Market Briefs | August 30, 2023

December cotton is currently trading in a relatively sideways pattern between established support above 83¢ and resistance at the 11-month high of 88.83¢. Export demand has been disappointing, and the strength is coming from questions about U.S. production. Only 33% of the crop is rated good to excellent at this point. In Texas, only 12% is rated good to excellent. In the August report, USDA cut more than 2.5 million bales off the production forecast and cut harvested acreage by 910,000 acres. That leaves a production estimate of 13.99 million bales produced on 8.62 million acres. Hurricane Idalia could pose some risk to cotton in the Southeast, especially where bolls are opening.

After breaking uptrending support in reaction to the August production and supply/demand reports, rice futures are now being driven higher by concerns about global supplies and Asian prices. On top of their ban on non-Basmati rice imports, India has now added a 20% tax on exports of parboiled rice, effective through Oct. 20. African countries are cancelling purchases and using stocks because they can’t pay the higher prices. September futures have moved to their highest level in 6 months and need to close above the February high of $16.56 to suggest further gains are possible. USDA says rice harvest is 25% complete, with most of that progress in Texas and Louisiana. Arkansas producers have 11% of the crop in the bin. U.S. rice production is expected to total 203.6 million cwt, up 2.6 million from 2022.

Over the past several weeks, the trajectory of corn futures in the market has maintained a lateral movement, displaying minimal fluctuations. Recent updates on crop conditions, released on Monday, revealed a notable 2% decline compared to the previous week. Despite this dip, the outcome turned out to be more favorable than anticipated. USDA presently rates the corn crop at 56% under the classification of good/excellent. As we transition into the upcoming harvest season, a concerning development involves the gradual decrease in water levels along the Mississippi River. This situation reminds us of a similar problem we faced last year. It might become a big issue for moving grains smoothly in the upcoming fall season. 

In recent weeks, there has been a modest upward movement in the futures market for Nov. 23 soybeans. According to the latest information from USDA, as of Aug. 27, 58% of the crop is rated good to excellent, compared to 59% last week. Unfortunately, the weather forecast doesn’t appear to provide much relief, as elevated temperatures are expected to persist, negatively impacting the soybean crops. Amidst these challenges, certain factors are contributing to the ongoing upward trend in the price of November soybean futures. One key factor is the heightened domestic demand for soybeans, which continues to exert a positive influence on their market value. Furthermore, the outlook for the weather remains hot, further underpinning the upward trajectory in soybean futures. 

Wheat prices were mixed, with a general trend higher. This trend can be attributed in part to the anticipation of reduced wheat production potential in Canada for the current season, which has been characterized by a notable lack of sufficient moisture. For the 2023/24 season, there is a projected uptick of 5.8% in total wheat acreage, reaching approximately 52.679 million acres. If these projections materialize and yields align with the typical trendline average of 49.2 bushels per acre, the outcome would be a collective wheat production of roughly 2.063 billion bushels. These projections underscore the intricate balance between factors such as weather conditions, acreage, and yields.

Live cattle futures continue to show strength as cash and wholesale beef prices remain firm and provide support. Packer margins are improving There is concern that recent extreme heat in the plains has had a negative impact on cattle. The August Cattle on Feed report was mostly supportive. The Aug. 1 feedlot inventory was down 2% from the year-ago total. July placements totaled 1.62 million head, down 8% from 2022. However, slow marketings suggest that later in the year supplies will top year-ago numbers. October futures need to take out resistance at $183.72 in order to make another run at the high of $185.75. October feeders set a new high this week of $257.92.

Hog futures are attempting to stabilize after recent losses. The October contract is establishing support at $78. Seasonal weakness in cash hog and wholesale pork prices is putting some pressure on prices. Worries that a downturn in China’s economy will impact demand added additional pressure. Lighter hog weights are limiting pork production currently, but both weights and slaughter totals are expected to increase into the fourth quarter.