Crops Analysis | June 6, 2023
Price action: July corn futures closed up 10 1/2 cents at $6.08, near the session high and at a five-week high close.
Fundamental analysis: Short covering and technical buying from the speculators were featured today after the corn market got a bullish surprise with Monday afternoon’s weekly USDA crop progress reports. The agency surprisingly rated 64% of the U.S. corn crop “good” to “excellent,” down five points from the previous week and three points lower than market expectations. Ratings dropped in each of the top five corn production states. The last weekly drop that large in corn condition ratings, for this time of year, occurred in 2001.
Weather in the Corn Belt also leans bullish for prices. There are significantly dry pockets in the region that need rain. World Weather Inc. today reported “a close watch will be made on nearly widespread rain expected Friday through Sunday and follow-up showers in much of the Midwest Monday through Thursday of next week.” If these rain events occur as advertised, enough rain should fall to prevent crop stress of significance during the next two weeks, said the forecaster.
Technical analysis: The corn futures bulls and bears are on a level overall near-term technical playing field. Recent gains suggest a market bottom is in place and prices are in a fledgling uptrend on the daily bar chart. The next upside price objective for the bulls is to close July prices above solid chart resistance at $6.25. The next downside target for the bears is closing prices below chart support at the May low of $5.47. First resistance is seen at this week’s high of $6.14 and then at $6.20. First support is at $6.00 and then at this week’s low of $5.95.
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 3 1/4 cents to $13.53 1/4, closing above the 20-day moving average. November soybeans rose a nickel to $11.84 3/4. July meal dropped $4.50 to $396.70, notching a low-range close, while July soyoil climbed 166 points to 50.92 cents, the highest close since May 11.
Fundamental analysis: Soybeans attempted to extend farther above last week’s low following the government’s weaker-than-expected initial crop rating and an old-crop daily export sale of 165,000 MT to Spain. As of Sunday, USDA estimated 91% of the soybean crop was planted compared to the five-year average of 76%, with emergence projected at 74% versus the average of 56%. However, the crops first condition rating came in 3 percentage points lower than expected at 62% “good” to “excellent.” When USDA’s weekly condition ratings are plugged into the weighted Pro Farmer Crop Condition Index (CCI: 0 to 500-point scale, with 500 being perfect), the soybean crop started out 13.1 points below last year at 357.8. However, last year’s ratings began a week later.
Today’s forecast is wetter for eastern Kansas to Michigan and Ohio Friday through Monday, and some areas, especially in the east, will receive enough rain to induce significant increases in soil moisture, notes World Weather, which could result in improved ratings next week. Crop Consultant Dr. Michael Cordonnier kept his soybean yield and production forecasts unchanged at 52 bu. per acre and 4.53 billion bu., respectively, noting dry conditions in June do not necessarily translate to lower yields if weather turns more favorable later in the growing season.
Technical analysis: July soybeans carved a 23 3/4-cent range and ended the session largely sideways but above the 20-day moving average of $13.49 1/4. The area will serve as initial support along with $13.41 3/4, then $13.33 1/2 and the 10-day moving average of $13.28 3/4. From there, the next area of significant support will lie around $13.00, then at the May 31 low of $12.70 3/4. Conversely, resistance at $13.59 3/4 was tested today for the second straight session, indicating bulls are set on working above the level, with success then leading to a battle at $13.69 1/2 and again at $13.77 3/4. The 40-day moving average of $13.96 3/4 and 100-day of $14.53 1/4 will serve as resistance in the event of success above the aforementioned areas.
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 rose 3 3/4 cents to $6.27 3/4. Prices closed nearer the session low after hitting a three-week high early on. July HRW wheat fell 2 cents to $8.20 ¼, near mid-range. Spring wheat futures fell 3 3/4 cents to $8.16 1/2.
