Crops Analysis | December 15, 2023
Price action: March corn futures notched a 3 3/4 cent gain on a session, settling at $4.83, but fell 2 1/2 cents on the week.
5-day outlook: Corn futures reverse overnight losses on spillover strength from wheat, though continue to face downward technical selling pressure. Prices traded in a tight range all week, with losses limited by downtrend line support and gains capped by downtrend resistance. Little catalyst is likely to spur prices out of the tight technical downtrend over the coming week as volume gets lighter ahead of the Christmas holiday, which likely means prices will continue to trend lower, driven by technical selling. A daily close above $4.85 resistance would indicate that the recent selling pressure would likely cease, targeting firmer resistance at $4.90. Meanwhile, if bulls fail to hold support at $4.73 1/2, further downside is likely to persist through the holidays.
30-day outlook: The January updates for domestic production alongside updates to the balance sheet will capture traders’ attention when they return to their desks following the holidays. There have been significant revisions to the November crop estimate in January in the past. USDA has been quick to increase demand forecasts over the past few months as well as production estimates have been increased. USDA is also below historical averages for feed use, leaving room for the demand side of the balance sheet to increase, which is especially true this year as crop quality is not as good as recent years. Export demand has picked up in recent weeks as well, leading us to believe that exports could prove more bountiful than previously anticipated. While it will take a significant shift to bring ending stocks back below the 2-billion-bushel mark, the January Crop Production and WASDE reports are likely to provide a significant catalyst in the coming month.
90-day outlook: Brazilian weather has been in the driver’s seat for soybeans for the better part of the last few months. With delayed planting and harsh crop conditions present throughout, it is not a question of if acres will be reduced but by how much. Purchases of safrinha seed and fertilizer are down 18-20% year-over-year, largely due to delayed soybean planting, erratic weather and generally low corn prices. As first crop soybeans are harvested in the coming month and a half, there will be a much better picture as to just how many safrinha corn acres will be planted. Further crop stress and delayed/reduced safrinha corn planting could underpin U.S. corn prices in the coming quarter.
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: January soybeans rose 1 3/4 cents to $13.15 3/4 and gained 11 3/4 cents on the week. January soymeal rose $1.90 to $405.60 and rose 90 cents week over week, while January soyoil rose 48 points to 49.99 cents, but is down 21 points from a week ago.
5-day outlook: South American weather and technical woes continue to hover over the soy complex, as seven straight days of daily soybean sales and stronger-than-expected November crush, reported late-morning, failed to spur much buying action. Traders are seemingly pausing to see if next week’s rains in Brazil materialize as recent forecasts for moisture have proven mostly futile. World Weather Inc. reports Brazil will see showers and thunderstorms next week, with some critically important rain expected from Bahia to Mato Grosso, easing crop stress, though more rain will be needed.
The National Oilseed Processors Association (NOPA) reported November crush at 189.038 million bu., down 0.736 million bushels from October, but a record for the month and bullish against expectations. It was also well above November 2022 crush at 179.184 million bu., a 9.4% or 5.5% increase. Soyoil stocks totaled 1,213.31 million pounds, up 114.424 million pounds month over month and above trade expectations.
30-day outlook: Traders will be tuned into USDA’s final production estimates, due out January 12. Any changes to supply and demand data and global production will also be closely monitored. Earlier this week, South American crop consultant, Dr. Michael Cordonnier reported “there is definite downside risk for the Brazilian soybean estimate,” as rainfall remains erratic and about 10% of the crop was left to plant. Meanwhile, Cordonnier maintained soybean production in Argentina could rise from his current estimate of 50 MMT, as producers are expected to switch some corn acres to soybeans amid better weather conditions.
90-day outlook: U.S. exports and crush data will continue to serve as market drivers into the new year. While this week’s weekly export sales data for week ended Dec. 7 proved tepid, USDA has reported daily sales every day this week, totaling 1,437 MMT, which will be reported in next week’s Weekly Export Sales Report. Meanwhile, crush levels continue to notch records amid increased soyoil use due to elevated biodiesel demand.
What to do: Get current with advised sales.
