Crops Analysis | May 19, 2023
Price action: July corn futures fell 3/4 of a cent on the session to $5.54 1/2, while falling 31 3/4 cents on the week for the biggest weekly drop since July 2022.
5-day outlook: Corrective buying propped up prices in this morning’s trade, but sellers prevailed in the latter half of today’s session. While corn futures were oversold, the underlying bearish fundamentals remain in place and the path of least resistance remains lower. The psychological $5.00 mark supported December futures for the last few sessions, which will remain important support next week if bulls want to limit the downside. The path of least resistance remains lower, but oversold conditions could prove favorable for bulls into next week.
30-day outlook: As it gets closer to the May 25 crop insurance prevent plant date, acres in the Northern Plains will be watched more and more. As mentioned in this weeks Pro Farmer weekly newsletter, North Dakota’s late planting progress implies 500,000 to 1 million prevent plant acres this spring. While weather remains favorable for planting, progress is still at a snail’s pace due to remaining excessive moisture in the soil. While there will not be a concern similar to 2019, risk remains in how many of those acres do get planted.
90-day outlook: Nearly every spring faced with excessive selling, is met with a summer rally due to some sort of weather scare. This summer appears no different, but the question remains of how low corn prices will go in the meantime. Current weather models do not show risk of a 2012 esque drought, but the negative PDO preceding El Niño could still bring dryer than normal conditions over the Corn belt, most of which has already seen drier than normal conditions over the last couple years. Since the recently released USDA new crop balance sheet is unlikely to change demand estimates over the next couple months, corn prices will have to rely on a production scare to rally.
What to do: Get current with advised sales. Be prepared to make additional sales on a corrective price rebound.
Hedgers: You should be 75% sold in the cash market on 2022-crop. You should also be 25% forward sold on expected 2023-crop production for harvest delivery.
Cash-only marketers: You should be 75% sold on 2022-crop. You should also be 25% forward sold on expected 2023-crop production for harvest delivery.
Price action: July soybeans fell 26 cents to $13.07 1/4, losing 82 3/4 cents on the week. July meal fell $5.00 to $409.10, a $23.80 loss on the week, while July soyoil fell 2 points to 47.27 cents, a 225-point loss week over week.
5-day outlook: The soybean sell off seemingly stabilized, though meal pressure robbed overnight gains from the complex. Increasing U.S. supply prospects are continuing to weigh on the complex as planting efforts persist at a record pace. Also, waning global demand amid fresh South American supplies outpace already record projections nearly each month. Earlier in the week, Dr. Michael Cordonnier increased his estimates for the Brazilian soybean crop by 1 MMT, to 155 MMT, with good yields in northern Brazil apparently able to compensate for lower yields in far southern Brazil. Meanwhile, Conab increased its crop estimate to 154.8 MMT, via an increase in yield and acreage. The Argentine crop remains a bit of a mystery. Cordonnier has the crop pegged at 23 MMT, while the Rosario Grains Exchange lowered the estimate to 21.5 MMT and the USDA at 27 MMT. Nonetheless, in a more comfortably supply situation has eased market concerns in the interim, though many unknowns remain.
30-day outlook: Planting has gone exceptionally well with progress as of May 14 at 49%, up from 35% the week before and the five-year average of 36%. Plantings in Illinois were reported at 77%, while Iowa stood at 69% and Indiana at 52%, each notably ahead of their respective five-year average. However, notable laggards included North Dakota at 2%, compared to the five-year average of 15%, Minnesota at 30% planted (37% average) and Wisconsin at 24% (30% average), while Michigan was 33%, behind only 2 percentage points from average. It’s no question that weather in the northern Corn Belt will be crucial over the next several weeks as crop insurance planting deadlines creep closer. World Weather Inc. notes rain will increase in the west May 26-27, when many areas from eastern Kansas to the eastern Dakotas and Minnesota receive up to 0.75” and locally more with some heavier rain in the north.
90-day outlook: The state of the global economy and demand will continue to serve as major focal points over the longer term, amid a worldwide battle against inflation. USDA’s weekly export data provides consistent insight into the overall demand picture. As of late, and not by complete surprise, top soybean importer China has been looking to South America to fulfill its needs, though recent economic data has suggested China may not be consuming as much, despite the country’s abolition of its zero-Covid strategies. As of May 11, USDA reported net export old-crop sales of only 17,000 MT, with reductions from China during the week totaling 119,200 MT. However, net sales of new-crop soybeans totaled 663,800 MT, with unknown destinations (390,000 MT), China (187,000 MT) and Mexico (65,000 MT) top purchasers. Shipments of 189,100 MT for the week were also down 54% from the previous week and 60% from the four-week average. Primary destinations were Mexico, Egypt and the Philippines.
What to do: Get current with advised cash sales. Be prepared to advance sales.
