Afternoon Market Commentary – February 3, 2023
by: Chris Betz
|Old Crop (futures month, change, settle price)||CH3||2’2||677’4||SH3||2’2||1532’0||WH3||4’2||756’6|
|New Crop (futures month, change, settle price)||CZ3||1’0||596’0||SX3||0’6||1369’6||WN3||3’6||771’6|
Technical Thoughts – February 3, 2023
By: Ken Lake
For the week, corn moved lower, soybeans sideways and wheat somewhat higher.
March corn failed at 685 for the sixth time since December 28. The short-term trend remains sideways but the euphoria around the bullish WASDE report in January is gone. This morning trading at 672, it is trading below its 10,20 and 100,200-day moving averages and only trading above its 50-day moving average, 664. There is Fibonacci support at 657. Weekly chart support is 669. The saving grace here is the fact that those 10,20,100,200 day moving averages are all in an incredibly tight 4-cent range between 677 and 673. A range so tight that it could be easily overcome given a reason to do so. I’m still looking for that reason.
December corn made a double bottom at 583 ¾ on January 24th but since then the contract has only ground out a meager gain. It did manage to close above its 10 and 20-day moving averages this week but is testing that support (590/593) this morning. Today’s value remains in bearish mode as it is below all the other moving averages followed. The short-term trend remains lower. The contract continues to track the post-bull market year of 2013 which with adequate 2023 seedings and trend-line yields would point to continued lower values from here. The contract is looking for a boost.
March soybeans are struggling in the 1531 area, but the trend remains up. Target the January high, 1549 to advance sales. The contract high, 1572 is still in play but we mush get a close above 1549 in order to advance. Support on the daily chart is 1517, 1513. Weekly chart support is 1490. Extensions on close above 1572 are shown in the chart below but are not in play today.
November soybeans formed a double bottom at 1330 on January 25th which followed a low near there way back on October 19th so 1330 becomes a significant support value. To date the contract has only retraced about 40% of its high to low move from the December 30th high at 1429. That with the current rally indicates the 50% Fibonacci retracement value at 1379 should be your next sales target. After 1379, 1391 is the target. The moving average indicators remain in bearish mode but are turning higher. The 50% value at 1379 becomes the most important number going forward. If the contract can overcome that number, then higher values would be in play.
March wheat found support at 727 and has over come its 10 and 20-day moving averages to form a weak bullish signal. Weak because of how close those moving averages are. The contract closed above its 50-day moving average yesterday for the first time since November 1st. Overnight, it continues to track just above that average which holds hope of attracting some managed money to help boost values. A close above 750 today will score the second weekly positive close which is helpful.
July wheat closed above its 50-day moving average, 771, yesterday and continues to trade there this morning. I will wait to see if values hold above the 50 day today and into Monday before offering upside targets, stay tuned.
Charts of the Day – January 31, 2023
Fertilizer Update – January 13, 2023
By: John Ezinga
Ready for 2023?
Here we go!
Let’s recap the past 6 months.
CF is the 800-pound gorilla….they influence 28% values the most….domestically speaking.
In July of 2022 they came out with a summer fill price right after they were rejected by the FTC for tariff protection. At first, I thought they would be upset by that but then quickly realized with the premium generated from the war in Ukraine they were more than happy to match world values and not have the stigma of raising prices into a tariff announcement. What they did over the next 45 days surprised me (they raised prices nearly $175 ton in 45-60 days) Normally they would have that kind of increase spread out over 8 months as to not encourage imports. Domestic nitrogen market apparently said we are going to “charge what the market will bear” July thru October because they knew the imports without tariffs would eventually head back towards the US and drive prices lower. Here we are in January, and we are unloading rail cars in Middleton from imported tons. And the market has nearly corrected down 125 of the 175 dollars increase from last summer. High prices cure high prices…..and in today’s world it happens fast! I think CF planned to export tons of UAN to offset the imports, but I think they were surprised by how fast the import tons showed up. Not to mention the Canadians have taken a stand against Russia and have a 30-35% tariff on all Russian fertilizers. So basically, the Canadians are pushing world tons to the US market.
