Crops Analysis | April 11, 2024
Price action: May corn fell 5 1/2 cents to $4.28 3/4, marking a low-range close.
Fundamental analysis: Mild pre-report gains faded into USDA’s monthly Supply & Demand update this morning, with heavier losses ensuing as traders processed the data. A slew of data out prior to its release, however, had corn futures favoring the upside, as both Conab and the Rosario Grains Exchange reported reductions to corn estimates for Brazil and Argentina. Conab reduced its estimate for Brazilian corn production by nearly 1.8 MMT from its previous estimate to 111.0 MMT, which represents a 16% drop from year-ago. Meanwhile, Argentina’s Rosario Grains Exchange sliced the country’s corn crop forecast by 6.5 MMT to 50.5 MMT, citing “unprecedented” damage from spiroplasma disease carried by leafhoppers. The exchange noted further, “This is the first time since estimates have been made that such significant damage has been seen from a non-climatic factor.”
However, offsetting news of South American production cuts were tepid weekly U.S. corn sales. USDA reported net sales during the week ended April 4 totaled 325,500 MT, a new marketing-year low and notably below pre-report expectations of 750,000 MT to 1.3 MMT.
USDA’s Supply & Demand data escalated selling efforts as 2023-24 U.S. carryover was pegged at 2.122 billion bu., slightly higher than the average pre-report estimate. USDA made no changes on the supply-side of the balance sheet, but increased USDA feed & residual and food as well as seed and industrial use, each by 25 million bu. on the demand side. Corn-for-ethanol production gained the entire increase for the seed and industrial use category, while exports were left unchanged from March at 2.1 billion bu. Global carryover for 2023-24 was lowered 1.35 MMT from March to 318.28 MMT, which was well above the average pre-report estimate and 2022-23 carryover of 302.19 MMT. USDA left Brazil’s corn crop estimate unchanged at 124 MMT but reduced the Argentine crop by 1 MMT to 56 MMT.
Technical analysis: May corn bears forged a close below the 10- and 40-day moving averages $4.33 1/2 and $4.32 1/2 for an increased technical posture. Initial support will now serve at $4.28 1/2, then $4.26 1/2 and the Feb. 26 low of $4.08 3/4. Resistance will now serve at today’s failed support levels, then at the 20-day moving average, currently trading at $4.34 3/4, and again at $4.38 1/2, $4.41 1/2, $4.50 and the 100-day moving average of $4.58 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.
Price action: May soybean futures fell 5 1/2 cents to $11.59 1/4 though settled well off session lows. May meal futures surged $4.70 to $335.6, settling near session highs. May bean oil futures plunged 158 points to 46.02 cents.
Fundamental analysis: Selling pressure in soybeans found little relief following this morning’s USDA report as prices continue to trend lower on the daily bar chart. USDA cut total supply for 2023-24 by 5 million bushels, cutting exports from 30 million bushels to 25 million bushels. The agency cut the demand forecast 30 million bushels, with the bulk of that coming from exports (down 20 million bushels to 1,700 million bushels). USDA lowered seed use 2 million bushels and residual use 9 million bushels. The adjustments altogether rose ending stocks 25 million bushels from last month to 340 million bushels. Trade expected ending stocks at 319 million bushels, according to a Bloomberg poll. USDA continues to be slow to adjust crush use, which is pacing well above the needed pace to hit the current USDA forecast. Anticipation of Argentine crush depressing demand for U.S. meal could be why USDA is hesitating to adjust crush. USDA opted to lower export demand despite inspections pacing ahead of the required pace to hit their former estimate at 1,720 million bushels. Lack of export sales likely lent pessimism in that regard, though seems a little premature.
USDA opted to leave South American production largely unchanged in today’s report. USDA left Brazilian production at 155 MMT, despite analysts calling for production at 152.3 MMT. Argentine production was pegged at 50 MMT, in line with expectations. Production for Paraguay was increased a modest 200,000 MT to 10.5 MMT. While USDA remains on the upper end of production expectations, CONAB lowered their production estimate 336,000 MT to 146.522 MMT this morning.
USDA reported soybean export sales of 305,300 MT during the week ended April 4, which were up 57% from the previous week but down 3% from the four-week average. Net sales were within pre-report expectations ranging from 200,000 to 600,000 MT.
Technical analysis: May soybean futures closed lower for the fourth consecutive session as prices continue to trend lower on the daily bar chart. Bulls are seeking to reclaim prior support, now resistance at $11.64 3/4. Further buying finds resistance at $11.68 1/2, then $11.74. Meanwhile, support comes in at today’s low of $11.51, which is quickly backed by the psychological $11.50 mark. Further selling finds support at $11.40 3/4, which capped most of the downside in late February.
