Crops Analysis | June 14, 2023
Advice: We advise hedgers and cash-only marketers to sell another 10% of 2022-crop to get to 85% priced. For 2023-crop, hedgers should sell 25% of expected production to get to 50% forward priced for harvest delivery and reown 25% in December call options short-dated to August (July 21 expiration), which are currently trading around 17 cents. Cash-only marketers should sell 10% of expected 2023-crop production to get to 35% forward priced.
Price action: July corn fell 4 3/4 cents to $6.07 3/4, a mid-range close, while December futures fell 2 cents to $5.49 1/4.
Fundamental analysis: Corn futures recovered from overnight weakness early in the session but began handing back gains around mid-morning despite support from a weaker U.S. dollar. Traders positioned ahead of the Fed’s interest rate decision, which was reported at 1 p.m. C.T., as futures attempted to inch higher following the Fed’s decision to keep rates unchanged. The decision marks the first pause in the central bank’s string of 10 straight increases over the past 15 months. However, the Fed signaled interest rates will likely rise by another half of a percentage point by the end of the year due to a stronger-than-expected economy and slower decline in inflation.
Weather continues to be a market driver as several key growing areas throughout the Corn Belt progress through the growing season with less-than-adequate moisture levels. World Weather Inc. indicates north-central Iowa and eastern Minnesota to Michigan will miss much of Saturday through Monday’s rain and crop stress is likely to increase during the next ten days, but with at least some soil moisture in place and a lack of heat over the period should dampen crop stress. The forecaster notes the net drying expected during the next two weeks will leave a large part of the Midwest at a critical level of dryness and if timely rain returns in the last days of June or first of July, production potentials could be high, but if rain does not increase, yield potentials will likely quickly decline.
U.S. ethanol output fell by 18,000 barrels per day (bpd) to 1.018 million bpd in the week ending June 9, while stocks rose 700,000 barrels to 22.9 million barrels on the week.
USDA will report its weekly export sales data for week ended June 8 ahead of the open tomorrow. Traders are expecting old-crop sales to range from (100,000) to 550,000 MT, with new crop sales expected between 0 and 350,000 MT. Last week, USDA reported net old-crop sales of 172,709 MT and new-crop net reductions of (106,783) MT.
Technical analysis: July corn futures gapped lower in the overnight session, falling below support at $6.07 1/4, though this morning’s open saw adequate upward momentum to fill the overnight gap. However, the strength was short-lived, with a close held just above this morning’s tested support level. A continued test of the area will likely find bears then targeting $6.01 3/4 and the 40- and 20-day moving averages of $5.95 3/4 and $5.90 1/4, respectively. From there, little support lies until the May 18 low of $5.47. In the event bulls are able gather strength to work higher, resistance will continue to stand at the 100-day moving average of $6.21 1/4, with a breach of the technically significant area likely increasing buying impetus, though additional resistance will stand at $6.30 1/4, again at $6.35 1/2 and the May 18 high of $6.47 1/2.
What to do: Get current with advised sales. Be prepared to make additional sales on additional price strength.
Hedgers: NEW ADVICE -- Sell another 10% of 2022-crop to get to 85% priced in the cash market. Sell another 25% of expected 2023-crop production to get to 50% forward priced for harvest delivery and reown 25% in December call options short-dated to August (July 21 expiration). Our purchase price was 17 cents.
Cash-only marketers: NEW ADVICE -- Sell another 10% of 2022-crop to get to 85% priced. Sell another 10% of expected 2023-crop production to get to 35% forward priced.
Advice: We advise hedgers and cash-only marketers to sell another 10% of 2022-crop to get to 80% priced. We also advise selling an initial 10% of expected 2023-crop production for harvest delivery.
Price action: July soybeans led the complex lower, falling 11 cents to $13.88 1/4, while November soybeans rose 1/2 cent to $12.40 and nearer the session high and at a four-week high close. July soybean meal fell $7.80 to $389.70 and near the session low. Prices closed at a 10-month-low close. July bean oil gained 53 points to 55.96 cents. Prices closed nearer the session high and hit a two-month high.