Hedgers: You should be 55% priced in the cash market on 2023-crop production. You should have 10% of expected 2024-crop production sold for harvest delivery next fall.
Cash-only marketers: You should be 50% priced on 2023-crop production. You should have 10% of expected 2024-crop production sold for harvest delivery next fall.
Price action: March SRW wheat rose 13 1/3 cents at $6.29 1/4 and near the session high. For the week, March SRW fell 2 1/2 cents. March HRW wheat futures gained 6 1/4 cents to $6.42 3/4 and near the daily high. For the week, March HRW fell 18 1/4 cents. March spring wheat rose 13 1/2 cents to $7.30 3/4 and gained 1 1/4 cents on the week.
5-day outlook: The technically bullish weekly high close in March SRW wheat futures Friday sets the stage for some follow-through technical buying early next week. However, HRW futures bears had the much better week, which will likely limit the upside in SRW futures next week. Better risk appetite in the general marketplace following this week’s surprisingly easy lean on monetary policy by the Federal Reserve should attract more speculative buying interest in the grain markets in the near term.
30-day outlook: Traders in the coming weeks will continue to monitor weather patterns in major world wheat-producing regions. Relief from dryness in U.S. hard red winter wheat areas the past two days has been significant and with more precipitation coming in the second week of the forecast the outlook for spring 2024 will be much improved. Wheat in France is not well established and there is concern over winter crops in Spain. Winter crops in India are rated well but will need moisture in January and February to ensure the best yields. China wheat is well established and mostly dormant. China received needed snow that should protect wheat against the bitter cold weather expected this weekend and next week. Australia’s late-season harvest weather is improving in Victoria and South Australia, but some grain quality decline likely occurred earlier this week because of too much rain. Argentina’s rain into early next week will stall fieldwork and raise a grain quality concern. Drier weather in Argentina next week will help reduce concern over grain quality, said the forecaster.
90-day outlook: U.S. wheat export sales during the week ended Dec. 7 reached a marketing-year high. China has been a solid buyer of U.S. wheat. The depreciation of the U.S. dollar on the foreign exchange market (The U.S. dollar index this week hit a four-month low.) is another positive element that will make U.S. wheat prices more competitive on the world trade markets. U.S. wheat sales abroad need to continue to improve in the coming months in order to pull prices up from presently still-depressed levels.
What to do: Get current with advised sales.
Hedgers: You should be 60% priced in the cash market for 2023-crop. You should also have 10% of expected 2024-crop production sold for harvest delivery next year.
Cash-only marketers: You should be 60% priced for 2023-crop. You should also have 10% of expected 2024-crop production sold for harvest delivery next year.
Price action: March cotton fell 88 points to 79.93 cents and gave up 151 points on the week.
5-day outlook: Cotton futures continue to be plagued by the 40-day moving average, which continues to limit bulls’ appetite for the natural fiber, along with lackluster demand. Technicals will likely continue to drive price action amid the typical late-December, low-volume period, with continued sideways consolidation inside the Dec. 7 range of 82.75 cents to 79.52 cents likely into next week.
30-day outlook: USDA’s January production and supply and demand updates, due out January 12, will guide price direction into the new year. Traders will also be tuned into global production amid a likely increase in Brazilian acres due to persisting weather anomalies, which have caused producers to switch soybean acres to cotton. World Weather Inc. notes Argentina crop conditions are improving and prospects for cotton in Brazil are also improving as timely rain falls to raise soil moisture for planting and early development in various locations next week.
90-day outlook: Traders will continue to closely monitor U.S. export sales activity into the new year, with a close eye on China as deflationary concerns build. For week ended Dec. 7, USDA reported weekly export sales of only 57,800 RB, which were down 50% from the previous week and 77% from the four-week average. Meanwhile, shipments during the week totaled 148,700 RB, which rose 7% from the previous week and 42% from the four-week average. China, Mexico and Vietnam were top destinations during the week.
What to do: Get current with advised sales.
Hedgers: You should have 60% of 2023-crop production forward sold in the cash market.
Cash-only marketers: You should have 60% of 2023-crop production sold.
