Crops Analysis | April 8, 2024
Price action: May corn futures rallied 1 1/4 cents to $4.35 1/2, though traded on both sides of unchanged throughout the session.
Fundamental analysis: Corn futures traded on both sides of unchanged before ultimately posting mild gains. Prices were caught between bullish inspections and news out of China, and a relatively bearish outlook for corn plantings and spring growing. USDA reported corn export inspections of 1.420 MMT (55.9 million bu.) during the week ended April 4, which were down 51,859 MT from the previous week but above the pre-report range of expectations from 1.0 MMT to 1.4 MMT. Meanwhile, China’s grain production faces an unknown bottleneck. Chinese state-run newspaper Economic Daily reported, “Under the current situation where it is increasingly difficult to increase production, my country has launched a new round of action to increase grain production capacity.” Increased Chinese production has weighed heavily on U.S. corn as expected Chinese imports are expected to fall given the adoption of GMO’s effect on yield in the nation. A hit to production could provide another boost to U.S. corn exports.
The outlook for much of the Corn Belt remains quite favorable and supportive of early plantings. The two-week forecast features a healthy mix of rain and sunshine, with ample breaks between rain for fieldwork to advance, World Weather Inc. notes. Soil moisture is still lacking in many areas from the eastern Dakotas to southwestern Minnesota, eastern Kansas, western and north-central Iowa and parts of western Missouri. Meanwhile, frequent rain is expected in the next ten days through much of Brazil and Paraguay will maintain favorable soil moisture in many Safrinha corn areas, while boosting soil moisture in drier locations, the forecaster says.
This afternoon, USDA is expected to report corn plantings at 4% completed, according to a Bloomberg poll. That would be up from 2% last week and 3% a year ago.
Technical analysis: May corn futures continue to attempt to grind higher on the daily bar chart, though stiff resistance continues to stifle gains. Bulls are seeking to overcome 40-day moving average resistance at $4.38 1/2, which has capped nearly all gains since its initial test in early March. Additional resistance stands at $4.42 then $4.48. Meanwhile, support stands at $4.35, the 20-day moving average, with backing from $4.31 1/2 then $4.26 1/2.
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.
Fundamental analysis: The soybean market languished again today in its choppy trading range. Bean bulls did take note that May soybean meal futures posted price gains for the fourth session in a row. Spreaders were also featured buying meal and selling bean oil. Look for some more position-evening ahead of Thursday morning’s monthly USDA supply and demand report.
Weaker crude oil prices today did limit buying interest in soybeans and bean oil, but the U.S. dollar index was weaker today, which likely offset the negative impact of lower crude oil prices.
Brazil’s soybean harvest reached has 78% of the planted area as of last Thursday, according to AgRural.
USDA this morning reported U.S. soybean export inspections of 484,328 MT, which were down 63,023 MT from the previous week but within the pre-report range of expectations.
Technical analysis: The soybean bears have the overall near-term technical advantage. The next near-term upside technical objective for the soybean bulls is closing May prices above solid resistance at $12.50. The next downside price objective for the bears is closing prices below solid technical support at $11.73. First resistance is seen at last week’s high of $12.01 3/4 and then at the March high of $12.26 3/4. First support is seen at last week’s low of $11.68 1/2 and then at $11.60.
The soybean meal bears have the firm overall near-term technical advantage. The next upside price objective for the meal bulls is to produce a close in May futures above solid technical resistance at the March high of $347.60. The next downside price objective for the bears is closing prices below solid technical support at the contract low of $323.20. First resistance comes in at $340.00 and then at $345.00. First support is seen at today’s low of $332.30 and then at $330.00.
Soybean oil bears have the slight overall near-term technical advantage. The next upside price objective for the bean oil bulls is closing May prices above solid technical resistance at the November high of 53.16 cents. Bean oil bears' next downside technical price objective is closing prices below solid technical support at 46.00 cents. First resistance is seen at today’s high of 49.13 cents and then at the March high of 49.80 cents. First support is seen at 47.25 cents and then at 46.00 cents.
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.
Fundamental analysis: Wheat futures closed mixed on the session despite posting big overnight gains. India is expected to produce 105 MMT of wheat, according to the country’s flour millers group, 7 MMT (6.25%) less than the Indian government estimate. India does not historically import or export much wheat, though the government has been actively involved in trying to stabilize food prices, which could lead to an increase in imports if production takes enough of a hit.
Excessive wind speeds and low relative humidity during the weekend further reduced soil moisture through HRW acres World Weather Inc reports. Some rain fell across Nebraska and northeastern Colorado, along with a few showers and thunderstorms in central Oklahoma and north-central Texas, the forecaster says. Some rain is forecast in the Red River Valley of the south. Conditions are expected to continue to warm this week, increasing the need for additional rain as soil moisture is depleted.
USDA reported wheat inspections of 497,534 MT (18.3 million bu.) during the week ended April 4, which were down 71,613 MT from last week’s revised figure but above the seasonal pace needed to hit the current USDA estimate. Wheat inspections have been impressive the last couple of weeks, though poor outstanding sales continues to limit optimism on the export front.
USDA is set to release their weekly crop progress report this afternoon. A poll of analyst by Bloomberg estimates winter wheat conditions as down a point to 55% “good” to “excellent.” Spring wheat plantings are seen as advancing 3 points to 4% planted.
Technical analysis: Winter wheat futures ended the day mixed as rally sellers took advantage of the overnight rally. May SRW futures continue in a modest uptrend on the daily bar chart, though bears defended initial resistance at $5.70. Additional buying targets today’s high of $5.73 3/4, then $5.80. Meanwhile, support stands at $5.62 3/4, the 40-day moving average, then $5.55 1/4.
May HRW futures showed relative strength today, though continue to struggle expanding the range to the upside. Bulls largely defended initial resistance at $5.86, which marks down trendline resistance stemming from the December highs and the 40-day moving average. Further buying targets resistance at $5.95 1/4 then the psychological $6.00 mark. Meanwhile, support comes in at $5.80, the converged 10-day and 20-day moving averages, then $5.74 3/4.
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 closed up 40 points at 86.65 cents today and nearer the session low. Prices hit a two-month low early on today.
Fundamental analysis: The cotton futures market today saw some short covering and a corrective bounce from recent strong selling pressure. There was also some positioning ahead of Thursday’s monthly USDA supply and demand report.
The key outside markets were a mixed bag for cotton futures today. A weaker U.S. dollar index was friendly for cotton, while lower crude oil prices were a negative for the natural fiber.
Last Friday’s stronger U.S. jobs report was also a mixed bag for the cotton market, it seems. While the U.S. economy is growing at a healthy pace, the marketplace now is reckoning the Federal Reserve will raise U.S. interest rates only twice this year. Reads a Wall Street Journal headline today: “Economic data stir doubts about Fed rate cuts.” A stronger economy suggests better demand for apparel, but less Federal Reserve easing of monetary policy this year suggests less consumer confidence.
World Weather Inc. today said west Texas cotton regions may get some moisture briefly this week. The U.S. Delta “may get too wet for a while, further delaying the start of planting. The U.S. southeast and far western cotton areas will be seeing a good mix of weather” in the near term.
Technical analysis: The cotton futures bears have the overall near-term technical advantage. Prices are in a five-week-old downtrend on the daily bar chart. The next upside price objective for the cotton bulls is to produce a close in May futures above technical resistance at 90.00 cents. The next downside price objective for the cotton bears is to close prices below solid technical support at 83.00 cents. First resistance is seen at today’s high of 88.24 cents and then at 89.00 cents. First support is seen at 86.00 cents and then at 85.00 cents.
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.
