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Commodities Markets Report. Week 7 2023

Global weather review

• La Niña continues in the tropical Pacific, but oceanic indicators (sea surface temperatures, SSTs) have weakened since their peak during spring 2022. While ocean temperatures have eased from La Niña thresholds, the atmosphere has yet to respond, and remains La Niña-like.
• La Niña typically increases the chance of above-average rainfall for northern and eastern Australia during summer, hot and dry summer for Argentina and USA.
• All models anticipate SSTs in the central Pacific will return to neutral ENSO levels during February, with neutral conditions (neither La Niña nor El Niño) anticipated until at least mid-autumn. As accuracy is generally lower for long-range ENSO forecasts made during summer, ENSO outlooks that extend past autumn should be viewed with caution.
• The Indian Ocean Dipole (IOD) is neutral and has little influence on Australian climate while the monsoon trough is in the southern hemisphere (typically December to April).
• In India light rainfall is likely over Punjab and Haryana, other parts of India to be dry.
• In Brazil widespread showers maintained overall favorable summer crop prospects, despite local problems with dryness and excessive moisture.
• In Argentina warm, sunny weather fostered rapid growth of immature summer crops, after several weeks of beneficial rainfall.

Dollar Index

Commodities Index

Soybean meal: Buy

• This month’s 2022/23 U.S. soybean outlook is for lower soybean crush.
• Soybean crush is forecast at 2.23 billion bushels, down 15 million from last month on lower domestic soybean meal disappearance and a higher soybean meal extraction rate.
• US soybean ending stocks are forecast at 225 million bushels, up 15 million.
• Global 2022/23 soybean supply and demand forecasts include lower production, crush, and ending stocks.
• Global production is reduced 5.0 million tons to 383.0 million on lower crops for Argentina and Ukraine. Argentina’s crop is reduced 4.5 million tons to 41.0 million on lower area and dry weather conditions impacting yields. Ukraine’s crop is down 0.4 million tons on lower reported area harvested.
• Global oilseed crush is reduced 3.4 million tons mainly on lower crush for China, Pakistan, and Argentina.
• China’s crush is lowered on slower-than-expected pace to date. Pakistan’s crush is reduced on lower available supplies. Argentina’s crush is lowered leading to reduced soybean meal and oil shipments.
• Global soybean ending stocks are reduced 1.5 million tons to 102.0 million, with lower South American stocks partly offset by higher stocks for China.
• SA weather is favorable for the coming 1-2 weeks.

Soybean meal: Weather review

Following several weeks of beneficial rainfall, warm, sunny weather promoted growth of summer grains, oilseeds, and cotton in key farming areas of central and northeastern Argentina. Aside from a few pockets of light showers (5-25 mm, approaching 50 mm in spots), little to no rain fell from La Pampa and Buenos Aires northeastward. Heavier rain (10-50 mm) covered northwestern farming areas centered over Salta and northwestern Santiago del Estero, increasing moisture for later-planted summer crops, including cotton. Weekly average temperatures ranged from near normal to as much as 3°C above normal throughout the region, with daytime highs reaching the upper 30s (degrees C) in northern farming areas and in extreme southern districts in La Pampa and Buenos Aires. According to the government of Argentina, soybeans were 98 percent planted, as of February 2;

Locally heavy showers maintained generally favorable summer crop prospects, although a few locations are struggling with dryness or experiencing fieldwork delays from earlier periods of wetness. In southern Brazil, rainfall continued to be unseasonably light (less than 25 mm) in Rio Grande do Sul, where daytime highs locally reached 35°C. A wetter pattern continued elsewhere in southern Brazil, although a few pockets of dryness were recorded in Mato Grosso do Sul and Paraná. According to the government of Rio Grande do Sul, 99% of soybeans were planted, and 52 percent of that crop had reportedly flowered. In Paraná, 95% of soybeans, 1% of both crops had been harvested; Elsewhere, scattered, locally heavy showers (25-100 mm in most areas) overspread key soybean areas in the Center-West and northeastern interior farming areas (Mato Grosso northeastward), although pockets of dryness dominated eastern growing areas in and around western Bahia. Highest daytime temperatures reaching the lower and middle 30s (degrees C) fostered maturation of soybeans. The breaks in rainfall supported seasonal fieldwork, although activity continued to lag the usual pace due to earlier periods of wetness. According to the government of Mato Grosso, soybeans were 24 percent harvested as of February 3, lagging both last year’s pace (47 percent) and the 5-year average (32 percent);

Soybean meal: Price Chart

Cotton: Buy

• Cotton futures closed slightly lower on Thursday.
• World production is 330,000 bales lower than it was in December as lower production in India more than offsets gains in the United States and Brazil.
• Global S&Ds saw 1.03m bale production decrease from India.
• The global carryout at 850k bales tighter to 89.08 million.
• For the week ended 2nd Feb USDA’s FAS reported 262,788 RBs of old crop cotton sales that is +170k RBs from last week and from 185k y/y. China and Turkey were the top buyers. Weekly Exports were 210k RBs, leaving the accumulated total at 4.8 million. For new crop, USDA had 1.261 million on the books, a 30% lighter volume than this time last season.
• Pakistani cotton import forecast to 4.5m bales from 5 flat citing importer financing.

Cotton: Weather review

India was mostly dry, there is no weather associated threat as growing and harvest season is finalized in January.

In Texas cotton also remains out of any weather related threats as harvest season goes on from Sept-Dec.

Cotton: Price Chart

Special Market Situation

SMS - refers to a set of market indicators (COT data) that indicates major market turnarounds. For example, if market is oversold it is likely moving average will go up, if market is overbought downward movement is expected.

Special situation trade setups are selected based on 10+ years of trading experience, but there are no guarantees that any trade will prove profitable or will not produce a loss. A trade may require more than one entry attempt. You alone are responsible for your trading decisions. It is up to you to control the risk by using stop losses.

This special situation does not claim immediate practical application. Actionable buy and sell signals are published on our website charts every week.

You can get more information here.

Wheat

Commercial insiders hold their largest net long position in 2.5 years. Funds are holding their largest net short total in 3.6 years, tagging wheat as speculatively oversold.

Breakout of the monthly high to confirm the trend change.

Natural Gas

Commercial insiders hold their largest net long position in 2.8 years and funds hold their largest net short total in the same period, categorizing natural gas as speculatively oversold.

Euro FX

Commercial insiders hold their largest net short (most bearish) position in 2.0 years.

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