Crops Analysis | June 12, 2023
Price action: July corn rose 13 cents to $6.17 1/4 after trading at the highest level since April 21. December corn rose 18 3/4 cents to $5.49 1/4, near the session high, notching a six-week high close.
Fundamental analysis: Corn gapped up in the overnight open, with the momentum stemming mostly from questionable Midwest weather in the coming days. Some concern may also be surfacing as Brazil’s safrinha harvest was 2.2% completed as of last Thursday, which lags last year’s pace of 6.6% by the same date, according to AgRural. The firm reported the safrinha crop is developing favorably, but a cooldown is expected in the second half of the month, which will be closely monitored. USDA’s weekly export inspection data also proved steady with 1.169 MMT (46.0 million bu.) reported for week ended June 8, while inspections were down 37,674 MT from the previous week, they were near the top-end of the pre-report range from 750,000 MT to 1.3 MMT.
World Weather Inc. notes western U.S. Midwest corn and soybean production areas will be dry this week, resulting in greater crop stress for parts of Iowa, Illinois and the upper Midwest that missed rain during the weekend and were already dry late last week. The forecaster notes yield losses are possible next week if significant rain fails to evolve this weekend and temperatures turn warmer than expected next week.
USDA will update crop conditions following the close, according to a Reuters poll, analysts anticipate a 2-percentage point drop in conditions to 62%, which would trail last year’s rating by 10 percentage points.
Technical analysis: July corn gapped 4 3/4 cents higher overnight and extended above resistance at $6.09 1/2 and $6.15, a move which handed bulls a bit more technical leverage. An extended follow-through tomorrow will continue to face resistance around $6.22, where the technically significant 100-day moving average stands, though success above the area will likely see in increase in buying efforts. However, if turnaround Tuesday trade takes over, support will be seen at today’s failed resistance levels, then at the 10-day moving average of $6.03, again at $5.98, $5.92 and the 20-day moving average of $5.90 1/4.
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 13 3/4 cents to $13.72 3/4, despite November futures rising 4 3/4 cents to $12.09, a three-week high. July soybean meal futures rose 20 cents after trading in a volatile range, ending the day at $397.4. July soyoil closed 61 points lower at 53.98 cents after failing to overcome technical resistance.
Fundamental analysis: Old crop soybeans fell under pressure today as price succumbed to technical resistance and the ongoing demand destruction, while new crop futures shared spillover strength from corn caused by ongoing dryness across the corn belt. Export inspections came in lower than expected this morning at 140,197 MT (5.2 million bu.), below expectations ranging from 175,000 to 400,000 MT. Through the three remaining months of the crop year, exports are barely expected to exceed the current amount of outstanding sales, pointing to inspections remaining weak until the end of the crop year. We expect further revisions lower by the USDA to old crop export forecasts in the next couple months.
Frost was seen across the upper Midwest this morning, very abnormal for this time of year. The very low humidity present over the region is causing wild swings in temperatures, according to World Weather Inc. These rapid swings in temperature are expected to continue until moisture flows into the region, bringing the humidity higher. The frost itself is unlikely to have a substantial production impact but is more a testament of just how dry it has become in parts of the Midwest. The forecaster says the Gulf of Mexico is still closed as a moisture source for the region and the longer this remains to be the case “the more unlikely significant rain will be to fall”.
USDA releases their weekly crop progress report this afternoon with analysts expecting soybean crop conditions to fall two points to 60% good to excellent according to a Bloomberg survey, the lowest reading for the second week of June since 2012 (2019 did not report conditions until the last week of June). Plantings are expected to be 95% completed.
Technical analysis: July soybeans saw sustained selling pressure and fell back below the 40-day moving average. Bulls maintain the technical advantage with today’s session being just the second down day in the past nine sessions. Price rejected off the May 12 low of $13.88 1/2 which will remain stiff resistance and a key spot for bulls to overcome for sustained upside. Additional resistance stands at the 40-day moving average at $13.81. Bulls are looking to defend initial support at the June 8 close of $13.63 1/4, quickly backed by the converging 20- and 10-day moving averages at $13.59 and $13.57 1/4, respectively. Additional selling would encounter stiff support at the late-May resistance zone at $13.40, now turned support.
