Crops Analysis | April 5, 2024
Price action: May corn futures fell 1 cent to $4.34 1/4 and lost 7 3/4 cents on the week.
5-day outlook: Corn futures failed to follow wheat to the upside today as technical resistance continues to loom over the market. May corn futures closed above the 40-day moving average just once in the past month despite testing that mark several times. After closing above the 40-day moving average last Thursday following the bullish acreage and stocks reports, prices fell back below that mark on Monday and continued lower Tuesday. The latter half of the week’s retracement to the resistance level indicates that prices are likely to trend sideways for the time being. The next significant catalyst for the corn market will be next week’s USDA supply and demand report on Thursday. The quarterly stocks data released last week indicated that demand throughout the second quarter of the marketing year was quite robust and warrants an increase in several of the use categories, though the question remains how much the USDA will change their current forecasts.
30-day outlook: After next week’s supply and demand update, the attention will quickly turn to weather as planters roll across the Midwest. The past week has boosted soil moisture across much of the Corn Belt and temperatures are expected to rise across much of the Midwest next week, which will likely accelerate planting, World Weather Inc. notes. Soil moisture is still low in many areas from the eastern Dakotas to southwestern Minnesota, eastern Nebraska and western and north-central Iowa, though precip forecast next weekend in those areas. If weather this spring is relatively mild and planting goes smoothly, many analysts anticipate producers will opt to increase their corn plantings, though our research suggests there is not much of a trend either way for years that see a significant drop in acres in March intentions.
90-day outlook: Weather will of course play a significant factor in price action over the coming quarter, though barring any significant planting delays, a market-moving catalyst will have to come from better realized South American production. The Buenos Aires Grains Exchange cut their Argentine corn estimate to 52 MMT from 54 MMT previously. Their estimate was as high at 56.5 MMT just a couple of months ago. Disease appears to be a big factor in why the agency cut their estimate, according to Reuters. Brazilian crop estimates are tending to trend modestly lower among most private analysts as safrinha corn estimates are shrinking. USDA remains in the upper end of estimates and many analysts are expecting a cut to their estimate in next week’s reports. A significant cut to South American production could be a driving force that draws enough export demand to support prices in the coming months.
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 a nickel to $11.85 but lost 6 1/2 cents on the week, while May soymeal fell 40 cents and gave up $4.60 week-over-week. Meanwhile, May soyoil gained 74 points on the day and 94 points on the week.
5-day outlook: Soybeans ended the week higher after carrying over last week’s selling earlier in the week, though overhead technicals and tepid export sales continue to limit an earnest move to the upside. However, the marketplace will continue to digest payroll data, released this morning by the Labor Department’s Bureau of Labor Statistics, which showed U.S. employers hired far more workers than expected in March and raised wages, suggesting a much more robust economy and thus possible delays in anticipated interest rate cuts from the Federal Reserve. Meanwhile, soyoil futures were revived by an extended rally in crude oil amid mounting geopolitical tensions between Iran and Israel, which will continue to be closely monitored for further developments.
Traders will take additional direction from USDA’s updated supply and demand data next week, due out April 11.
30-day outlook: U.S. weather will have the floor over the next month, as producers ramp up planting efforts. World Weather Inc. reports the Delta and portions of Alabama will see frequent and significant rain Sunday into Thursday that should result in local flooding. The forecaster reports a few days of mostly dry weather will follow and planting may resume in some areas, while many areas remain too wet for fieldwork before another storm advertised for April 15-17 stalls fieldwork once again. The Midwest is expected to see a mostly favorable mix of rain and sunshine during the next two weeks and fieldwork should advance between rounds of precip with planting likely to accelerate when temps warm next week.
90-day outlook: U.S. export sales and crush will be the long-term trade focus as export sales have been hemmed by ample Brazilian supplies and persisting strength in the U.S. dollar. Meanwhile, U.S. crush levels have consistently notched record paces over the past several months amid reduced crush from top meal exporter, Argentina. This week, February crush was reported at 193.332 million bu., a record for the month, but down 900,000 bushels from 194.832 million bushels in January, but up 17.032 million from February 2023. U.S. crush will be closely monitored as Argentina begins to reap fresh supplies and attempt to ramp the country’s crush back to levels seen before last year’s historic drought.
What to do: Get current with advised sales.
