Market Briefs | Jaurary 10, 2023

Bearish price trends persist for corn and soybeans, particularly with improved weather in Brazil boosting safrinha corn production. The March contract hit a year contract low of $4.51 this week as the markets are trading based on the weather. Currently, U.S. exporters maintain a competitive edge, as Brazil withdraws from the corn export market. Rising global shipping rates, influenced by Red Sea incidents and Panama Canal drought, add pressure to corn. Traders anticipate a USDA production revision lower than four-million metric tons in the upcoming WASDE, with the average estimate around 125 million metric tons.

Soybean prices remain on a bearish trend even as hot and dry conditions threaten yields in Southern Brazil’s Parana state. However, other key soybean-growing states in Brazil have seen a significant improvement in yield prospects due to cooler temperatures and widespread rains in recent weeks. The nearby soybean contract found a new six-month low this week at $12.28. U.S. soybean exports continue to lag, down 16% compared to last year, yet the Census export report indicates a November export of 274 million bushels, surpassing the FGIS weekly inspections total by 30 million bushels, despite being 115 million bushels less than the previous year. Notably, U.S. soybean exports to China have declined by 35% this year, reaching just under 90 million bushels.

Wheat markets appear to be in a pause mode, with traders anticipating new fundamental data from USDA’s WASDE reports. Front month prices show proximate support at $6.00, while resistance hovers around $6.20. Attention is on Friday’s wheat seeding numbers, and the majority anticipates a decrease in winter wheat planting. The average trade estimate ahead of the January WASDE suggests a reduction of over one million acres in wheat seeding, though some private analysts project a steeper decline, ranging from 1.5 to 2 million acres.

Rice futures started 2024 off with a bang. The March contract rallied higher on the first trading day of the year, closing above the $18 mark, only to chart a huge bearish reversal the next day, trading as high as $18.14 before closing at $17.31½.  That high certainly looks like a top, but prices have been consolidating since then, with trading confined to a narrowing range. Strong Asian rice prices have improved U.S. competitiveness in export markets, improving export sales and providing support to futures. In fact, Thai rice prices ended 2023 at 15-year highs. New crop contracts are currently trading about $2 below the old crop prices, but coupled with a significant improvement in input costs (particularly fertilizer), we could see increased rice plantings this spring.

Cotton futures are trading in a mostly sideways pattern. March has established support at the low of 77.66 cents and resistance at 83.13 cents and prices are consolidating withing that rage. New crop December cotton is trending higher, but so far has been unable to overcome resistance just below 80 cents. This is not encouraging as farmers make final planting decisions for the 2024 crop. There are some encouraging signs that demand could improve, and importantly, the economy has not moved into a recession, but that seemingly has not carried over into futures prices just yet. The National Cotton Council is conducting their annual production survey, and those results, released in February, will be our first look at what cotton farmers are planning for 2024.

February live cattle futures are chopping along mostly sideways above support at a double bottom near $165.50 charted in early December. The market is finding resistance at $172.50 for the time being, but a close above that level could see the market move to challenge resistance at $175.20. June futures also have been unable to overcome resistance at $172.50. We have seen significant weakness in wholesale beef prices and packer operating margins to begin the year. Weakness in the stock market and a stronger dollar are also negative market factors. The current supply of market-ready cattle is more than adequate to meet demand, and that will also keep lid on prices.  

February live hog prices look to be charting a significant bottom. On the first trading day of the new year, the market plunged, trading as low as $64.65½. The market has since recovered and is now challenging resistance at $73. Firm wholesale pork prices and packer margins have provided support as the market recovers. The supply of hogs in the pipeline is more than adequate to meet demand, however, so that could limit the upside potential of the market for the time being.