Fundamental analysis: Wheat futures prices surged overnight on news Ukraine’s Nova Kakhovka dam was damaged in a blast, which resulted in flooding and likely reduced water supplies for crops downstream in southern Ukraine. However, wheat prices backed down from the overnight highs in a typical market overreaction to a surprise event. Still, the attack on the dam escalates the Russia-Ukraine war and makes the present Ukraine grain-shipping deal with Russia even more flimsy.
Limiting selling interest in wheat futures today was news Australia’s wheat production is forecast to plunge 34% to 26.2 MMT after record production in 2022-23, according to the according to the Australian Bureau of Agricultural and Resource Economic Sciences (ABARES).
World Weather Inc. today reported conditions in the U.S. winter and spring wheat regions next seven days will be mostly favorable. Some pockets of the HRW region will still be too wet with more concern over wheat quality. However, many areas are likely to receive a favorable amount of rain. In the northern Plains, needed rainfall will occur in eastern areas where topsoil moisture has recently declined. Southwestern production areas of Montana may become too wet. Some more rain may be needed next week in the western Dakotas and eastern Montana, said the forecaster.
Technical analysis: Winter wheat futures bears still have the overall near-term technical advantage. SRW bulls' next upside price objective is closing July prices above solid chart resistance at the May high of $6.69. The bears' next downside objective is closing prices below solid technical support at the May low of $5.73 1/4. First resistance is seen at today’s high of $6.48 and then at $6.69. First support is seen at this week’s low of $6.15 1/2 and then at $6.00. The HRW bulls' next upside price objective is closing July prices above solid technical resistance at $9.00. The bears' next downside objective is closing prices below solid technical support at last week’s low of $7.63 3/4. First resistance is seen at $8.35 and then at today’s high of $8.47 1/4. First support is seen at today’s low of $8.05 1/2 and then at $8.00.
What to do: Get current with advised sales.
Hedgers: You should be 100% sold in the cash market on 2022-crop. You should be 40% forward sold for harvest delivery on expected 2023-crop production.
Cash-only marketers: You should be 100% sold on 2022-crop. You should be 40% forward sold for harvest delivery on expected 2023-crop production.
Cotton
Price action: July cotton rose 55 points to 85.34 cents, nearer the session high.
Fundamental analysis: Taking direction from grains, cotton was able to mark modest gains despite outside market pressure. A lagging planting pace versus the five-year average was likely instrumental in underpinning gains. As of Sunday, the government estimated 71% of the crop was planted, still behind the average of 75% and indicating 3.277 million acres were left to plant, according to USDA’s March projection of 11.3 million acres. Individual states behind their respective average pace include Kansas 69% (79% average), Texas 60% (vs. 69% average), South Carolina 81% (88% average), North Carolina 81% (85% average) and Alabama 90% (91% average).
World Weather notes a large part of West Texas, southwestern Oklahoma and the Texas Panhandle will receive additional rain through Wednesday and some additional flooding may occur in the Panhandle where rain will be greatest. Shower activity is expected to diminish through June 20 and planting will steadily increase, but some fields are not likely to dry out in time for cotton to be planted, according to the forecaster. Dry weather will be most common during the next two weeks in the Blacklands, Coastal Bend and south Texas with soil moisture adequate to support most cotton development while the region dries down.
Technical analysis: July cotton held an inside day, spending the session trading mostly within Monday’s lower range, indicating the natural fiber is patiently waiting for the next catalyst. An additional test of resistance at 86.03 cents will then find increased momentum towards resistance at 87.28 and 88.10 cents. However, a push to the downside will find continue to find initial support at 83.96 cents, then at the 20- and 100-day moving averages of 83.64 and 83.24 cents, respectively. A turn below these levels will then encounter support at 83.14 cents and the 40-day moving average of 82.61 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 100% priced on 2022-crop in the cash market. You should be 50% forward-priced on 2023-crop for harvest delivery.
Cash-only marketers: You should be 100% priced on 2022-crop. You should be 50% forward-priced on 2023-crop for harvest delivery.
