Crops Analysis | April 19, 2024
Price action: May corn futures rose 6 3/4 cents at $4.33 1/2 and near the session high. For the week, May corn lost 2 cents.
5-day outlook: Friday’s good gains and technically bullish weekly high close set the table for some follow-through buying interest Monday. Trading has been choppy and sideways recently, and two solid up-days in a row would give the bulls confidence that a major market bottom was put in place in late February. Corn was boosted in part today as USDA this morning reported 216,500 metric tons of U.S. corn sold for delivery to Mexico. Of the total, 23,000 metric tons is for delivery during the 2023/2024 marketing year and 193,500 metric tons for the 2024/2025 marketing year. Geopolitics will influence the grain futures markets next week. After the overnight Israel pin-prick air strike on Iran, many geopolitical analysts are saying both countries want to de-escalate their military confrontation. Still, the situation remains unstable and could expand volatility next week.
30-day outlook: Weather conditions in the Corn Belt will come more into play in the coming weeks as corn planting is approaching fast. World Weather Inc. today said some planting delays are expected in U.S. corn production areas into May, “but overall the outlook is mostly a normal planting potential.” The southeastern U.S. will have the best weather over the next two weeks. Portions of the Delta and central Midwest may trend too wet. Meantime, in South American corn-growing regions too much rain coming to Rio Grande do Sul, Brazil and neighboring areas may lead to some flood-related problems and a decline in some summer crop conditions. Drying elsewhere in Brazil is normal for this time of year. Northern Mato Grosso will get additional rain for a while and most of the Safrinha corn is rated favorably. Concern may also continue in Argentina where rain frequency may continue a little high.
90-day outlook: Weather patterns in the U.S. Midwest will be very close to the front burner of the corn market for the next few months. More years than not, some degree of a weather scare develops in the corn and soybean markets in the summertime. Better U.S. corn exports will be key for the corn market to sustain a price uptrend in the coming months. After routinely topping 1.0 MMT through much of the first quarter, U.S. corn exports fell sharply in early April. Much is likely due to increasing South American corn sales following the harvest season, with the bigger safrinha crop still to come. This week’s rally in the U.S. dollar index to a five-month high will only make U.S. corn prices less competitive on the world trade markets 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 rallied 16 1/4 cents to $11.50 1/2 at Friday’s close, but still lost 23 1/2 cents on the week. May soymeal firmed $5.70 to $343.70, but still lost 70 cents week-over-week. May soyoil rose 26 points to 44.38 cents but gave up 151 points from a week ago.
5-day outlook: Short-covering was the theme across the soy complex to end the week after facing notable selling efforts through most of the week. A slightly weaker U.S. dollar offered some support, as did a daily export flash from USDA, which showed sales of 121,500 MT to unknown destinations. Of the total, 13,500 MT were for 2023-24 and 108,000 MT for 2024-25. Moreover, rising geopolitical tensions involving Israel and Iran spurred corrective buying as traders look to hard assets as a safe haven, while a turn to a wetter weather pattern in the U.S. could steepen buying into next week. Traders will continue to closely monitor both over the weekend, with any geopolitical escalation heightening the odds of volatility to begin next week’s trade.
30-day outlook: While it’s still early in the planting season, traders will continue to closely monitor planting efforts across the U.S. and watch for any major weather hiccups which could impede progress. USDA reported earlier this week, soybean plantings were 3% complete as of April 7, slightly ahead of the five-year average. However, forecasts of wetter weather throughout the Midwest beginning next week through May 2 could cause producers to put the brakes on planting. World Weather Inc. notes a close watch will be made on the period as there is some potential for bands of heavy rain Thursday into the following weekend, with follow-up rain expected to cause delays to fieldwork, which could be extended deeper into May.
90-day outlook: The longer-term market focus continues revolve around U.S. export sales, which have struggled throughout the marketing-year as a partial result of a persistently strong U.S. dollar as well as robust Brazilian supplies. Helping offset a portion of the year-over-year decline in exports has been solid U.S. crush, which has notched records over the past several months. Earlier in the week, the National Oilseed Processors Association (NOPA) reported March crush among its members reached an all-time high, at 196.406 million bu., though the data moved the market minimally as it largely proved neutral against expectations. In addition to exports, U.S. crush activity will continue to be examined closely, especially as top soymeal exporter, Argentina, reaps fresh supplies to process.
