Crops Analysis | April 12, 2024
Price action: May corn futures surged 6 3/4 cents to $4.35 1/2, gaining 1 1/2 cents on the week.
5-day outlook: Corn futures negated all Thursday’s losses, finishing the week relatively flat from a week ago. Gains continue to be capped by the downward sloping 40-day moving average, which currently stands at $4.37 1/2. Prices have only closed above the 40-day once in the last month, despite testing that mark several times. A catalyst is unlikely to occur in the coming week to drive prices above that mark, which could lead to continued moderate selling pressure. USDA did not meet our expectations in raising their use forecasts, though little has changed fundamentally that would indicate our forecasts are overly optimistic. Still, USDA has been slow to adjust feed higher and exports have been strong, as inspections continue to outpace required number to hit the current USDA export estimate.
30-day outlook: Planting progress and spring growing conditions are likely to dictate much of the price action over the coming month. Planting progress may be slow in the eastern U.S. and Delta over the balance of the month due to recent rain and bouts of additional moisture along with some cooler temps, according to World Weather. The early planting date for much of the Corn Belt has come to pass, which gives the green light from crop insurance companies for producers to start hitting the fields. Warming temperatures across the Midwest will raise soil temperatures and little rain is forecast after Monday, April 15, which will likely boost planting progress ahead of the usual pace.
90-day outlook: Brazil is entering the last week of their historical rainy season, though longer range forecasts call for greater-than-normal rain at times. In a typical year, rain in Safrinha areas is minimal in late April and early May as the dry season is underway. Recent rain in western in southern Brazil will see frequent rain through Tuesday that will keep soil conditionals favorable in many Safrinha areas while inducing additional improvements in crop and soil conditions in drier locations, according to World Weather Inc. Conab’s corn production remains well below USDA, as does a lot of other private analysts. As the Safrinha season rolls on, a better understanding of how much Brazil will harvest is inevitable. A significant cut to production from USDA would likely entice funds to cover a portion of their short position, which they continue to maintain.
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 rallied 14 3/4 cents to $11.74 but marked a weekly loss of 11 cents, while May soymeal surged $8.80 to $344.40, picking up $11.30 on the week. May soyoil fell 13 points to 45.89 cents and lost 300 points week-over-week.
5-day outlook: Soybeans gained back a portion of this week’s losses during Friday’s session but continued to face technical hurdles looming overhead. Commodities favored a general risk-on tone in the wake of USDA’s bearish data dump on Thursday, despite a continued run in the U.S. dollar to a more than five-month high after a stronger-than-expected Consumer Price Index (CPI) reading earlier in the week. Moreover, dollar strength seemingly had little bearing on daily export sales, as USDA reported yet another flash sale this morning of 124,000 MT of soybeans to unknown destinations for delivery during 2023-24. This marked the third daily soybean sale for the week and was the first week of back-to-back soybean sales since mid-December. Of the total, 248,000 MT were for delivery during 2023-24 and 254,000 MT during 2024-25.
Next week’s price action could entail followthrough corrective buying from near-term oversold territory, though a larger move above current technical resistance will be required to notch any sustained strength.
30-day outlook: In recent years, corn plantings have been the ag industry focus during the month of April, but earlier soybean plantings have become increasingly popular in recent years. The trend began to change due to producers observing heightened plant resiliency as well as improvements in yield among early-planted beans, making weather over the next month even more important. World Weather Inc. reported earlier today that planting progress in the Delta and eastern portions of the Midwest may be slow over the balance of the month due to recent rain and bouts of additional moisture along with some cooler temps. Meanwhile, other areas of the Midwest will face additional rain into next Thursday, though the forecaster notes the remainder of the next two weeks will be mostly dry and planting should quickly increase. Planting progress by April 26 looks likely to be ahead of the usual pace if today’s forecast verifies. Many areas of the Midwest continue to observe low soil moisture levels, including the eastern Dakotas to southern Minnesota, eastern Kansas, western north-central Iowa and parts of western Missouri, where forecast rains will be important next week.
90-day outlook: U.S. export activity has been and will continue to be the longer-term focus as the marketing-year progresses. Cheaper Brazilian supplies amid large production and a strong U.S. dollar has consistently crimped sales abroad over the past year. However, at the same time, U.S. crush levels have risen amid strong demand for biofuels combined with stifled production from top meal exporter, Argentina (which endured a historic drought last season). Ultimately, though, USDA continues to show increased U.S. crush has minimally offset reduced exports, making the aforementioned increase in CPI ever more important as it implies inflation is stickier than recent notions. The current situation indicates sustained dollar strength is possible, but also heightens ambiguity around the price direction of commodities as the year progresses.
