Crops Analysis | June 26, 2023
Price action: July corn rose 6 1/2 cents to $6.37 1/4, a mid-range close, while December corn rose 1/4 cent to $5.88 1/4.
Fundamental analysis: Corn futures traded a choppy range as traders continue to monitor forecasts, which lean faintly positive as pollination approaches. Early strength in wheat complex led a short-lived rally amid weekend tensions in Russia, though USDA’s weekly export inspection data largely cast a shadow over the market as the demand outlook remains bleak.
World Weather Inc. states rain during the next two weeks is likely to be below normal in many areas, with most areas not seeing net increases in soil moisture, though enough rain is expected to support corn pollination and prevent continued deterioration of conditions in much of the region. The forecaster notes, however, there will be a few days of high crop stress this week from eastern Kansas and southeastern Nebraska to southern Illinois and western Kentucky where temps will reach the mid-90’s to lower 100’s Wednesday through Friday.
USDA reported weekly export inspections of 542,727 MT (21.4 million bu.) down from 830,999 MT last week and 877,310 MT last year. Inspections continue to wane as Brazilian farmers harvest the country’s second safrinha corn crop, which is 9.3% complete as of last Thursday, according to AgRural. Harvest efforts gained 4.6 percentage points on the week but lag last year’s pace of 20.3% for the same period.
The government will update crop ratings this afternoon, with a Reuter’s poll estimating a decline for the fourth week in a row. Traders expect the “good” to “excellent” rating will fall 3 percentage points from week-ago to 52% “good” to “excellent” as of Sunday. This compares to 67% “good” to “excellent” for the same period last year.
Technical analysis: December corn gapped higher overnight in step with the wheat complex but faded below the 10- and 200-day moving averages, which have converged around $5.84, and notched an intraday low just above support at $5.75 1/4. These levels will continue to serve as initial support, along with $5.62 3/4, then at the 20- and 100-day moving averages of $5.58 1/2 and $5.56 /4, respectively. Continued bull efforts will face resistance at $5.96, again at $6.08 1/2, then $6.29 1/4 and $6.41 3/4.
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 rallied 26 1/2 cents closing at $15.21, near the session high. July meal futures rose $3.9 to $414.6, a mid-range close. July soyoil climbed 157 points to settle at 59.51 cents.
Fundamental analysis: Soybean futures saw gains today, especially in old crop futures as bulls reversed losses from late last week. Weather continues to drive the market as much of rain over the weekend was limited to the northern portion of the Corn Belt. Rain is still forecast late this week and into Sunday across the Midwest but is expected to be erratic while temperatures are above normal and continue to cause net drying, World Weather Inc says. Drought and dryness are expected to continue over the next ten days despite temporary relief.
This afternoon’s Crop Progress report will give insight into how much rain across the northern Corn Belt improved soybean crops. Conditions are expected to continue to fall, with analysts expecting a 3-point fall to 51% good to excellent, according to a Reuter’s poll. USDA released soybean inspections this morning which totaled 141,158 MT, down from 179,548 MT last week and 185,184 MT last year. Inspections continue to wind down as the crop year is coming to an end, although a more rapid pace is needed to hit the USDA export forecast for the 2022-23 crop year.
Technical analysis: July soybeans futures led the complex higher and made a new for-the-move high today. Price seemingly broke out of a bull-flag technical pattern which would indicate continued strength in the coming days. Bulls are still in full control of the technical advantage, targeting $15.35 which capped all the upside from December to February before prices turned lower. A break of this level would be very significant for bulls, with $15.50 next on deck. Bears are targeting last week’s low at $14.68 1/2, backed by 10-day moving average support at $14.64 1/4. Additional weakness would target the $14.50 level.
July meal had a relatively tame session compared to last week. Price struggled to rally above the 40-day moving average at $415.50, which stands as first resistance. Additional resistance comes in at the 200-day moving average at $424.04, backed by last week’s high of $441.20. Bears are looking to take out support at $410.40, backed by $407.00 support.
July soyoil has retraced nearly all the losses from the surprisingly weak EPA announcement last week. Bulls have returned to the “point of the crime” and will face resistance at 60 cents next, which coincides with last week’s high. Additional strength will be met with resistance at 62.75 cents. If bears defend nearby resistance, support can be found at the 200-day moving average at 57.41 cents, backed by 55 cents. The recent volatility in soyoil markets is likely to continue until a close above 60 cents or below last week’s low at 53.13 cents occurs.
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: December SRW wheat closed down 6 cents at $7.55 3/4 and near the session low after hitting a three-month high early on today. December HRW wheat rose 5 cents at $8.68, still nearer the session low. Spring wheat futures closed 2 1/2 cents lower in the July contract at $8.62 1/4.
Fundamental analysis: Today’s low-range closes hint the winter wheat futures bulls have become exhausted. It appears the brief revolt in Russia did not provide the wheat bulls with lasting strength after overnight gains, and that the “risk off” attitudes in the marketplace today limited buyer interest in wheat markets today.
Very weak U.S. export inspections numbers also deflated the wheat bulls today. Weekly wheat export inspections totaled 203,724 MT, down from 235,175 MT the previous week and 237,820 MT last year. Last week’s weekly USDA export sales report also underscores the weaker global demand for U.S. wheat at present.
Weather also leans a bit bearish for wheat prices. U.S. maturation and harvest conditions are presently good in the HRW and SRW wheat areas, according to World Weather Inc.
This afternoon’s weekly USDA crop progress report is expected to show U.S. winter wheat harvested at 29% as of Sunday, compared to 15% complete last week. Winter wheat rated good to excellent condition is seen at 38%, unchanged from last week. Spring wheat rated good to excellent is expected to be 51%, also the same as last week.
Technical analysis: Winter wheat futures bulls still have the overall near-term technical advantage but appear tired. 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 $7.84 1/4 and then at $8.00. First support is seen at $7.50 and then at $7.40. 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 $8.00. First resistance is seen at $8.80 and then at the May high of $8.90 1/4. First support is seen at $8.50 and then at $8.40.
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 81 points to 77.86 cents, the lowest close since Dec. 12.
Fundamental analysis: Cotton futures extended lower for the fourth straight session as weekend rains in key U.S. growing areas enhanced the production outlook, largely overshadowing supportive outside markets.
Beneficial rains fell on parts of west Texas, southwestern Oklahoma and the Panhandle over the weekend, but much of the rain was light and quickly lost to evaporation, while excessive heat stressed cotton in a large part of West Texas, according to World Weather Inc. Meanwhile, drying in the southeastern U.S. recently has improved the excessive moisture situation, with periods of rain and sunshine expected for the Delta and southeastern states. However, the forecaster states significant stress is expected in west Texas and southwestern Oklahoma through Friday from a lack of soil moisture and hot to excessively hot temps before cooler temps and some showers bring temporary relief to the crop.
USDA will update planting progress and condition ratings this afternoon. Last week cotton plantings were estimated to be 89% complete, while conditions were rated 54% “good” to “excellent,” which was down from 59% the previous week and 68% a year-ago.
Technical analysis: December cotton fell under continued pressure, with technicals weakening further, as evidenced by a close below initial support at 77.90 cents. Continued selling will find bears now targeting 77.12 cents, which now serves as initial support, with next support at 76.05 cents. However, being near-term oversold could induce corrective buying towards 79.75 cents, with the 10- and 20-day moving averages of 80.01 and 80.58 cents serving up the next battle for bulls. From there resistance stands at 80.82 cents and at the 40-day moving average of 81.08 cents, and again at 81.60 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.
