Market Briefs | February 21, 2024

PUBLISHED February 21, 2024

At the beginning of the week, prices showed early strength, largely due to news of EPA administrator Micheal Regan’s expects participation alongside USDA Ag Secretary Vilsack at the Commodity Classic in Houston on March 1. This coincides with the EPA’s scheduled update on measuring carbon intensity for U.S. biofuels. However, prices took a downward turn on Wednesday morning due to a short-covering spree and expectations of ample supplies in both the U.S. and South America. Futures remain oversold, with managed funds approaching record short positions in corn futures. The March 2024 contract hit a new low this week, with cash U.S. corn prices nearing or falling below farmer breakeven levels. U.S. corn exports have surged by 32% compared to last year, exceeding the USDA’s estimate of 23%. In Brazil, the first corn crop harvest has reached 29% as of last Friday, while second crop plantings have soared to 59%, marking a 21% increase for the week and well surpassing the 40% pace from a year ago.

The March contract price opened the week with a gap higher, only to close the gap shortly after. The market appears eager for bushels sooner rather than later, judging by the price spread between nearby months and new crop prices. Although March contract prices recently hit an eight-month low, they rebounded slightly from the initial gap higher. Nearby support is at $11.60, while resistance now sits at last week’s $11.83. Early week rumors from Tuesday suggested China’s return from the Lunar New Year holiday, with reports of buying 10 to 12 cargoes of soybeans from Brazil. U.S. soy demand remains sluggish and following last month’s 35-million-bushel reduction in U.S. soy export sales by the USDA, traders anticipate another downward adjustment. Funds maintain a bearish position on soybeans, reaching a record high as of last Tuesday, while weather conditions in South America remain mostly neutral to bearish.

On Tuesday, the March 2024 contract demonstrated impressive gains until encountering resistance at $5.85, with the next resistance level situated at the 100-day moving average at $6.01. This strength seemed to stem from a technical perspective, as the market was severely oversold and lacked significant news catalysts. Despite sluggish export demand for U.S. wheat, both Chicago and Kansas City are indicating inverted March-May calendar spreads, typically considered a bullish sign. Much of the U.S. Midwest is forecasted to experience warmer-than-normal conditions, with rains this week favoring the eastern corn belt. Russia and Ukraine remain the primary contributors to driving prices lower due to ample supplies. A consultant informed Reuters that the world appears to be gradually transitioning back to a period of higher inventories.

Old crop rice futures are showing technical signs that a top has been charted. On Feb. 12, both the March and May contracts set new highs before turning lower and charting a bearish key reversal. Follow through selling was limited last week but has since accelerated. March has violated uptrending support, but could find additional support between $17.00 and $17.50. New crop futures, on the other hand, have sold off significantly in the past two weeks, taking over a dollar off the market in the process. Farmers should carefully consider SCO and ECO crop insurance coverage this year. The RMA projected price of $15.50/cwt could provide significant price protection for rice farmers. Export demand has been supporting old crop futures. World prices remain strong, due in part to India’s export ban. Last week’s sales of 154,900 metric tons was bolstered by the recent Col-Rice TRQ auction to Colombia, which accounted for 88,000 metric tons of the total. The first outlook for the 24-25 marketing year, however, paints a more bearish picture for the future. Planted acres are expected to hold steady at 2.9 million, but ending stocks are forecast to increase 4 million cwt to 46.5 million cwt. 

After a nearly two-month rally, cotton futures have stumbled, gapping sharply lower on Tuesday, the first trading day after both USDA and the National Cotton Council released their first look at the 2024 crop. The NCC survey showed planted intentions of 9.8 million acres, down 3.7% from 2023, while Arkansas farmers reported intentions to plant 7% fewer acres in cotton. However, the survey was open in December and January, and cotton prices continued to trend sharply higher while grain prices moved lower. At the annual Ag Outlook Forum, USDA pegged cotton acres at 11 million. That estimate is not survey based, but traders seemed to put a lot more stock in the USDA number than in the NCC survey. 

Cattle futures have been under pressure from negative packer margins and weaker cash markets. Underlying support continues to come from reduced cattle supplies. Technically, April futures continue to trend higher, and have found support at $180 in the recent downturn.