Market Briefs | Jan. 18, 2023

Thursday, Jan. 12 was one of the bigger reporting days of the year for USDA. In addition to the monthly WASDE report from the ERS, NASS released their Annual Crop Production Report and the Dec. 1 Quarterly Grain Stocks Report. For the most part, the reports were bullish and provided support. 

The biggest exception to that was cotton. Harvested acres were cut to 7.44 million acres, down from 7.88 million in the previous report. The average yield, however, was raised to 947 lbs/acre, up from 868 lbs/acre in the previous report. That yield increase more than offset the cut in acreage, so the net result of the report was 438,000 bale increase in the production estimate. The crop is now pegged at 14.68 million bales. In Arkansas, farmers harvested an average of 1,196 lbs/acre on 630,000 acres for a total production of 1.570 million bales. In the WASDE, exports were cut 250,000 bales and are now pegged at 12 million bales. US ending stocks were up 700,000 bales to 4.2 million bales, or 30% of use. The upland season-average on-farm price was down 2¢ from last month to 83¢ per pound. From a technical perspective, the report didn’t have much of an impact on the market. March futures remain locked in a sideways pattern between support at 80¢ and resistance at 90¢. Additional support is at 77.5¢.

For rice, the report was bullish. The biggest changes to the report came from long grain production, which was pegged at 128.15 million cwt. That’s down 3.5 million cwt from the previous report. In Arkansas, farmers produced an average of 7,410 lbs/acre on 1.084 million acres. The cut in production more than offset a two million cwt cut in exports in the WASDE report, resulting in an all-rice ending stocks estimate of 32.1 million cwt. That’s down 6 million cwt from last month. The projected long grain on-farm price was pegged at $16.70, and medium-grain was pegged at $17.60. Futures reacted sharply but fell short of challenging resistance at $18.53 and have since retreated back below the $18 mark.

USDA surprised the corn market, providing additional upside potential after a big market reaction on Thursday. USDA cut 200 million bushels from the corn crop estimate. U.S. farmers harvested an average of 173.3 bushels per acre from 79.2 million acres for total production of 13.73 billion bushels. In Arkansas, farmers harvested 173 bu/acre from 695,000 acres. In the WASDE, a decrease in exports of 150 million bushels was more than offset by the cut in production, resulting in a decrease of 15 million bushels in the carryout estimate. The trade was expecting an increase in ending stocks, so the small decrease was considered bullish. The average on-farm price was pegged at $6.70/bu. Futures reacted initially by charting a huge bullish reversal. Follow through has been somewhat limited as the market struggles with resistance around $6.85 for March. December futures are holding above $6 for now, but resistance around $6.05 is proving tough at this point.

The soybean production estimate was also cut more than expected. USDA says U.S. farmers harvested an average of 49.5 bu/acre from 86.3 million acres, for total production of 4.28 billion bushels. In Arkansas, farmers harvested an average of 52 bu/acre from 3.15 million acres. In the WASDE, projected esports were cut by 55 million bushels to 1.99 billion bushels, down 7% from the previous market year. Ending stocks were down 10 million bushels from the previous report to 210 million bushels. The average on-farm price is estimated at $14.20, up 20¢ from the previous report. The March contract has resistance near $15.50. New crop November is trading in a mostly sideways pattern between support at $13.80 and resistance at $14. 

Livestock and Poultry
Beef, pork, and turkey production forecasts were raised for 2023 in the January WSDE report. Broiler and egg production were lowered. The beef forecast was raised on higher expected slaughter, which was partially offset by the forecast for lower carcass weights. Pork production was raised on pig crop data for the second half of 2022. Broiler production was reduced based on hatchery data. For 2023, cattle and hog price forecasts were increased on expectations for strong demand. 

The 2023 milk production forecast was lower on expectations for a smaller average cow inventory. Output per cow was unchanged from last month. For 2023, the price forecasts for all components are lower with expectations of weak domestic demand and price pressure in international markets. The 2023 all milk price was lowered to $21.60/cwt, down from the 2022 price of $25.55/cwt.