Crops Analysis | June 16, 2023

Crops Analysis | June 16, 2023
Crops Analysis | June 16, 2023
(Pro farmer)

Corn

Price action: July corn futures finished the day 17 cents higher to $6.40 1/4, marking a 36-cent gain on the week. December futures rallied 23 cents today to $5.97 1/2, closing 67 cents higher on the week and just half a cent lower than this week’s high.

5-day outlook: A weather market has sent volatility higher as corn futures rocketed to the highest level since mid-April in the July contract and since late February in the December contract. The old crop-new crop spread continues to tighten, now the smallest inversion since March. Price has entered over bought territory, but with a continued dry forecast over the next ten days and fears of production loss due to crop stress may drive the market higher yet. Important rain events are expected starting tonight and going into Sunday, along with forecast rain from June 24-26, in areas west of the Mississippi, according to World Weather Inc. This precip will help prevent serious crop stress during the next ten days, but rain is light enough that some stress may still occur. Price is at risk of a corrective sell-off, partly seen in middle of today’s session which saw price sell off nearly a dime from the highs. The main risk for bulls over the next week is a wet forecast or unexpected rain, which will send prices lower even faster than they came up.

30-day outlook: The upcoming June acreage report will be closely watched alongside the quarterly grain stocks report released June 30. As it stands, the quarterly stocks report is unlikely to have many surprises. The acreage report will give an in-depth look at how many of the returning acres in the northern Plains ended up being planted, as seedings were delayed thanks to Red River basin flooding early this spring. It is our opinion that more of these acres were planted than not, as hot and dry conditions allowed for topsoil drying that allowed producers to get the crop into the ground. This limited the amount of prevent plant in the near-million returning corn acres, which may pressure price if analysts expect a large reduction in plantings.

90-day outlook: Weather over the coming quarter is going to have a large impact on price, and volatility is going to remain regardless of weather. The June acreage report will give insight into returning (less productive) acres in the northern Plains. Paired with continued dryness and below average condition ratings, it is a matter of when, not if, USDA will begin lowering the corn yield. Our research shows that while a record yield is not completely out of the picture, it is becoming less likely the longer it stays dry. Weather is likely to continue to drive the market until there is more certainty about production prospects, but markets should calm down once August hits the calendar at the latest. The median gain and median duration of the first summer rally have already come to pass, showing that this year’s initial rally is rather exceptional. The demand destruction that has taken place over the last two months is no help to corn bulls either, and as the record Brazilian crop hits the world market it will be difficult to find a home for the U.S. crop.

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.

 

 

Soybeans

Price action: July soybeans rallied 38 1/4 cents on the day to $14.66 1/2, marking an 80-cent gain on the week. November futures closed 50 cents higher to $13.42 1/4, marking an impressive weekly gain of $1.38 and closed on the week’s high.

5-day outlook: Soybeans have entered a steep uptrend on the daily bar chart, evidenced by the November contract rising over two dollars since May 31, with the bulk of that gain coming this week. Bean futures have quickly entered overbought territory, with July trading at the highest level since late April and November trading at the highest level since mid-March. Weather continues to drive soybeans higher, although the effects of dry weather do not have much impact on production at this juncture. Nevertheless, soybean futures have been trading higher alongside corn, giving a good opportunity to make the first sale of the 2023-24 marketing year.

30-day outlook: USDA’s end-of-June Acreage and Quarterly Stocks Reports will be a major market driver, though weather could quickly become the focus following the government’s updated estimates. The recent dry weather allowed planting of what is likely more acres than many expected in the northern Plains. North Dakota indicated increased plantings of 850,000 acres in the March Prospective Plantings report. Most of the spring, Red River basin flooding thwarted planting efforts, leading to a behind-average pace in the northern Plains despite a national average that paced well ahead of schedule. Most of these acres will likely have been planted, thanks to the recent extensive dryness. Depending on what most analysts believe, this could be a bearish surprise following the June acreage report.

90-day outlook: Late-summer weather will play a key role in how soybean futures perform throughout the growing season. The 90-day forecast indicated increased precip in the western Corn Belt, alongside above-normal temps in the eastern Belt. Hot and dry conditions in 2021 showed that soybeans are resilient late in the growing season and can produce near-record yields in those conditions. Precip is needed at some point and is expected towards the latter half of the summer, when soybeans need it most. Soybean exports have turned around after a lackadaisical May, alongside a record NOPA crush for the month. Crush is likely to expand to a record for the current marketing year. Both of these indicate better demand prospects than we thought a month ago, but continued Brazilian exports will help keep a lid on soybean prices as the summer progresses.

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.   

 

 

Wheat

Price action: December SRW wheat futures rose 29 cents to $7.15 3/4, near the daily high and hit a two-month high. For the week, December SRW gained 57 3/4 cents. December HRW wheat futures closed up 31 cents to $8.37 and nearer the session high. Prices hit a four-week high today and for the week rose 44 1/4 cents. December spring wheat futures climbed 22 1/4 cents to $8.60 1/4. July spring wheat futures rose 20 3/4 cents on the session to $8.53 1/2, rising 43 1/4 cents on the week.