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 rose 13 1/2 cents to $5.50 1/4 and nearer the session high. For the week, May SRW lost 5 3/4 cents. May HRW wheat futures rose 4 1/4 cents to $5.81 1/2 and near mid-range. For the week, May HRW fell 8 1/4 cents. Spring wheat futures rose 8 1/4 cents to $6.47 and gained 4 1/4 cents on the week.
5-day outlook: The winter wheat futures markets saw more short covering to end the trading week. Good gains in corn and soybean futures also supported buying interest in the wheat markets today. Look for the wheat markets to continue to take direction from the daily price action in corn futures for the near term. Traders will closely examine the weekly USDA crop condition report out Monday afternoon.
Geopolitics is likely to continue to have an influence on the grain markets next week. Despite fresh ideas late this week that the Iran-Israel military tensions may now de-escalate after the minor Israeli air strike against Iran overnight, the situation in the Middle East remains tense and unpredictable. Any new military action in the Middle East would likely see grain market bulls headline for the sidelines.
30-day outlook: Weather in U.S. wheat country will remain near the front burner of the wheat markets in the coming weeks. World Weather Inc. today said that in U.S. HRW regions, shower activity in the first week of the outlook will be beneficial, “but much more moisture will be needed for unirrigated fields. Cool temperatures will help limit evaporation, but warming is expected next week.” Greater rainfall is expected in the second week of the outlook. However, there is some uncertainty of the significance of the rain will be in western production areas. The rain in the west is likely to be more erratic compared to areas in the east but could be enough for a rise in topsoil moisture, said World Weather. In the northern Plains, some limited shower activity in the next seven days will not have much effect on soil moisture. However, near- to below-average temperatures will limit evaporation rates. “Greater precipitation in the second week of the outlook will be good for improving planting conditions,” said World Weather.
90-day outlook: The appreciation of the U.S. dollar on the foreign exchange market is worsening the U.S. wheat export situation. That was evidenced this week by China canceling U.S. wheat sales of 123.700 MT. The U.S. dollar index this week hit a five-month high, making U.S. wheat prices even less competitive on the world trade markets. Solid U.S. economic growth recently is likely to prevent the Federal Reserve from cutting interest rates until later this year, at the earliest. That suggests strength in the U.S. dollar will persist in the coming months.
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.
Price action: May cotton rose 59 points to 78.69 cents/pound but tumbled 393 points on the week. Most active July futures firmed 41 points to 81.02 cents but lost 357 points week-over-week.
5-day outlook: The month of April has proven vastly bearish for cotton futures, with the most-active July contract closing lower eleven of the fifteen trading days so far this month. While the recent rally which pushed the natural fiber to multi-year highs largely featured a mix of short supply and notable demand, the run-up in prices has increased buyer hesitation from global purchasers and continues to plague futures, even after a near twenty-three cent dive from the Feb. 28 high to this week’s low. U.S. dollar strength is also handicapping export prospects. The U.S. balance sheet will continue to remain historically snug until fresh supplies are harvested, leaving demand a major near-term market driver.
30-day outlook: Earlier in the week, USDA reported planting efforts were 5% complete across U.S. growing regions as of April 7, which was slightly behind the five-year average. Texas was reported at 8% complete, two-percentage points behind the state average. World Weather Inc. indicates weather will be variable in key growing areas in the coming week as West Texas is expected to see waves of rain during the next week to ten days, which will bolster moisture for planting. Southwestern dryland areas of the region will benefit most from the precip, though more may eventually be needed. The Blacklands will also face greater rain, while lighter more infrequent rain will impact South Texas. Meanwhile, cotton areas in the Delta may become too wet once again in the last week of the month, while southeastern states will experience a favorable mix of rain and sunshine.
90-day outlook: The U.S. dollar will continue to have implications for cotton demand as the marketing-year progresses. Despite efforts by the Federal Reserve, the U.S. economy continues to proceed at a remarkable clip, as evidenced by a series of economic reports in recent weeks. This indicates interest rates may stay elevated for longer and has simultaneously given new life to the dollar over the past month-and-a-half, dampening the natural fiber’s global competitiveness.
Meanwhile, as the U.S. balance sheet remains relatively tight, world supplies could increase notably as harvests progress in South America and Australia, further increasing odds of reduced demand for U.S. supplies in the coming months.
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.