May meal futures showed relative strength today as spreading was actively features in the soy complex. Prices are grinding sideways on the daily bar chart as bulls try to form a bottom. Bulls are seeking to overcome resistance at $336.0, which is backed by the 40-day moving average at $339.0. Initial support stands at $335.0, the converged 10-day and 20-day moving averages, which is backed by $330.9, then $328.3.
Heavy selling pressure was seen in bean oil today, bringing May futures to the lowest mark in over a month. Initial resistance now stands at 46.35 cents, with backing from 46.93 cents, then the 40-day moving average at 47.63 cents. Support comes in at the psychological 46.00 cent mark, which is backed by support at 45.53 cents, then 45.04 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.
Price action: May SRW wheat fell 6 3/4 cents to $5.51 3/4 and nearer the session low. May HRW wheat closed down 11 1/4 cents at $5.83 1/4 and near the session low. May spring wheat futures plunged 14 3/4 cents to $6.37.
Fundamental analysis: Losses in the corn and soybean futures markets today spilled over into selling pressure in wheat markets. A solid rally in the U.S. dollar index to a four-month high late this week is also a bearish element for the wheat markets.
USDA’s monthly supply and demand report today showed U.S. wheat carryover at 698 million bu., up 25 million bu. from last month and 8 million bu. above trade expectations. USDA trimmed total supplies 5 million bu. to reflect a 5-million-bu. drop in wheat imports to 140 million bushels. USDA left U.S. exports at 710 million bu. USDA put the national average on-farm cash wheat price for 2023-24 at $7.10, down 5 cents from last month.
USDA this morning reported U.S. wheat export sales of 80,700 MT for 2023-24 and 274,400 MT for 2024-25. Sales were within market expectations.
World Weather Inc. said that in U.S. HRW country one round of rain is likely in the next seven days and it will be mostly in eastern production areas, leaving the west “with a continued need for more moisture. Unusual heat and windy conditions Friday through Tuesday will lead to high evaporation rates,” said the forecaster. In the northern Plains, a large storm system still has potential to impact the region Monday through Wednesday. There remains some uncertainty with how significant the precipitation associated with this storm system will be. However, it has potential to bring the region some beneficial moisture for use with spring fieldwork, said the forecaster.
Technical analysis: Winter wheat futures bears have the overall near-term technical advantage. However, SRW prices are starting to trend up on the daily bar chart. SRW bulls' next upside price objective is closing May prices above solid chart resistance at $5.90. The bears' next downside objective is closing prices below solid technical support at the March low of $5.23 1/2. First resistance is seen at Wednesday’s high of $5.67 1/4 and then at last week’s high of $5.74 3/4. First support is seen at today’s low of $5.48 1/4 and then at $5.35.
Recent sideways price action in HRW futures begins to suggest a near-term market bottom is in place. The HRW bulls' next upside price objective is closing May prices above solid technical resistance at the March high of $6.05 1/4. The bears' next downside objective is closing prices below solid technical support at the contract low of $5.51 1/2. First resistance is seen at today’s high of $5.97 1/4 and then at $6.00. First support is seen at this week’s low of $5.71 and then at the April low of $5.60 1/2.
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 futures dropped 194 points to 83.37 cents, marking the lowest close since Jan. 17.
Fundamental analysis: Cotton futures closed lower for the third consecutive session with selling accelerating after the report this morning. USDA opted to leave the balance sheet unchanged in this month’s update but did lower their expected average farm price by a penny to 76.0 cents. We maintain a more pessimistic view on exports as sales have been poor despite the recent downtick in prices. The report this morning noted that Chinese imports of cotton are likely to rise to 14.2 million bales, up from prior estimates of 12.9 million bales. That mimics the increase that China’s ag ministry published, which implied imports would rise 300,000 MT to 2.3 MMT, though that remains well below the current USDA estimate, which equates to about 3.1 MMT. Regardless, China has not been actively purchasing U.S. cotton and USDA does not expect them to. This morning, USDA reported net cotton sales of 89,500 bales, modestly above a week ago but down 7% from the four-week average.
Cotton futures continued to trade lower despite a surge in U.S. stocks today. Cotton futures tightly tracked stocks on the rise seen earlier this year. That correlation breaking and cotton sinking despite strong equity gains is a testament to the current weakness of the cotton market and points of likely continued selling pressure.
Technical analysis: May cotton futures faced steady selling pressure throughout the session. Bears continue to maintain full control of the technical advantage. Resistance can be found at the psychological 85.00 cent mark on corrective buying. Further buying targets resistance at 86.25 cents, then the 200-day moving average at 86.80 cents. Support comes in at 83.15 cents, 82.50 cents, then 81.08 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.