5-day outlook: Today’s technically bullish weekly high closes in the winter wheat futures markets set the table for follow-through technical buying interest early next week. (Markets are closed Monday for a holiday.) Weather-market inspired gains in corn and soybean futures markets this week have helped to propel the wheat markets higher and will likely continue to do so next week.

Wheat traders will continue to keep a close eye on the weather in world wheat-producing regions. World Weather Inc. today reported U.S. wheat in the central Plains is in fair condition and would benefit greatly from a period of dry weather. U.S. Midwest soft wheat is still rated well with little change likely. Wheat in interior southern and eastern Alberta continues to struggle with dryness and some of the crop is not likely to perform well. Crops in other parts of the Prairies should experience better conditions. Some production cuts may occur because of drought in Alberta.  Wheat production areas in Europe are expected to get some rain eventually, but warm temperatures and limited rains for a while longer may raise some concern over crop stress, said the forecaster.

30-day outlook: Dimming hopes of the Ukraine-Russia grain-shipping deal being extended past July are prompting heightened concerns about global wheat supplies. Such will continue to be a bullish element for the wheat markets in the coming weeks, or longer. However, commercial hedge pressure as the winter wheat harvest picks up speed and moves farther north may cap gains in the coming weeks. Also, veteran wheat traders know that when the weather market in corn and soybeans starts to fizzle, wheat futures markets will also be susceptible to increased selling pressure. Weather markets in the grains tend to end abruptly.

90-day outlook: Some of the strength in the wheat market just recently can be attributed to the depreciation in the value of the U.S. dollar on the foreign exchange market. The U.S. dollar index today hit a five-week low. However, after this week’s disappointing USDA export sales report for U.S. wheat, traders are reminded export demand for U.S. wheat needs to improve significantly in the coming months, if prices are expected to continue to appreciate.

U.S. spring wheat planting is virtually complete. The crop is looking better than last year at this time, but the early drop in condition ratings is concerning. Still, with long-term weather forecasts looking favorable for the Northern Plains crop, HRS price gains likely cannot be extended this summer.

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: December cotton futures rose 50 points to 80.10 cents, near mid-range and for the week down 1.72 cents/pound.

5-day outlook: Some short covering was seen in the cotton futures market today, following this week’s selling pressure. If that selling resurfaces next week, prices would move into strong technical support layers that have kept a floor under prices for three months.

Cotton traders will be monitoring weather conditions in the southeastern U.S. extra closely next week. World Weather Inc. in a midday dispatch today said “significant heavy rains have occurred in the past 48-hours in the U.S. southeastern states with 2.50 to 7.50 inches occurring across much of southern Georgia and the eastern Gulf Coast states. Over 9.00 inches fell in some areas of northern Florida. Heavy rains are expected to continue in the next seven days, with another 1.50 to 3.50 inches expected with some areas seeing locally heavier amounts in excess of 6.00 inches.”

30-day outlook: The cotton market in the coming weeks will continue to be impacted by key outside markets, which now are overall friendly for cotton futures. The U.S. dollar index hit a five-week low today, making U.S. cotton more competitive on the world market. The major U.S. stock indexes this week hit 10-month highs, which if the rallies continue suggests better consumer demand for apparel heading into the fall and winter buying seasons. Crude oil price action recently has been mostly neutral for cotton.

90-day outlook: USDA Thursday reported old-crop U.S. cotton sales of 98,900 RB for the week ended June 8, which were down 79% from the previous week and off 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. These are disappointing numbers compared to U.S. export sales seen in recent weeks. Another potential negative for the cotton market is recent economic data out of major cotton consumer China showing slowing growth. With the end of the crop marketing year looming, anticipation of a larger 2023-24 U.S. cotton crop may also depress prices.

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.

 

Latest News

After the Bell | March 18, 2024
After the Bell | March 18, 2024

After the Bell | March 18, 2024

Pro Farmer's Daily Advice Monitor
Pro Farmer's Daily Advice Monitor

Pro Farmer editors provide daily updates on advice, including if now is a good time to catch up on cash sales.

Weekly wheat and soybean inspections drop on the week; corn holds steady
Weekly wheat and soybean inspections drop on the week; corn holds steady

Weekly wheat and soybean inspections during the week ended March 14 fell 164,665 MT and 98,672 MT, respectively, from the previous week. Meanwhile, corn inspections rose nearly 73,000 MT.

Monday Morning Wake Up Call | March 18, 2024
Monday Morning Wake Up Call | March 18, 2024

Corn and wheat futures are higher this morning with soybeans working to the upside. Livestock futures are higher to start the week...

Markets, Traders Coming Around to ‘Higher-for-Longer’ Regarding Interest Rates
Markets, Traders Coming Around to ‘Higher-for-Longer’ Regarding Interest Rates

Big boost for hybrid cars | Oil markets surge | Brazil investigates alleges China trade dumping

Chart Trends | March 18, 2024
Chart Trends | March 18, 2024

Short-term trend turns bearish in SRW wheat.