Crops Analysis | May 24, 2023
Price action: July corn rose 9 3/4 cents to $5.87 1/4, closing near the session high and above the 20-day moving average.
Fundamental analysis: Corn futures were able to extend higher for the third straight session, with nearby futures encountering the strongest gains. The strength came despite continued U.S. dollar strength, which touched the highest level since mid-March in late-morning trade. Recent hawkish comments have pushed the dollar higher, with a weakness in stocks boosting the liquidity demand for the greenback. However, ongoing uncertainties surrounding the U.S. debt ceiling curbed upside momentum.
The Midwest will see much more sunshine than rain during the next two weeks, allowing plantings to soon be completed in much of the region, notes World Weather Inc. The forecaster states much of the region will dry down significantly leaving many areas in need of greater rain in early June to keep soil conditions favorable.
Ethanol production in week ended May 19 averaged 983,000 barrels per day (bpd), a 4,000 bpd decrease from the previous week and 3.1% below the corresponding week last year. Ethanol stocks fell another 1.5 million barrels to 22.041 million barrels, the lowest since the week ended No. 11, 2022. Ethanol stocks are 1.671 million barrels (7.0%) below year-ago.
USDA will report its weekly export sales data for week ended May 18 early Thursday morning. Traders are expecting old-crop sales ranging from net reductions of 500,000 MT to 400,000 MT and 0 to 300,000 MT for new-crop. Last week, old-crop net-reductions of 338,974 MT and new crop sales of 73,998 MT were reported for the week prior.
Technical Analysis: July corn was able to pull off a close above the 20-day moving average of $5.81 1/4 along with resistance at $5.84 1/4, as bears give up a bit more technical traction, though the camp still holds the near-term advantage. A push higher, however, will continue to face resistance at $5.90 3/4, and at $6.00 3/4. A push above these levels will likely find bulls grasping the advantage, with efforts then working toward the 40-day moving average of $6.04 and then the 100-day moving average of $6.28 3/4. Conversely, support will now lie at the 20-day moving average, as well as the 10-day of $5.74 3/4. From there $5.67 1/4, $5.57 1/4 and $5.50 1/2 will provide additional support.
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 rose 2 cents to $13.24 1/2 and nearer the session low. July soybean meal lost $4.20 at $402.20 and closed nearer the session low. July bean oil gained 24 points to 48.00 cents and settled near mid-range.
Fundamental analysis: It appears the soybean market today was caught in the middle of solid gains in corn and solid losses in wheat. An appreciating U.S. dollar index that today hit a two-month high also limited buying interest in soybeans to just tepid short covering.
Weather in the U.S. Corn Belt also leans bearish at present. World Weather Inc. today said weather in the U.S. is still largely favorable for aggressive fieldwork this week. “There will be need for rain in June, but the current dry and warm bias will be exactly that which is needed to get crops planted as quickly as possible.”
There are renewed concerns about demand for soybeans from major importer China. A report said China is facing a new wave of Covid-19 infections and could see as many as 65 million cases per week by the end of June.
Thursday morning’s weekly USDA export sales report is expected to show U.S. soybean sales in the 2022-23 marketing year of -50,000 to 300,000 MT, and sales of 100,000 to 675,000 MT in the 2023-24 marketing year.
Technical Analysis: The soybean bears have the solid overall near-term technical advantage. Prices are in a four-week-old downtrend on the daily bar chart. A bearish pennant pattern has formed on the daily bar chart. The next near-term upside technical objective for the soybean bulls is closing July prices above solid resistance at $14.00. The next downside price objective for the bears is closing prices below solid technical support at $13.00. First resistance is seen at this week’s high of $13.44 1/4 and then at $13.65 1/4. First support is seen at the May low of $13.04 3/4 and then at $13.00.
The soybean meal bears have the firm overall near-term technical advantage. Prices are in a four-week-old downtrend on the daily bar chart. The next upside price objective for the meal bulls is to produce a close in July futures above solid technical resistance at $430.00. The next downside price objective for the bears is closing prices below solid technical support at $388.00. First resistance comes in at today’s high of $410.60 and then at this week’s high of $416.90. First support is seen at $400.00 and then at $395.00.
Soybean oil bears have the solid overall near-term technical advantage. Prices are in a 4.5-month-old downtrend on the daily bar chart. The next upside price objective for the bean oil bulls is closing July prices above solid technical resistance at 53.00 cents. Bean oil bears' next downside technical price objective is closing prices below solid technical support at 42.50 cents. First resistance is seen at this week’s high of 49.08 cents and then at 50.00 cents. First support is seen at this week’s low of 46.65 cents and then at the May low of 45.75 cents.
