last several years, as much of the Corn Belt remains in need of moisture. If corn acres do come in lower as many analysts expect and this spring provides challenges in planting, it will not take much to add weather premium into new crop futures, which remain within a quarter of two and a half year lows.
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: May soybeans rose 3 cents to $11.98 1/4, notching the highest close since Feb. 8 and a 14 1/4 cent gain on the week. May soymeal fell $2.70 to $334.70 and lost $6.70 week-over-week. May soyoil rose 101 points to 49.92 cents and rallied 325 points from a week ago.
5-day outlook: Soybeans spent most of the session under mild pressure, mustering a bounce from the session low as corrective strength in corn lent support, ultimately pulling prices into positive territory into the close. However, soymeal selling capped momentum, as did psychological resistance at the $12.00 handle, a level not traded in a month prior to Thursday’s session. Meanwhile, the National Oilseed Processors Association (NOPA) released February crush data late-morning, which showed U.S. soybean crush rebounded during the month from January’s weather-reduced pace to the highest-ever level for the month, topping all trade estimates.
NOPA members processed 186.194 million bu. of soybeans last month, up 0.2% from the January crush of $185.78 million bu. and up 12.6% from year-ago crush of $165.414 million bu. It was the largest February crush, topping the previous record of 166.288 million bu. in 2020. Soyoil stocks among NOPA members as of Feb. 29 rose to 1.690 billion lbs., up 12.2% from the 1.507 billion lbs. at the end of January and the largest end-of month supply since June.
Look for soybeans to continue to take direction from corn into next week, though soymeal direction could be a key driver for the complex.
30-day outlook: USDA’s Prospective Planting and Quarterly Stocks Reports, due out March 28, will be the next major development for soybeans. While government and independent surveys alike are being sent out to producers across the country, ambiguity looms over USDA’s planting peg as the corn to soy ratio has mostly favored soybeans. However, a February rice rally and steady run-up in cotton prices have likely vied for acres. The last trading day of the month is almost sure to bring a surprise, though traders will quickly return their focus to further South American production updates and U.S. plantings as efforts begin.
90-day outlook: U.S. export business has certainly been a sore point over the past several months, as South America continues to provide the world with discounted supplies. However, a subpar crop could hinder future export activity for the country. On Tuesday, Brazilian crop agency, Conab lowered its soybean production forecast 2.6 MMT to 146.86 MMT, notably less than USDA’s most recent projection of 155 MMT. The marketplace will continue to watch for additional updates on the size of the South American crop and will likely have a heightened focus on U.S. crush as Argentine facilities ramp back up following last year’s historic drought.
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: May SRW futures settled 3 3/4 cents lower at $5.28 1/2, marking a 8 1/4 cent loss on the week. May HRW futures dropped 8 1/2 cents to $5.66 1/4, losing 12 1/2 cents on the week. May spring wheat fell 8 3/4 cents to $6.46 1/2 and lost 16 1/4 cents from a week ago.
5-day outlook: Wheat futures gave up overnight corrective gains and ultimately closed lower for the third consecutive session, continuing to be the weak link in the grain and soy complex. SRW futures stopped short of challenging Monday’s contract low this afternoon, but the overarching downtrend on the daily bar chart indicates that a test and likely break of that contract low is likely early next week. An extended rally in the corn and soy markets could encourage buyers in the wheat market and put in a meaningful low. Next week’s export sales are likely to be disappointing once again as it will include two of the three recent daily cancellations by China, who has been cancelling cargos all over the world, seemingly favoring Russian wheat.
30-day outlook: The upcoming reports at the end of the month are likely to be the main catalyst over the next several weeks. USDA will release their quarterly Grain Stocks Report on March 28. Feed use is expected to jump year-over-year from historic lows the last couple of years. USDA is often slow to adjust feed and will await stocks reports before making any changes. As exports are likely to remain at the lowest mark in over 50 years, feed use could be a factor that tightens the balance sheet and provides underlying support for futures. USDA will also release their Prospective Plantings Report on Mar. 28, which is likely to indicate wheat acres falling year-over-year, as implied by the December Seeding Report earlier this year. Still, corn and bean prices have been sharply lower and many producers are looking for alternative crops, which could encourage them to plant spring wheat, though prices have succumbed to heavy selling pressure there as well. The reports are likely to dictate much of the price action through the spring growing season.
90-day outlook: As winter crops continue to come out of dormancy, attention will turn to spring weather across the northern hemisphere. Russia continues to export their wheat crop at a record pace, any slowdown in production is likely to shift demand elsewhere, which would likely support world prices. Russian wheat’s FOB price crossed below the $200/MT mark for the first time since August 2020, though French wheat prices are not much more expensive. The world’s top exporters stocks-to-use ratio continues to tighten and is at the tightest level since 2007-08, which leaves the market particularly vulnerable to weather challenges, which can stall production in any number of countries. The U.S. is currently largely dependent on exports for a significant uptick in demand, which leaves CBOT wheat prices particularly vulnerable to the world market.
What to do: Get current with advised sales.
Hedgers: You should be 70% priced in the cash market on 2023-crop. You should be 20% forward priced for harvest delivery on expected 2024-crop production.
Cash-only marketers: You should be 70% priced on 2023-crop. You should be 20% forward priced for harvest delivery on expected 2024-crop production.
Price action: May cotton rose 46 points to 93.94 cents but gave up 133 points on the week.
5-day outlook: Cotton futures spent the week rather subdued following two weeks of notable price swings. The price action was particularly odd following USDA’s bullish supply and demand data a week ago, though outside market pressure this week likely played a role in futures action as the U.S. dollar showed strength and equities fell under pressure. Meanwhile, this week’s crude oil surge to a four-and-a-half month high spurred minimal enthusiasm for the natural fiber. Next week will likely bring extended consolidation, with technical support/resistance at the 40- and 10- and 20-day moving averages confining price action. However, corrective strength in equities could bring a return of recent price strength.
30-day outlook: USDA’s Prospective Planting and Quarterly Stocks Reports, due out March 28, as well as early-spring weather, will be the major price drivers over the next month. Traders will be focused on producer planting intentions, though ultimately mother nature will determine acreage and production. World Weather Inc. maintains spring planting delays will affect the Delta and southeastern states, but indicates it is unclear how significant those delays are likely to become. Excessive moisture will prevail from the lower Delta into parts of Alabama and in a few Georgia locations during the next couple of weeks and the Carolinas may become wetter as well. South Texas and the Texas Coastal Bend region may get rain this weekend into next that will improve topsoil moisture for future planting. Rains that fall in West Texas will certainly be welcome, though the moisture does not look to be well distributed. The forecaster notes the Texas Blacklands will remain favorably moist.
90-day outlook: U.S. cotton exports have recently faded amid higher prices. USDA reported net upland sales of 85,800 RB during the week ended March 7, which rose 65% from the previous week but were down 10% from the four-week average. The direction of the U.S. dollar, which appears to be at a technical crossroads, could significantly impact exports in the coming months. Meanwhile, shipments of the natural fiber continue to prove quite robust, with exports totaling 293,300 RB during the week ended March 7. Top destinations included China, Vietnam and Bangladesh.
What to do: Get current with advised sales.
Hedgers: You should be 90% sold in the cash market on 2023-crop. You should also have 25% of expected 2024-crop production forward sold for harvest delivery.
Cash-only marketers: You should be 90% sold on 2023-crop. You should also have 25% of expected 2024-crop production forward sold for harvest delivery.