Hedgers: You should be 65% sold in the cash market on 2023-crop. You should have 10% of expected 2024-crop production sold for harvest delivery next fall.
Cash-only marketers: You should be 60% sold on 2023-crop. You should have 10% of expected 2024-crop production sold for harvest delivery next fall.
Price action: May SRW wheat futures hit a five-week high today and closed up 11 cents at $5.67 1/4, near mid-range and for the week up 7 cents. May HRW rose 4 3/4 cents to $5.82 1/4, near mid-range and lost 3 cents on the week. May spring wheat rose 1 3/4 cents to $6.48 and gained 3 cents on the week.
5-day outlook: Today’s technically bullish weekly high closes in May winter wheat futures suggest there will be follow-through short-covering and perceived bargain-hunting buying interest early next week. Still, wheat market traders will look to the corn futures market for daily price direction. If corn continues to languish at lower price levels, the upside will almost certainly be limited in wheat futures, too. Traders will closely examine Monday afternoon’s weekly crop progress updates for wheat.
30-day outlook: Weather conditions in major global wheat-producing regions will remain near the front burner in the coming weeks. World Weather Inc. today said flooding that occurred during the weekend in north-central Morocco is abating and the same is true for the excessively wet areas of western France and southwestern Spain. These areas will see steadily improving crop conditions. There is potential for southeastern Europe (the Balkan Countries, Ukraine and parts of Russia’s Southern Region) to trend drier than usual over the next couple of weeks with well-above-normal temperatures. Western CIS crop areas to the north of this region will continue to see the remaining snow melt and surplus moisture will be running off into rivers and streams. Harvesting in India should advance well this month. Wheat development in China should also advance well. Rain is needed in southwestern Western Australia. Canada’s southwestern Prairies will get some welcome precipitation today, further improving topsoil moisture for spring planting that begins soon. Rain is needed in many other areas across the Prairies. U.S. crop areas are expecting very little change in field conditions, although portions of hard red winter wheat will be drying down, said the forecaster.
90-day outlook: The U.S. dollar index is trending higher and this week hit a five-month high. That’s a bearish element for the U.S. wheat markets, especially as weekly USDA export sales figures have been disappointing. Traders will continue to closely monitor the trajectory of the greenback in the coming months. Volatility in the grain markets could increase in the coming few months, as corn and soybean planting and growing seasons get under way, while U.S. winter wheat harvest in the southern regions will commence in the coming weeks.
What to do: Get current with advised sales.
Hedgers: You should be 80% 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 80% priced on 2023-crop. You should be 20% forward priced for harvest delivery on expected 2024-crop production.
Cotton
Price action: May cotton slipped 89 cents to 86.25 cents and plummeted 513 points on the week.
5-day outlook: Nearby cotton futures slipped to more than a two-month low, extending below support at the 100-day moving average for the first time since mid-January. Selling ensued despite a continued rally in crude and notable buying across equities following stronger-than-expected jobs data released earlier today. Traders will be tuned in for USDA’s supply and demand update next Thursday, though recent data from the government has had minimal effect on the natural fiber as the marketplace has largely been increasingly focused on demand destruction from recent multi-year highs as well as the notable inverse between old- and new-crop futures. Some technical buying could evolve into next week, though it could be delayed until after Thursday’s report.
30-day outlook: Planting efforts have begun in areas of western Texas and southwestern Oklahoma, which have been dry and are expected to remain dry through much of the next two weeks. World Weather Inc. notes fieldwork should advance well around one round of organized precip Monay night into Wednesday, which should induce beneficial increases in soil moisture in a few areas. Meanwhile, the Blacklands, Coastal Bend and south Texas will see more sunshine than rain during the next two weeks with fieldwork likely to advance well around the rain, while parts of the Blacklands and Coastal Bend should see some increases in soil moisture.
90-day outlook: U.S. cotton sales continue to prove lackluster following the aforementioned run in prices. On Thursday, USDA reported net upland cotton sales of 84,900 RB for the week ended March 28, which were down 14% from the previous week, but up 4% from the four-week average. Top purchasers for the week included China, Turkey and Honduras. Meanwhile, shipments continue to prove rather robust, totaling 367,600 RB during the week, up 2% from the previous week and 7% from the four-week average. U.S. cotton exports could become further hindered by an increase of South American supplies as the marketing-year progresses.
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.