July soymeal rose 20 cents to $397.40 after trading in a volatile $8.30 range. Price is teetering on the lower end of the recent uptrend stemming from the May 30 close, any additional weakness will have bears targeting the May 31 low at $386.30, with very little support in the interim. A bounce tomorrow would confirm support at today’s close and target the upper end of the recent range at $408.00 with resistance on the way at the 20-day moving average, currently at $406.20. Price has maintained a tight range for the last two-week, key support and resistance levels are converging and point to a move sooner than later.
July soyoil futures tested and failed against the 100-day moving average. Price rallied over 10 cents in eight days, so some profit taking is to be expected. First resistance stands at the 100-day moving average at 54.56 cents, with very little resistance until the April 18 high of 56.21 cents. Bulls are looking to defend support at Friday’s low at 52.20 cents, backed by the converged 10- and 40-day moving averages at 51.25 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.
Price action: July SRW futures rose 3 1/2 cents to settle at $6.33 3/4, the highest close since May 16, while December SRW wheat rose 4 1/2 cents at $6.62 1/2, nearer the session high. July HRW wheat fell 1 1/4 cents at $7.96 1/2 and near mid-range. July spring wheat futures rose 2 1/2 cents to $8.14 1/4.
Fundamental analysis: SRW wheat futures saw short covering and buying interest from sharp gains in corn futures today, while the HRW futures market languished. Russia has been sending strong indications the Russia-Ukraine Black Sea grain-shipping deal is likely not to be extended beyond its mid-July expiration, which has been price supportive.
World Weather Inc. today reported the northern Plains and southeastern Canada Prairies will experience restricted rainfall over the next ten days, resulting in some net drying. “Fieldwork will advance well, but timely rain will be needed to ease developing dryness. No drought busting rain is expected, but enough relief should occur to revitalize crops that have been withering in recent days and weeks.” The forecaster said hard red winter wheat production areas will experience a good mix of rain and sunshine during the next ten days.
USDA reported disappointing U.S. wheat export inspections of 246,559 MT, which were down 57,841 MT from the previous week and just above the pre-report range of 200,000 and 425,000 MT.
The weekly USDA crop progress reports out this afternoon are expected to show U.S. spring wheat at 97% planted versus 93% last week and 94% at this time last year. The spring wheat condition is seen rated at 64% good to excellent, unchanged from last week and compares to 54% in the same condition last year at this time. Winter wheat condition is expected to be at 36% good to excellent as of Sunday, compared to 36% last week and 31% last year at this time. Winter wheat harvested is expected at 10% complete—the same as last year at this time. These figures came from a Bloomberg survey of analysts.
Technical analysis: Winter wheat futures bears still have the firm overall near-term technical advantage. SRW bulls' next upside price objective is closing July prices above solid chart resistance at $7.00. 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 $6.38 3/4 and then at $6.62. First support is seen at $6.25 and then at $6.10. The HRW bulls' next upside price objective is closing July prices above solid technical resistance at $8.40. The bears' next downside objective is closing prices below solid technical support at the May low of $7.36 1/4. First resistance is seen at $8.00 and then at $8.15. First support is seen at today’s low of $7.86 1/2 and then at $7.70.
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 55 points to 83.49 cents, the lowest close since May 31.
Fundamental analysis: Nearby cotton extended lower for the fourth straight session amid a heavy selloff in crude oil futures as investors become anxious ahead of release of key inflation data and the Federal Reserve’s decision on interest rates later this week. While the expectation is for rates to remain unchanged this month, many investors are concerned the Fed will resume rate hikes next month.
World Weather Inc. reports rain fell through much of the Panhandle, parts of southwestern Oklahoma and a few northern locations in West Texas, extending planting delays while a large part of the Blacklands also received rain. The forecaster notes additional rain will fall into Wednesday in much of southwestern Oklahoma, the Texas Panhandle and northern and eastern parts of West Texas causing further delays in planting that will likely prevent a larger number of fields from becoming planted. However, a warmer, drier weather pattern will occur Thursday through June 26 allowing planting to be completed where it is not too late to be planted.
Technical analysis: July cotton traded as low as 83.08 cents in today’s session and ended the session below initial support at 83.66 cents. Followthrough selling efforts will continue to find additional support at 83.29 cents and at the 40-day moving average of 82.75 cents. A breach of this area will then see bears working towards the May 25 low of 79.86 cents, with little support between the two levels. However, upside momentum will be slowed at the 20- and 10-day moving averages of 84.39 and 84.69 cents, respectively. From there, 85.01 and 85.38 cents will serve up resistance along with the June 8 high of 86.96 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.