CF went from raising prices every time I called to calling me looking for a bid. Farmers don’t like to catch knives and have decided to stay out of the way recently…..content to let N producers swing in the wind.
Don’t lose sleep for them though….the cost of production is still way off to the downside.
As you can see below the index is moving in your favor but only slightly. Yes, N prices are in a freefall, but 2023 Corn values are starting to slide and when you combine the two it generates the chart below…..28% is still over valued when compared to corn and especially when compared to UREA….which is updated below.
FREE TRADE IN ITS PUREST FORM (at least compared to other fertilizers….LOL)!!
As stated above….high prices cure high prices. We are seeing this play out in real time. Throw in a strong dollar and collapsing Natural gas prices and you get Urea 30 cents per pound cheaper than UAN and even under NH3!!
I read a book a while back about the US river system and how it is the most efficient logistics transportation system in the world. And as the river levels have started to normalize, we are seeing its world class value shine.
Again, Urea production has responded to high prices and is leading the N markets lower. Cost of production using 5 MMBTU is around $150/ton FOB NOLA. Add $150 to get it up here and you can see that Urea could be cut in half and just touch breakeven. I do not think this will happen, but it is good to look at tail risk on both sides of the price distribution curve.
Originally, I thought Urea would find support and work higher to get inline with 28%, but corn prices have started to fade and if they continue it looks like 28% will have to come down to match urea!
If corn prices battles with soybean prices as we head into spring urea could find support. If both fade lower as mentioned by MAC’s Ken Lake, then you should be prepared to buy the remainder of your inputs in spring at the spot price which will be lower.
Chart below shows urea as NEUTRAL currently.
I think this chart is spot on. We all know there is a premium for the Ukraine war. The question I have, is can it get worse than war? I suppose nuclear is always out there but highly improbable. That said, if peace breaks out, I think we take 10-20% out of all commodities……is your marketing plan prepared? There are two periods in past 20 years that we as farmers wish we would have sold 3 years forward…..2008 and 2012…is 2022 going to be another?
Work with your MAC merchant to put strategies together to protect future cash flows. I am not saying sell the farm…..but you will never go broke taking profit!
Well….straight from shortage to surplus…….When Mosaic’s mine flooded it added to the war story and high commodity prices. Now the table has turned, and they are looking for homes.
In July I was at the SW Fertilizer conference and the president of a major North American producer told me they had a forward book so solid that he needed ZERO demand from USA to make his budgets for the foreseeable future. I got a call from a rep of that same company this past fall asking what price it would take for MAC to buy some tons……LOL. You can always see the farthest at the top of the hill.
That said, I have been advocating a hold pattern for the past 8 months as prices have corrected lower. I do not really see anything on the potash front to make me a buyer other than time. We are getting close to a bottom for spring 23…although trend into 24 is still lower…..my opinion.
Phosphate has tariff protection and out of all other fertilizers it feels like this one might be starting to get snug. Price is drifting lower but not at same rate as potash and the nitrogen’s….buy hand to mouth on the dry and maybe get your starters booked.
30 pounds every crop every year is a bare minimum. Yield responses across the board have made sulfur the new must have.
We have ATS, Sul4rPlus, and AMS available for your needs.
New (not new) Ideas…..
I like to gauge the direction of fertility based on what farmers and agronomists tell me. For the past year or two I have had more than usual conversations about humic acid being used in dry and liquid forms. I raise this because a lot of guys go the field with relatively the same program their fathers did. I think a trend is forming where the agronomics are pointing to the benefits of buffering Nitrogen and Salts with a carbon form to protect and make plant availability increase.
I am not an agronomist, but I know a few, and when they all start singing the same tune, I pay attention. I have always said that the nitrogen and potash go in the big tanks and the phosphate and sulfur in the small ones……..I think humic acid is vying for a place at the table in every fertility program. Talk to your agronomist and if you need supply, MAC will have it in what ever form you demand.
The above charts are guides. Build soil levels in the green, maintain in the yellow, and if you can stomach it pull out of the soil bank in the red. (I have yet to meet a farmer who can stomach it.)