Crops Analysis | June 15, 2023
Price action: July corn futures rallied 15 1/2 cents on the session to $6.23 1/4, though gains were led by the December contract closing 25 1/4 cents higher at $5.74 1/2.
Fundamental analysis: Corn futures surged overnight and buying accelerated into the day session as the continued dry forecast raises uncertainty around production prospects. Agricultural commodities rose across the board today, aided by a plummeting U.S. dollar index which has given up all the gains made in May. A weakening greenback is generally good for exports, but recent price rallies are dampening any potential pickup from the weaker dollar. Today’s rally in December corn futures breached the median gain of a summer rally, $5.69. While rallies do continue past the median, it often takes continued bullish stimulus, of which there has been plenty of recently with continued dryness. This market has been weather driven and will continue to be weather driven once rain starts to fall, which is why we encouraged producers to make a sale yesterday, laid out in the section below.
The most recent reading for the Drought Monitor shows nearly 90% of the Midwest considered “too dry”, along with most of Iowa. There is a rain event forecast to begin on Friday and work into Monday that will ensure most western and southern areas have adequate soil moisture to prevent significant crop stress during the next ten days, although northeastern Iowa, southeastern Minnesota to Michigan and most of Ohio will miss this key precip, World Weather Inc reports. Net drying is expected throughout the next two weeks throughout the corn belt, leaving the end of June/early July in great need of moisture, else significant yield loss is at risk.
This morning, USDA released export sales for the week ended June 8, announcing net sales of 273,300 MT for 2022-23 and 21,100 MT for 2023-24. Traders expected sales of (100,000) to 550,000 MT for 2022-23 and 0 to 350,000 MT for 2023-24. Net sales were up 58% from the previous week and up noticeably from the prior 4-week average.
Technical analysis: July corn futures were seemingly dragged higher by new crop futures throughout the session as calendar spreads were down big on the day after losing 30 cents in the last five trading sessions. July futures continued the recent steep, methodical march higher after the last two days of losses. Traders paused less than two cents below the 200-day moving average at $6.28 which marks the next stiff technical resistance level, paired with the significant $6.25 level that capped gains earlier this week. Above there, resistance can be expected at $6.44. If bears attempt to regain technical control, support can be expected at $6.16, backed by the 10-day moving average currently at $6.09, which has supported prices since the last week of May. If this level fails, the recent steep uptrend is invalidated, and support at $5.90 is likely to be tested.
December corn futures led the complex higher today and closed above the 100-day moving average ($5.52 1/2) as well as the 200-day moving average ($5.66 1/2). Price has not closed above the 100-day moving average since December, and failure of the 200-day moving average accelerated the selling seen throughout the first quarter of the calendar year. Price traded up to the March highs today and stalled gains, which will mark initial resistance at $5.73 1/2. The next level of resistance comes in at $5.90. Bears are aiming to bring price back below the 100-day moving average at $5.52 1/2, in hopes of a “failed breakout reversal”, which would have price quickly testing $5.35 support.
What to do: Get current with advised sales. Be prepared to make additional sales on additional price strength.
Hedgers: You should be 85% priced in the cash market on 2022-crop. You should be 50% forward priced for harvest delivery on 2023-crop, with 25% reowned in December $5.70 call options short-dated to August (July 21 expiration) at 17 cents.
Cash-only marketers: You should be 85% sold on 2022-crop. You should be 35% forward priced for harvest delivery on expected 2023-crop production.
Price action: July soybeans rose 40 cents to $14.28 1/4, marking the largest daily gain since September 2022, while November soybeans rose 52 1/4 cents to $12.92 1/4, near the session high and the 100-day moving average of $12.95 1/4. July meal rose $4.50 to $394.20, while July soyoil rose 247 points to 58.43 cents, the highest close since March 8.
Fundamental analysis: Soybeans grabbed solid gains, in tandem with grains, as persisting dry weather conditions throughout the Midwest heightened supply concerns. USDA’s weekly export sales data also proved notable following a stretch of recent weakness. Adding to the upward momentum was support from outside markets as well as the National Oilseed Processor’s Association (NOPA) crush report which showed a record of 177.915 million bushels crushed during May. NOPA’s crush was a 4.683-million-bushel increase from April and came in higher than the average pre-report estimate of 175.88 million bushels, according to a Reuters poll. The May 2023 figure also outpaced year-ago by 6.838 million bu. or 4%.
World Weather Inc. reports 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, with some farms in eastern Nebraska and eastern South Dakota also hurting significantly for moisture. The forecaster notes at least some rain must fall soon in these drier areas to keep production potential from falling more dramatically.
USDA reported weekly old-crop export sales of 478,400 MT for week ended June 8, which were up noticeably from the previous week and from the four-week average. Sales were near the top-end of the pre-report range of 250,000 and 550,000 MT. New-crop sales of 48,500 MT were also reported, missing the pre-report range of 100,000 to 350,000 MT.
