Crops Analysis | June 22, 2023
Price action: July corn futures led the complex lower, falling 10 1/2 cents to close at $6.60 1/2. December futures closed 8 cents lower to $6.20 3/4.
Fundamental analysis: Corn futures saw extensive selling overnight and into today’s session, but buyers stepped up in the latter half of the session to pare losses. Weather continues to drive the market and increased forecast rainfall weighed heavily on prices, with increases in Illinois, Indiana and Iowa. While rain prospects have increased, the expected moisture is still not likely to seriously replenish the soil, World Weather Inc says. The wetter forecast and overbought conditions after the 70-cent run in the last week each weighed on corn today, but traders were unable to break below yesterday’s low. The drought zone in the Midwest continues to expand, rising 3.4% in the last week to 92.7% of the area being too dry, according to the Drought Monitor.
Weekly ethanol production rose 34,000 barrels per day (bpd) to an average of 1.052 million bpd in the week ended June 16. That was 0.3% below the same week last year. Ethanol use remains well below the pace needed to reach current USDA estimates for the 2022-23 marketing year. While the market has been pricing in poor supply, demand prospects remain slim, with exports and ethanol underperforming. Demand can change on a dime, but with a record Brazilian corn crop hitting the world market soon, exports are likely to similarly underperform.
The USDA is set to release export sales tomorrow morning, the weekly report being delayed because of Monday’s federal holiday. Net sales for corn for 2022-23 are expected to come in between 0 and 600,000 MT, while sales for 2023-24 are expected to be between 0 and 200,000 MT. Last week, sales were 273,255 MT and 21,055 MT, respectively.
Technical analysis: July corn futures traded in an inside day compared to yesterday’s session. Bulls want to keep price above yesterday’s low to defend against a bearish V top and chalk today’s session up to profit taking. Today’s high of $6.70 1/4 marks initial resistance and is backed by Wednesday’s high at $6.72 1/2. This level capped nearly all the upside in January and February earlier this year and will prove as still resistance. Any additional upside will target resistance at $6.95. Initial support is today’s low of $6.53, backed by yesterday's low of $6.47 1/4. $6.45 marks the January support zone as well as the April highs. A close above $6.75 or below $6.45 will determine the next leg of the market from a technical perspective.
What to do: Get current with advised sales/positions. Be prepared to make additional sales on signs the weather rally has run out of steam.
Hedgers: You should be 85% priced in the cash market on 2022-crop. You should be 50% forward priced for harvest delivery on expected 2023-crop with 25% reowned in December $7.00 calls short-dated to August (July 21 expiration). Our fill on the $7.00 calls was 12 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 fell 14 1/4 cents to $15.00 1/2, after marking an intraday low of $14.68 1/2. November soybeans ended 37 1/2 cents lower at $13.39 1/2, carving a low-range close. July meal fell $14.50 to $424.70, while July soyoil rose 14 points to 55.77 cents after trading as low as 53.13 cents.
Fundamental analysis: Given the ability to recover in the event of late-season rains, soybeans handed back a portion of Wednesday’s gains as prospective weather forecasts indicate possible relief over the weekend. Heavy selling in crude oil futures cast a greater shadow over commodities amid demand concerns, while the soyoil market faced lingering pessimism overnight following the Environmental Protection Agency’s decision on Wednesday to pare biodiesel mandates for 2023-25 from earlier projections. However, corrective buying in soyoil futures ultimately gained traction and was able to pull soybeans from earlier lows.
While World Weather Inc. indicates dryness will continue to be a problem through the Midwest over the next seven days. Meaningful rainfall that can overcome evaporation and increase topsoil moisture will decline and be limited to the northwestern Corn Belt. However, local meaningful rains are also expected. The forecaster notes rainfall will be most widespread Saturday through Sunday, with an additional improvement in rain likely next week, though there is looming uncertainty as to how much moisture will be available from the Gulf of Mexico.
Reported a day later than normal due to Monday’s federal holiday, USDA’s weekly export sales data Friday morning is expected to show a range of old-crop sales of 100,000 to 600,000 MT for the week ended June 15. Traders anticipate new crop sales of 0 to 300,000 MT. Last week, USDA reported net old-crop sales of 478,400 MT for the week prior, in addition to new-crop sales of 48,500 MT.
Technical analysis: July soybeans were able to muster the strength to close above the psychological $15.00 level following a noteworthy attempt to erase all of Wednesday’s gains. While support at $14.88 3/4 was tested, the area will continue to serve as initial support, with additional support lying at $14.62 3/4 and at the 200- and 100-day moving averages of $14.51 1/2 and $14.44 1/2, respectively. A turn below these levels would likely induce heavier selling toward the 10-day moving average of $14.29 1/2, then the 40- and 20-day moving averages of $13.85 1/2 and $13.81 1/4. On the contrary, initial resistance stands at Wednesday’s high of $15.21 1/4, then at $15.31, $15.47 1/4 and $15.73 1/4.