Hedgers: You have 70% of 2022-crop sold in the cash market. No 2023-crop sales have been advised.
Cash-only marketers: You have 70% of 2022-crop sold. No 2023-crop sales have been advised.
Price action: July SRW wheat fell 6 3/4 cents to $6.05 and near the session low. Prices hit a more-than-two-year low today and for the week lost 30 cents. July HRW wheat dropped 32 3/4 cents to $8.24 1/4, hit a two-week low and for the week lost 52 3/4 cents. July spring wheat fell 24 1/2 cents to $8.04 and lost 42 cents on the week.
5-day outlook: Today’s technically bearish weekly low closes in the wheat markets are likely to prompt follow-through chart-based selling pressure early next week. This week’s surge in the U.S. dollar index to a seven-week high has made U.S. wheat even less competitive on the world trade markets. HRW wheat traders are brushing aside the poor condition of the HRW crop. The Wheat Quality Council’s annual wheat tour results showed this year’s crop is expected to be the smallest in more than 60 years. World Weather Inc. reported today that parts of Kansas, Colorado, Oklahoma and Texas received welcome rain Thursday and will have additional opportunities to receive rain periodically in the next week to ten days. Meantime, soft wheat development in the Midwest “is still looking very good with high yields likely,” said the forecaster. Spring wheat planting in both the northern Plains and Canada’s Prairies is advancing well, said the forecaster.
30-day outlook: Seasonal factors for wheat price action this time of year also lean bearish. The upcoming wheat harvest pressure suggests a drop well below $6.00 a bushel for SRW futures may be likely. It’s also very doubtful the nearby HRW wheat future can hold its present “8 handle.” North Dakota and Canadian spring wheat plantings are behind schedule with the U.S. insurance deadline on May 31 nearing. However, better planting in late May could see producers catching up fast.
90-day outlook: This week’s USDA export sales report was disappointing for U.S. wheat exports. The agency USDA reported net wheat sales reductions of 42,100 MT for 2022-23, a marketing-year low. Sales of 336,800 MT were reported for the 2023-24 marketing year. The total was at the low end of market expectations. With the U.S. dollar appreciating on the foreign exchange market, future weekly USDA wheat export numbers may continue to disappoint.
What to do: Get current with advised sales. Be prepared to advance sales on additional corrective gains.
Hedgers: You should be 95% sold in the cash market on 2022-crop. You should also be 40% forward sold for harvest delivery on expected 2023-crop production.
Cash-only marketers: You should be 95% sold on 2022-crop. You should also be 40% forward sold for harvest delivery on expected 2023-crop production.
Cotton
Price action: July cotton fell 1 point to 86.65 but gained 612 points on the week.
5-day outlook: Cotton futures bulls were the clear victor this week, despite pressure from outside markets and the grain and soy complexes amid continued risk-off sentiments. The bull camp’s handiwork boosted the natural fiber’s technical posture and ability to grab the highest intraday level since early February. However, the nearby July contract has entered overbought territory and could see a corrective pullback next week as a result. Solid support lies around the 83.00 area, where the 100- and 40-day moving average have nearly converged.
30-day outlook: USDA reported planting progress at 35% complete as of May 14, up from 22% the previous week, but behind the five-year average by one percentage point. Weather over the next several weeks will be crucial for final plantings and plant development. World Weather Inc. notes West Texas, southwestern Oklahoma and the Texas Panhandle will see isolated to scattered showers most days through the next two weeks slowing planting progress while improving conditions for plant establishment. The forecaster indicates showers will occur into this weekend in the Blacklands and parts of the Coastal Bend and south Texas where the moisture will help to maintain favorable soil conditions before a drier weather pattern occurs Monday through June 2, allowing for fieldwork to quickly increase. Meanwhile, cotton areas in the Delta remain plenty moist while recent drying in part of the southeastern states has been welcome and beneficial.
90-day outlook: This week’s run higher has been largely attributed to increased demand prospects, evidenced by USDA’s weekly export sales data. Traders will maintain a keen eye on the weekly data as the marketing year progresses in order to gauge the global economy. In the week ended May 11, USDA reported old-crop net sales of 132,400 RB, which were down 46% from the previous week and 28% from the four-week average. Top purchasers included China, Vietnam and Pakistan. Net new-crop sales for the week totaled 28,100 RB to Bangladesh, South Korea and Turkey. Shipments were steady at 332,700 RB, which was unchanged from the previous, but down 7% from the four-week average.
What to do: Get current with advised sales. Be prepared to advance sales on a test of the winter highs.
Hedgers: You should be 90% sold in the cash market on 2022-crop. You should be 40% forward-priced on expected 2023-crop production for harvest delivery.
Cash-only marketers: You should be 90% sold on 2022-crop. You should be 40% forward-priced on expected 2023-crop production for harvest delivery.
