Crops Analysis | June 13, 2023

Crops Analysis
Crops Analysis
(Pro Farmer)

Corn

Price action: July corn futures fell 4 3/4 cents to $6.12 1/2 and was the only contract in the complex to close lower on the day as December futures rallied 2 cents to $5.51 1/4.

Fundamental analysis: Corn futures pared gains in the latter half of the session as technical pressure urged selling. Prices surged this morning led by new crop futures on crop conditions falling more than expected to 61% “good” to “excellent,” down three percentage points from the previous week.  When plugged into the weighted Pro Farmer Crop Condition Index (CCI; 0 to 500-point scale, with 500 representing perfect), the corn crop fell 4.8 points to 360.9, which is 18.8 points below year-ago. Conditions are at the lowest level since 2019 for the second week of June. Crop consultant Dr. Michael Cordonnier cut his corn yield forecast by 1 bu. to 178 bu. per acre, noting moisture stress across 45% of U.S. corn acres. He now projects the U.S. corn crop at 14.86 billion bushels.

Current forecast shows sporadic and lighter than usual precip for a while, although a quarter to three-quarters of an inch of moisture is expected for much of the Midwest this weekend, according to World Weather Inc. While more rain is needed, the cooler than normal temperatures have reduced evaporation and crop stress, buying time for additional precip. Although, cool temps could come to an end this week as ridge building is expected over the Plains and western Corn Belt next week, which would warm up temps and continue to keep rainfall limited. The recent trend of declining crop conditions is likely to continue until widespread, meaningful precipitation across the corn belt, which should be price supportive in the interim.

Technical analysis: July corn futures succumbed to selling pressure this afternoon as price was unable to close above the 100-day moving average at $6.16 1/4. This key resistance stalled the April rally, a close above which would open the door to the 200-day moving average resistance at $6.28 1/4. Today’s high of $6.25 also coincided with the support zone from the first half of April and will stand as additional resistance. Bulls want to defend trendline support at $6.05, else a test of last week’s low at $5.95 is likely.

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.

 

 

Soybeans

Price action: July soybeans rose 26 1/2 cents to $13.99 1/4, finishing the session above the 40-day moving average for the first time in nearly two months and marking the highest close since May 15.

Fundamental analysis: The soy complex edged higher, led by a surge in soybean futures amid a second week of lower-than-expected government ratings and supportive outside markets. USDA’s rating of the soy crop as of Sunday was 59% “good” to “excellent,” which was down 3% from the previous week and a percentage point below pre-report estimates. When USDA’s ratings are plugged into the weighted Pro Farmer Crop Condition Index, (CCI; 0-to-500-point scale, with 500 representing perfect), the soybean crop dropped 7.3 points on the week to 350.6 and is 20.4 points below a year-ago. Crop consultant, Dr. Michael Cordonnier lowered his U.S. soybean yield by 0.5 bu. this week to 51.5 bu. per acre and noted a neutral to lower bias going forward as 39% of U.S. soybean acreage is in drought. Cordonnier stated germination, plant population and emergence could be impacted in drier areas but could recuperate if the weather improves in late July and August.

World Weather Inc. reports no excessive heat is likely in the Midwest, although the region will trend a little warmer later this week and stay seasonably warm into next week. The forecaster notes precip remains limited for many areas in the coming week.

Technical analysis: July soybeans rallied to their highest level in a month, gaining technical traction with a close above the 40-day moving average of $13.84 3/4 for the first time since April 19 as well as former resistance at $13.87 1/2. A close above resistance at $14.02 1/4 will be the next objective for bulls, with a close above the $14.00 area likely intensifying buying efforts towards $14.11 3/4 and the 100-day moving average of $14.46 1/4. From there, the April 19-20 gap from $14.78 3/4 to $14.76 1/2 will likely serve as the next upside target. Failure to breach $14.00 will likely see bear efforts resume in earnest, though a move lower will continue to find support initially at $13.63 1/4, then at the 10- and 20-day moving averages of $13.56 3/4 and $13.42 3/4, respectively. A breach of these levels will find bears then working towards the May 31 low of $12.99 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.

 

 

Wheat

Price action: July SRW futures rallied 2 1/2 cents to $6.36 1/4, the highest close in five weeks. July HRW futures fell 4 3/4 cents to $7.91 3/4 after being up as much as 10 cents, while July spring wheat fell 4 1/2 cents to $8.09 3/4.