Technical analysis: July soybeans carved a 44 1/2 cent range as bulls managed to capture greater technical control, with a high-range close above resistance at $13.98, $14.08 and $14.17 1/4. A move higher will find the next area of significant resistance at the 100-day moving average of $14.44 1/2. From there, $15.00 serves as the next area of major resistance. Profit-taking efforts, however, will find support at today’s failed resistance, as well as the 40-day moving average of $13.80 3/4, then the 10-day at $13.75 1/2 and again at $13.70 and the 20-day moving average of $13.48 1/2.
What to do: Get current with advised cash sales. Be prepared to advance sales on additional price strength.
Hedgers: You should be 80% priced in the cash market on 2022-crop. You should have 10% of expected 2023-crop production forward sold for harvest delivery.
Cash-only marketers: You should be 80% sold on 2022-crop. You should have 10% of expected 2023-crop production forward sold for harvest delivery.
Price action: July SRW wheat gained 31 1/4 cents to $6.62 1/2, the highest close since April 21, while December SRW wheat gained 29 3/4 cents to $6.86 3/4. Prices closed near the session high. July HRW wheat rose 27 cents to $8.12 3/4 and December HRW wheat gained 26 3/4 cents at $8.06, both ending near the session high. July spring wheat futures rose 23 1/2 cents to $8.32 3/4.
Fundamental analysis: The wheat futures markets saw short covering and perceived bargain buying featured today, amid strong gains in corn and soybean futures as those two markets are seeing a weather scare play out. Global supply concerns also lifted wheat today as it appears the Russia-Ukraine grain-shipping deal will come to an end next month. Reports said grain shipments from the Black Sea region have already begun to dwindle. A sharp drop in the U.S. dollar index today also benefitted the wheat futures market bulls.
USDA this morning reported new-crop U.S. wheat sales of 165,000 MT, which were disappointing and below market expectations.
World Weather Inc. today reported wheat in Alberta and western Saskatchewan, Canada benefitted from rain Wednesday and additional moisture is expected in this next ten days to further improve some crops. “A more generalized rain must occur to more completely change the moisture and crop situation,” said the forecaster. Some rain will also benefit a part of the northern U.S. Plains later today into Friday and again next week. Wheat production areas in Europe are expected to get some rain eventually, but warm temperatures and limited rain this week may raise some concern over crop stress between now and then.
Technical analysis: Winter wheat futures bears still have the overall near-term technical advantage. However, the bulls are working on starting a price uptrend on the daily bar chart for SRW. SRW bulls' next upside price objective is closing December prices above solid chart resistance at $7.50. The bears' next downside objective is closing prices below solid technical support at the May low of $6.08 1/4. First resistance is seen at today’s high of $6.90 1/4 and then at $7.00. First support is seen at $6.75 and then at $6.60. The HRW bulls' next upside price objective is closing December prices above solid technical resistance at $8.50. The bears' next downside objective is closing prices below solid technical support at the May low of $7.36. First resistance is seen at today’s high of $8.06 1/4 and then at $8.20. First support is seen at $7.85 and then at this week’s low of $7.76 3/4.
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: July cotton fell 115 points to 80.64 cents, the lowest close since May 25.
Fundamental analysis: Cotton futures extended lower for the seventh straight session as drier weather is expected over the next two weeks to allow for planting to be completed. USDA’s weekly export sales data also proved light relative to recent sales, overshadowing outside market action which would typically be price-friendly to the natural fiber.
World Weather Inc. indicates a drier weather pattern will occur during the next two weeks in southwestern Oklahoma, the Texas Panhandle and northern and eastern parts of West Texas allowing for planting to soon be completed while the drying may come too late for some fields to be planted with cotton. The forecaster notes soil moisture is adequate to support cotton development during the next two weeks in most areas with exceptions in southwester parts of West Texas where soil moisture is already short. The Delta and southeastern states should see favorable weather over the next two weeks, though heavy rain overnight in Georgia may have induced some flooding and additional rain in the coming week may add to the wet bias. Meanwhile, southern Georgia and northern Florida have been trending too dry recently.
USDA reported net old-crop sales of 98,900 RB for the week ended June 8, which were down 79% from the previous week and 61% from the four-week average. New crop sales of 65,700 RB were also reported for the week, while shipments for the week totaled 244,800 RB, and were down 23% from the previous week and 19% from the four-week average.
Technical analysis: July cotton lost additional steam, evidenced by a low-range close following a recent string of consecutive lower closes which lends bears the full near-term technical advantage. Support was tested and failed today at 81.36 and 80.93 cents, with a push lower finding additional support at 80.16 cents, with minimal support between the level and the April 25 low of 77.68 cents. However, a turn into oversold territory may spark buying, which would be limited at today’s areas of failed support, then at the 40-day moving average of 82.58 cents and the 100-day at 83.13 cents. A move above these technically significant levels will then encounter resistance at the 10- and 20-day moving averages of 83.81 and 84.01 cents, respectively.
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.