November soybeans faced heavier selling into the close, ultimately ending the session below initial support of $13.52 3/4, though bulls will likely attempt to fill the gap created overnight between Wednesday’s close of $13.77 and today’s high of $13.73 1/2. Extended selling overnight into tomorrow’s session would find initial support at the 200-day moving average of $13.34 3/4 and again at $13.28 1/2. From there, additional support lies at $13.16, then at the 100-day moving average of $12.95 1/4. In addition to today’s high of $13.73 1/2, additional resistance stands at $13.89 1/2, $14.02 1/4 and $14.26 1/4.
What to do: Get current with advised sales/positions. Be prepared to advance sales on additional price strength.
Hedgers: You should be 80% priced in the cash market on 2022-crop. You should be 35% forward priced for harvest delivery on expected 2023-crop production with 25% reowned in November $14.00 call options short-dated to August (July 21 expiration). Our fill was 37 cents.
Cash-only marketers: You should be 80% sold on 2022-crop. You should be 25% forward sold for harvest delivery on expected 2023-crop production.
Price action: July SRW rose 4 1/2 cents to $7.39, while December SRW wheat rose 6 1/2 cents to $7.70 1/2, nearer the session high and hit a three-month high. July HRW wheat fell 2 3/4 cents to $8.71, though December HRW wheat gained 1 1/2 cents to $8.73 1/4, near mid-range and hit a five-week high. July spring wheat closed 1 1/4 cent higher at $8.80.
Fundamental analysis: Wheat market bulls fared pretty well today given the solid losses scored in the corn and soybean futures markets. Market fundamentals presently lean bullish for wheat. Russia is 99.9% certain to quit the Black Sea grain-shipping deal in July because it no longer needs Ukrainian ports to export ammonia, according to a senior Ukrainian diplomat. Meantime, reports said India’s wheat crop production will be at least 10% lower than the government’s estimate. India’s government forecast its wheat crop at a record 112.74 MMT, but the head of the Roller Flour Millers’ Federation said production would be around 101 MMT to 103 MMT.
The key outside markets limited buying interest in wheat today, as the U.S. dollar index was higher and crude oil prices were sharply lower.
World Weather Inc. today reported U.S. hard red winter wheat areas “may be a little wet, but the situation will improve and most of the soft wheat in the Midwest is filling, maturing under favorable conditions.” Meantime, improved rainfall recently in western Canada’s Prairies and the Dakotas into western Minnesota “has improved or soon will improve topsoil moisture.” Improving rainfall in northern Europe and Russia’s eastern New Lands will improve soil moisture. Australia’s winter crop continues to establish well, said the forecaster.
The weekly USDA export sales report is out Friday morning, delayed one day by the federal holiday on Monday. Traders expect U.S. wheat sales of 100,000 to 400,000 MT in the 2023-24 marketing year.
Technical analysis: Winter wheat futures bulls have the overall near-term technical advantage. Prices are in uptrends on the daily bar charts. SRW bulls' next upside price objective is closing December prices above solid chart resistance at $8.00. The bears' next downside objective is closing prices below solid technical support at $7.00. First resistance is seen at today’s high of $7.77 1/4 and then at $7.90. First support is seen at today’s low of $6.54 3/4 and then at $6.50. The HRW bulls' next upside price objective is closing December prices above solid technical resistance at $9.00. The bears' next downside objective is closing prices below solid technical support at $7.90. First resistance is seen at today’s high of the May high of $8.90 1/4 and then at $9.00. First support is seen at today’s low of $8.63 1/2 and then at $8.50.
What to do: Get current with advised sales.
Hedgers: You should be 50% sold in the cash market on 2023-crop production.
Cash-only marketers: You should be 50% sold on 2023-crop production.
Price action: December cotton fell 37 points to 80.15 cents after notching an intraday low of 79.42 cents.
Fundamental analysis: December cotton extended lower for the second straight session but was able to turn from early session lows despite strong selling in crude oil futures. Weather variability is likely underpinning futures following a recent stretch of too much rain in the southeastern U.S. World Weather Inc. notes rains will be greatest this week in the Carolinas and Virginia, resulting in an expansion of the wettest conditions into those areas, with all the southeastern states in need of a notable bout of drying. However, additional rains are expected in the area during the first week of July. Meanwhile, southwestern counties of West Texas are likely to become too dry very quickly because of no rain and persistent hot weather, which are expected over the next two weeks, raising concern over crop development.
USDA will release weekly export sales data for the week ended June 15 early tomorrow, delayed a day due to Monday’s federal holiday. Net old-crop sales of 98,900 RB were reported last week for the week prior, reflecting a 79% drop from the previous week and was down 61% from the four-week average. New-crop sales of 65,700 RB were also reported, with China and Turkey being the primary purchasers.
Technical analysis: December cotton is largely being abated by solid resistance at the 10- and 20-day moving averages which have converged at 80.69 cents. Though attempts to breach initial support at 80.05 cents failed, allowing the level to continue to serve as initial resistance. A continued test in tomorrow’s session could ignite heavier selling toward support at 79.21 and 78.63 cents, then the May 25 low of 78.45 cents. Conversely, a successful run above the 10- and 20-day moving averages will find further resistance at the 40-day moving average of 81.15 cents, then 81.69 cents and at the 100-day moving average of 82.14 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.