Fundamental analysis: Wheat futures held onto gains in the latter half of the session compared to corn, but continued seasonal harvest and technical pressure are capping prices for the time being. Winter wheat harvest is off to a slower than average start at 8% harvested (9% average), thanks to recent rainfall throughout the plains. Spring wheat is off to a below average start with conditions falling more than expected to 60% “good” to “excellent”, five points below the ten-year average. When plugged into the weighted Pro Farmer Crop Condition Index (CCI; 0 to 500-point scale, with 500 representing perfect), the spring wheat CCI rating declined 13.6 points over the past week to 356.6, though that was still 3.2 points above year-ago at this time. Meanwhile, winter wheat conditions continue to fare better than expected, rising two points week-over-week to 38% “good” to “excellent”, rising ten points since the beginning of May.

Conditions throughout the hard red winter wheat production areas are expected to have a good mix of rain and sunshine over the next week according to World Weather Inc, which will be beneficial for spring planted crops but becoming too wet for winter wheat, causing some quality concerns. Fieldwork is expected to advance between bouts of rain, although harvest will likely continue to trail behind the average. Drought stricken regions of the Canadian Prairies are expected to receive significant rainfall, with all the western Prairies receiving at least some meaningful moisture. Much of Canadian wheat production areas are struggling with drought and continued precip will be necessary to restore soil moisture.

Technical analysis: July SRW futures pared gains alongside corn today; unable to close above the 40-day moving average at $6.38. A close has not been held above this key resistance level since February 17 and has capped rally attempts in March, April and June thus far. A close above this key level will encourage bulls that an interim low is in place and more upside would be likely. Additional resistance would come in at the May high of $6.69, backed by the 100-day moving average at $6.84. If bears resume the downtrend, support can be expected at converged 10- and 20-day moving average support at $6.25 1/2, backed by the June 8 low at $6.11 1/4.

July HRW futures continue to show relative weakness compared to it’s SRW counterpart, although losses have kept in check by the recent support zone around $7.85. Losses are likely to accelerate with a daily close below this key support level, targeting the May 31 low of $7.63 3/4, then the May low at $7.36 1/4. Bulls are targeting resistance starting at the 10-day moving average at $8.03 1/4, which capped gains today, backed by recent bar chart resistance at $8.22 1/2.

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 77 points to 82.72 cents, ending the session below the 100- and 40-day moving averages.

Fundamental analysis: July cotton futures slid lower for the fourth straight session as mostly favorable weather in key growing areas outweigh supportive outside markets. A run-up in equities failed to provide much strength following the Labor Department’s report of a fading Consumer Price Index (CPI) for the 11th straight month in May. Consumer prices rose 4% from a year-ago, but down from 4.9% in April and a 40-year high of 9.1% in June 2022. Meanwhile, core CPI rose 0.4% for the third consecutive month, but the annual increase was lowered from 5.5% to 5.3%, the lowest since November 2021.

 USDA reported as of Sunday, planting progress rose 10 percentage points from a week ago but reduced the crop’s condition rating to 49% “good” to “excellent,” down from 51% a week ago. Though the current rating is still ahead of last year’s rating of 46% “good” to “excellent” score at the same date.

World Weather Inc. notes West Texas planting, emergence and establishment is expected to advance relatively well, although some of the dryland fields in the southwest do not have much moisture to carry on normal development for very long without rain. The Texas Panhandle and northern counties of West Texas have sufficient moisture to plant and support early crop development, though there will be need for a little rain later this month and in July. The forecaster indicates the Delta and southeastern states should see favorable weather over the next two weeks, although some heavy rain is expected.

Technical analysis: Bear efforts succeeded again today, with a close held below the 100- and 40-day moving averages of 83.26 and 82.74 cents, respectively, opening the door for a move lower in tomorrow’s session. Efforts will likely be stalled, however, at support near 82.54 cents and again at 81.99 cents. A breach of these levels will see bears then aiming towards the May 25 low of 79.86 cents. Conversely, buying efforts will be limited at today’s failed support levels and at resistance of 84.03 cents, then at the 20- and 10-day moving averages of 84.41 and 84.57 cents, respectively. A turn above these levels will find bulls regaining technical traction, then working towards 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.

 

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