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 futures rallied 4 1/4 cents to $5.56, though lost 11 1/4 cents on the week. May HRW futures jumped 6 1/2 cents to $5.89 3/4, marking a 7 1/2 cent gain on the week. May HRS futures rose 5 3/4 cents to $6.42 3/4 but lost 5 1/4 cents on the week.
5-day outlook: Wheat futures piggybacked corn today posting modest gains, with strength accelerating into the close. May SRW futures continue to trade in a modest uptrend from the March lows but have hugged the lower end of the range the last two sessions. Still, prices finished the week in a precarious position, vulnerable to an acceleration in selling pressure. Winter wheat conditions on Monday will attract the attention of wheat traders. Steady crop ratings reported by USDA earlier this week, despite windy conditions last week, point to how well established the winter wheat crop is. Warm temperatures this week encouraged growth though limited precipitation leaves the crop in need of moisture soon. Temperatures are expected to fall from unseasonably warm to unusually cool next week. Some concern over frost and freezing persists, though a significant hit to production is not expected at this juncture.
30-day outlook: Weather across the northern hemisphere will be closely monitored as winter crops evolve and spring crops are planted. Weather in Russia’s southern region and portions of eastern Ukraine will be drying down for a little while longer, with a current high-pressure ridge over Russia expected to dissipate next week, eventually bringing more moisture into the region, World Weather Inc. notes. Russian and French wheat continue to hold the most competitive prices on the global market, though prices have bounced from recent lows. If a significant catalyst were to come over the wheat market in the coming month, it would likely come from growing challenges in Russia and Ukraine, as that would eventually drive demand towards the U.S. However, it is more likely that wheat continues to closely track price action in corn and soybeans.
90-day outlook: The final quarter of the marketing year brings some unique catalysts for the wheat market. USDA cut their feed use forecast, which has been volatile in recent years. The government bumped their feed use estimate in October from 90 million bushels to 120 million bushels following strong first quarter use, although disappointing use in the subsequent two quarters led cuts in April. It should be noted, however, that feed use in the second and third quarters of the marketing year have been historically difficult to guess. This opens up the question on how feed use will turn out in the fourth quarter, which is also historically difficult to guess. That puts the ending stocks number for the 2023-24 marketing year in question, which could provide a catalyst in the coming quarter.
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 fell 75 points to 82.62 cents and marked a 363-point weekly loss.
5-day outlook: Cotton futures extended losses for the fourth straight session to a three-month low as notable selling across equities, along with U.S. dollar strength, largely negated support from rising crude oil futures. Oil rallied amid rising tensions in the Middle East, which have heightened risk of oil supply disruptions, though the news induced sentiments of risk aversion across equities. The U.S. dollar caught a bid earlier in the week following stronger-than-expected Consumer Price Index (CPI) data, which could portend the battle against inflation may prove lengthier than previous expectations.
Price action next week could involve some corrective buying, though the path of least resistance appears to be lower as technical resistance likely continues to limit a meaningful move to the upside.
30-day outlook: Weather in key U.S. growing areas will be monitored over the next month as planting efforts begin in earnest. On Monday, in its Crop Progress Report, USDA reported 5% of the nation’s cotton crop was planted, up 2% from the previous week but slightly behind the five-year average. While still relatively early in the season, plantings are being hindered in parts of the Delta and southeastern states by flooding. World Weather Inc. notes weather conditions will improve for a while, but another round of stormy weather is expected later this month. Meanwhile, the forecaster indicates southern portions of West Texas are still too dry and there is need for rain in southern Texas. While these areas are not as dry as last year, rain is needed, especially as temps are expected to trend much warmer Friday through Monday.
90-day outlook: U.S. cotton sales continue to prove tepid, despite prices having retreated from multi-year highs notched at the end of Feb. A U.S. dollar rally has largely weighed on the natural fiber amid reduced competition on the global marketplace. On Thursday, USDA reported net upland sales of 81,500 RB during the week ended April 4, which were down 4% from the previous week and 10% from the four-week average. Top purchasers for the week included China, Pakistan and Peru. Meanwhile, shipments for the week totaled 274,100 RB, down 25% from the previous week and 23% from the four-week average. China was the top destination, followed by Turkey and Vietnam.
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.
