Crops Analysis | June 8, 2023
Price action: July corn futures traded in an 18-cent range before settling 6 cents higher at $6.10 1/4. December corn futures rose 2 1/4 cents higher at $5.33.
Fundamental analysis: Corn futures saw a fair bit of volatility today, continuing this week’s norm as weather forecasts continue to drive the market. There was significant positioning taking place today, both due to the upcoming report and funds rolling positions from July. Tomorrow’s WASDE is likely going to continue that volatility, with analysts largely expecting USDA to leave corn yield unchanged, although some believe the USDA will cut production, leading to an overall yield estimate of 181.3 bushels per acre. Pre-report estimates suggest ending stocks for 2022-23 will be reported around 1,452 million bushels (1,417 in May) while 2023-24 stocks are expected to rise to 2,237 million bushels (2,222 in May). World ending stocks for 2023-24 are expected to remain unchanged from May at 312.9 MMT. Analysts continue to cut the Argentine corn production estimate for 2022-23, coming in at an average 35.6 MMT from 37 MMT in May. Meanwhile, Brazilian production analyst’s estimates rose to 131 MMT from 130 MMT reported in May.
New crop corn prices were pressured by forecasted rain for the Midwest, expected to start in the west this weekend and advance to the east next week. World Weather Inc warned the forecast is not likely to verify due to the Gulf of Mexico still being closed off as a moisture source for the corn belt. The market seemed to share that opinion as prices turned around in the latter half of the session to close green. Even though rain is forecast, current projections would not lead to a full restoration of soil moisture. The potential rain would help conditions over the next two weeks, but more rain is needed to restore soil conditions.
This morning, the USDA reported net corn sales of 172,700 MT for 2022-23 for week ended June 1, which were down 8% from the previous week but up notably from the four-week average. Net sales reductions of 106,800 MT were reported for 2023-24. Traders expected sales within a range of (100,000) to 600,000 MT for 2022-23 and 100,000 to 400,000 MT for 2023-24. Recent cancellations and overall export destruction has led us to believe that the USDA will lower their export forecast tomorrow, thus expanding the balance sheet for the current and next marketing year in tomorrow’s Supply and Demand report.
Technical analysis: July corn futures posted gains on the day, but remained within Monday’s range, as it has all week. The market appears to be waiting for tomorrow’s report, which will likely be a sufficient catalyst to break out of the current range. Bulls need a daily close above Monday’s high of $6.14 to confirm a continuation of the bullish trend. A daily close below Monday’s low of $5.95 would indicate a potential reversal and a retest of at least last week’s low at $5.77 1/2. To give an idea of how important these levels are, yesterday’s high and today’s high of $6.12 1/2 and $6.13 1/4 came within a couple cents of the high and today’s low was just 1/4 cent higher than Monday’s low. A rally above $6.14 would find resistance at $6.20 before a test of the 200-day moving average at $6.29. A break below $5.95 would have bears targeting $5.80, the last major support level before $5.50.
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 1/2 cents to $13.63 1/4, near mid-range, while July meal fell $1.20 to $404.00. July soyoil achieved a 203-point gain to 52.50 cents, the highest close since May 9.
Fundamental analysis: Soybeans extended mildly higher for the third straight session amid looming concerns over Midwest weather along with a weaker U.S. dollar and slightly stronger export sales data. The dollar fell under additional pressure following initial unemployment data which showed claims at a 19-month high, bolstering expectations for the Fed to pause rate hikes this month. USDA’s export sales data also provided a bit of boost, with net sales totaling 207,200 MT for week ended June 1. Sales for the week were up 68% from the previous week and noticeably from the four-week average. Japan, Germany and Egypt were top old-crop purchasers. New-crop sales of 264,600 MT were also reported. Traders expected net sales to range from (100,000) to 300,000 MT for old-crop and 50,000 to 400,000 MT for new-crop. However, meal sales, which have recently proven notable, were reported at 177,600 MT, a 56% decrease from the previous week and 42% from the four-week average.
While June weather has a much milder effect on soybeans, traders continue to focus closely on weather data as dryness continues throughout the Midwest. Regardless, a more generalized rain is needed to seriously improve soil moisture and long-term crop development potential, notes World Weather Inc, with rain expected over the next ten days likely sufficient in helping some crops develop more favorably, but not enough to fully restore soil moisture to normal.