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.
Advice: With the 2022-23 marketing year winding down, we advise wheat hedgers and cash-only marketers to sell the final 5% to get to 100% sold.
Price action: July SRW futures fell 16 cents before settling at $6.06 1/4. July HRW futures settled 29 1/4 cents lower at $8.12 1/4, near the session low. Spring wheat futures fell 21 3/4 cents to $7.99 and settled near the session low.
Fundamental analysis: Wheat futures continue to fall under pressure despite strength in corn and soy markets. Wheat generally struggles to rally throughout the spring and summer as harvest takes place and grain is continuously sold, but extended weakness in the face of outside market strength is evidence of how bearish the outlook is for the grain. The Illinois Wheat Association conducted a survey of the state’s crop and found soft red wheat yields at 97.12 bu/acre vs the USDA estimate of 78 bu. The current state record is 79bu/acre. While Illinois is not a major wheat producer, seeing estimates come in well ahead of estimates was certainly not bullish for the market.
Weather remains favorable for the next couple weeks in key HRW regions, although the top end of yield is already lost. World Weather Inc reports that frequent rain over the next couple weeks will improve soil moisture and noticeably reduce drought. Rain will be most beneficial in central and northern production areas.
USDA is set to release export sales for the week ended May 18 tomorrow morning, with analysts expecting -75,000 to 100,000 MT for 2022/23 and 200,000 to 500,000 MT for 2023/24. Last week export sales were -42,136 MT and 336,761, respectively. The marketing year is winding down and there is still more work to do to hit the current USDA estimate for exports.
Technical Analysis: July SRW futures fell back near $6.00 support after rejecting off 10-day moving average resistance at $6.19 1/2. Bulls were unable to follow through and a new move-low is likely in store. The psychological $6.00 level will act as support, quickly followed by Tuesday’s move-low at $5.94 1/4. Further weakness will look for support at $5.75. Bulls want to retrace today’s weakness and overcome initial resistance at the 10-day moving average at $6.19 1/2, followed by the May 11 low at $6.25 1/2. Bulls ultimately want to force a higher high above the May 16 high at $6.64 1/4.
July HRW futures were the weakest of the bunch today, although Monday’s low has been defended thus far. Price has remained more volatile than SRW and HRS contracts. Support remains at Monday’s low of $8.07 1/4 and is quickly backed by the psychological $8.00 level. Further weakness accelerates selling towards $7.50 support. Bulls are targeting initial resistance at $8.35 1/4, the 40-day moving average, backed by yesterday’s high at $8.49 1/2. $8.75 has capped most of the upside since December and will remain key resistance that bulls want to overcome to signal a counter-seasonal rally.
What to do: Get current with advised sales.
Hedgers: NEW ADVICE -- Sell the final 5% of 2022-crop to get to 100% sold in the cash market. You should be 40% forward sold for harvest delivery on expected 2023-crop production.
Cash-only marketers: NEW ADVICE -- Sell the final 5% of 2022-crop to get to 100% sold. You should be 40% forward sold for harvest delivery on expected 2023-crop production.
Cotton
Price action: July cotton fell 263 points to 81.72 cents and nearer the session low.
Fundamental analysis: The cotton market was hit hard by strong follow-through technical selling at mid-week. July futures have lost almost 5 cents so far this week. A stronger U.S. dollar index that hit a two-month high today was also a bearish outside market for cotton, as was a selloff in the U.S. stock market.
Reports that Covid-19 is surging in China again also raises concerns regarding dwindling Chinese demand for the natural fiber.
Weather in U.S. cotton country leans bearish for prices. World Weather Inc. today reported west Texas rainfall will increase the remainder of this week, favoring improved planting and emergence. U.S. Delta and southeastern states weather will also be favorable over the next two weeks, was well as in the southwestern U.S., said the forecaster.
Weekly USDA export sales on Thursday morning will be closely scrutinized by cotton traders. Last week’s numbers a bit disappointing.
Technical Analysis: Cotton bulls have lost their overall near-term technical advantage. An uptrend on the daily bar chart is in jeopardy. The next upside price objective for the cotton bulls is to produce a close in July futures above technical resistance at 86.00 cents. The next downside price objective for the cotton bears is to close prices below solid technical support at 78.00 cents. First resistance is seen at 83.00 cents and then at today’s high of 84.40 cents. First support is seen at today’s low of 81.40 cents and then at 80.00 cents.
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.