Fundamental analysis: Soybean bulls still have some momentum on their side amid rising concerns about dry weather in the Corn Belt potentially crimping yield potential. World Weather Inc. today reported concern over crop moisture in the Midwest “is running high, but without persistent, hot, temperatures there is a good chance crops will perform better than expected. Timely rainfall will be imperative even if the amounts continue below normal.” The forecaster said crop moisture stress is becoming significant from eastern Iowa and eastern Minnesota as well as western Wisconsin into central and southern Illinois and southern Indiana. “At least some rain must fall soon in these drier areas soon to keep production potentials from falling.”
Soybean traders will also continue to look to the corn futures market for direction. Soybean bulls should be at least somewhat concerned about the recent poor price performance in the meal futures market. Spreaders have been more active in the futures markets lately—buying bean oil and selling meal.
The U.S. soybean processing pace likely slowed for a second straight month in May as some crushers idled facilities for seasonal maintenance. The monthly National Oilseed Processors Association (NOPA) crush report is due out Thursday. Analysts expect crush at 175.880 million bushels and soyoil stocks at 1.942 billion pounds, according to a Reuters survey.
Traders are awaiting Thursday morning’s weekly USDA export sales report, which is expected to show U.S. soybeans sales of 250,000 to 550,000 MT for the 2022-23 marketing year and sales of 100,000 to 350,000 MT in the 2023-24 marketing year.
Technical analysis: July soybean bulls still maintain the technical advantage despite today’s selling pressure. Bulls defended 40-day moving average support at $13.82 1/4, which will be a key line in the sand for bulls in the latter half of the week. Bears are targeting additional support at $13.65, which served as stiff resistance prior to last week’s breakout. Bulls are targeting key psychological resistance at the $14.00 level, backed by Tuesday’s high at $14.15 1/2. The soybean bulls have the slight overall near-term technical advantage in the November contract. A fledgling, near-term price uptrend is in place on the daily bar chart and the bulls have momentum on their side. The next near-term upside technical objective for the soybean bulls is closing November prices above solid resistance at $12.80. The next downside price objective for the bears is closing prices below solid technical support at $12.00. First resistance is seen at this week’s high of $12.49 1/4 and then at $12.65. First support is seen at today’s low of $12.25 1/4 and then at $12.15.
The soybean meal futures bears have the solid overall near-term technical advantage. Prices are in a 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 $400.00. The next downside price objective for the bears is closing prices below solid technical support at the May low of $386.30. First resistance comes in at today’s high of $398.80 and then at this week’s high of $404.00. First support is seen at $388.70 and then at $386.30.
Soybean oil futures bulls have the slight overall near-term technical advantage. Prices are in a fledgling uptrend on the daily bar chart. The next upside price objective for the bean oil bulls is closing July prices above solid technical resistance at 57.37 cents, the 200-day moving average. Bean oil bears' next downside technical price objective is closing prices below solid technical support at 50.00 cents. First resistance is seen at today’s high of 56.67 cents and then at 57.00 cents. First support is seen at today’s low of 54.63 cents and then at 54.00 cents.
What to do: Get current with advised cash sales. Be prepared to advance sales on additional price strength.
Hedgers: NEW ADVICE -- Sell another 10% of 2022-crop to get to 80% priced in the cash market. Also sell an initial 10% of expected 2023-crop production for harvest delivery.
Cash-only marketers: NEW ADVICE -- Sell another 10% of 2022-crop to get to 80% priced. Also sell an initial 10% of expected 2023-crop production for harvest delivery.
Price action: July SRW futures fell 6 cents on the session before settling at $6.30 1/4, nearer the session low. July HRW futures also fell 6 cents on the day, closing at $7.85 3/4. July spring wheat fell 1/2 cent to $8.09 1/4.