USDA will release monthly supply and demand estimates tomorrow at 11 a.m. C.T., with analysts expecting higher U.S. ending stocks for both old and new crops, while global carryover is expected to be slightly lower, according to a Reuters poll.
Technical analysis: July soybeans were able to test initial resistance at $13.71 for the first time since mid-May after Wednesday’s attempt at the level fell short. However, the area will continue to serve as initial resistance as a close was held below the level. In the event of success above the area, resistance will then be encountered at $13.81 1/4, then at the 40-day moving average of $13.91 1/2 with little resistance from there to the 100-day moving average of $14.50 1/4. Conversely, initial support continues to serve at $13.50 1/4, then at the 20- and 10-day moving averages of $13.44 1/2 and $13.36 1/2. A turn below these areas will find bears capturing the full technical advantage, with sights set on a breach of $13.29 1/2, then $13.00 and the May 31 low of $12.70 3/4.
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 9 1/2 cents at $6.26 1/4. July HRW wheat gained 16 3/4 cents to $8.04 3/4. Both markets closed nearer their session highs. July spring wheat rose 21 3/4 cents to $8.15 3/4.
Fundamental analysis: The wheat futures markets today were boosted by rising concerns in the aftermath of flooding in Ukraine following the destruction of the Kakhovka dam. Ukraine could lose several million tons of crops due to the flooding in the south of the country, according to the Ukrainian agriculture ministry. A sharply lower U.S. dollar index today also supported buying interest in wheat futures.
World Weather Inc. today reported net drying is likely in much of the Texas Panhandle in the next seven days, which is “a needed change” due to excessive topsoil moisture and concerns of quality decline in winter wheat. In the northern Plains spring wheat country, the forecaster said rainfall in the next seven days will be greatest in western production areas of Montana, where it may be too much with fieldwork delays and a potential for some flooding. Some greater rain would be beneficial in the Dakotas and Minnesota though.
USDA this morning reported U.S. wheat export sales of 234,800 MT, for the 2023-24 marketing-year that began June 1. That was at the low end of trade expectations. There were undelivered sales of 877,400 MT carried over from 2022-23 to the new-crop marketing year.
Wheat traders are awaiting Friday morning’s June USDA supply and demand report. The agency is expected to show an all U.S. wheat production figure of 1.666 billion bushels, compared to 1.659 billion bushels estimated in the May report.
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 fell 70 points to 84.31 cents. December cotton rose 40 points to 81.63 cents.
Fundamental analysis: Nearby cotton inched higher overnight with solid export sales data sending the natural fiber skyrocketing, though strength was short-lived as a large drop in crude oil futures prompted a retreat. However, notable weakness in the U.S. dollar put some life back into futures in the wake of news U.S. weekly jobless claims surged last week, which strengthened expectations that the Federal Reserve will pause its recent string of interest rate hikes. However, the U.S. consumer inflation report for May, set for release on June 13, will likely provide a bit more insight into the health of the U.S. economy, which will coincide with the next Fed FOMC meeting June 13-14.
World Weather Inc. notes a drier weather pattern will occur during the next two weeks in West Texas, southwestern Oklahoma and the Texas Panhandle, allowing planting to accelerate while the drying will come too late for some fields to be planted. The forecaster reports dry weather will be most common during the next two weeks in the Blacklands, Coastal Bend and south Texas with soil moisture in place adequate to support most cotton development while the region dries down. World Weather Inc. also made note of a potential tropical cyclone in the Gulf of Mexico near June 19, with computer models suggesting a wide variety of forecasts from recent model runs for track and intensity of the storm. The forecaster further noted the potential cyclone is too far out in time to place much confidence in any computer forecast model run, though a close watch will remain on the forecast.
Technical analysis: July cotton traded a wide 270-point range with tests of resistance at 85.65 and 86.30 cents ultimately failing, though support at 84.21 cents continued to hold its ground. However, momentum below the level will then find additional support at the 20-day moving average of 84.02 cents, again at 83.42 and then at the 100- and 40-day moving averages of 83.28 and 82.72 cents. Meanwhile, resistance will continue at the formerly mentioned levels, then at 87.09 cents and the May 19 high of 87.98 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.