Fundamental analysis: Wheat futures continue to fail against overhead technical resistance as winter wheat harvest weighs on prices. Futures are ending their four-day streak of gains despite bullish news coming out of the Black Sea. Russia continues to insist that their end of the bargain is not held up, with Russian President Vladimir Putin accusing the West of “cheating” Moscow by failing to deliver promises to help Russian agricultural goods into world markets. The likelihood of a renewed grain deal after the current agreement’s expiration on July 18 continues to go down, which would help spur wheat futures off recent lows. After surging in the months following the Russian invasion last year, wheat futures have seen eight straight months of selling, sending prices down to a two-year low.
Contrary to the Corn Belt, winter wheat production areas are concerned with too much rain in the coming week that could lead to localized flooding and a potential threat to wheat quality, according to World Weather Inc. The rain will be beneficial for summer crops and bouts of fieldwork and harvesting are expected between bouts of rain. Temperatures have been largely moderate to cool but are expected to heat up next week to more above average, but precip will maintain moist soil conditions.
USDA releases export sales tomorrow morning, with analysts expecting net sales of 200,000 to 450,000 MT for the 2023-24 marketing year. Last week, USDA announced sales of 234,800 MT for the first week of the marketing year, which was well below the 10-year average.
Technical analysis: July SRW futures saw the first red day in a week as bulls continue to struggle against the 40-day moving average at $6.37 1/2. Price is currently in no-mans land with support at the converged 10- and 20-day moving averages at $6.25 1/2. Direction will be clear with a close above resistance at $6.37 1/2 or below moving average support. Price touched both of these key levels today. Further strength will encounter resistance at the May high of $6.69, backed by the 100-day moving average at $6.83. If bears continue to pressure price lower, support can be found at the June 8 low of $6.11 1/4, backed by the key psychological $6.00 level.
July HRW futures continue to be weighed down by harvest pressure, although price continues to be supported by the key $7.85 level. Losses are likely to accelerate below this key level, especially after consolidating here for the last six trading sessions. Bears are targeting the May 31 low of $7.63 3/4, backed by the May low at $7.36 1/4. Bulls are hoping to defend support and rally to 10-day moving average resistance at $8.00 1/4, backed by daily 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.
Price action: December cotton fell 91 points to 80.11 cents and nearer the session low. Prices hit a two-week low today.
Fundamental analysis: Trading in the cotton futures market remains choppy and sideways in a range, overall, amid conflicting near-term market fundamentals.
The Federal Reserve today said the U.S. economy continues to grow at a modest pace, but it paused on raising interest rates and leaned hawkish on monetary policy by saying at least two more rate hikes are likely this year. That prompted a selloff in the U.S. stock market that may put more downside price pressure on cotton futures in trading Thursday. The major stock indexes did hit 10-month highs this week, however. Worries about a sluggish Chinese economy are limiting buying interest in cotton futures. China’s central bank has recently initiated steps to ease its monetary policy.
World Weather Inc. today reported west Texas cotton planting, emergence and establishment are “expected to advance relatively well, although some of the dryland fields in the southwest do not have much moisture to carry on normal crop 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 especially in July. Meantime, the Delta and southeastern states crop weather should be favorable over the next two weeks, although some heavy rain is expected and that may bring on some flooding.
Thursday morning’s weekly USDA export sales report will be closely scrutinized by cotton traders. The bulls are hoping for a repeat performance from last week’s sales numbers, which saw U.S. sales of 480,400 running bales (RB) for 2022/2023--a marketing-year high--and up 79 percent from the previous week. China bought 384,700 RB. Exports of 317,000 RB last week were up 12 percent from the previous week and 4 percent from the prior 4-week average.
Technical analysis: Cotton futures bulls and bears are on a level overall near-term technical playing field amid the recent choppy trading. The next upside price objective for the cotton bulls is to produce a close in December futures above technical resistance at the April high of 84.50 cents. The next downside price objective for the cotton bears is to close prices below solid technical support at the March low of 77.56 cents. First resistance is seen at today’s high of 80.97 cents and then at 82.00 cents. First support is seen at today’s low of 79.85 cents and then at 79.00 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 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.
