Crops Analysis | June 30, 2023
Price action: December corn futures gave up corrective overnight gains and fell 33 3/4 cents to $4.94 3/4, falling 93 1/4 cents on the week. Expiring July futures ended the session down 26 1/2 cents at $5.54 1/2, ending the week 74 1/4 cents lower.
5-day outlook: Corn futures plunged following expected plantings coming in much higher than anticipated. Today’s acreage report showed planted corn acres at 94.096 million acres, up from the March report at 91.966 million acres and well above analysts’ average forecast at 91.853 million acres. December futures have lost over $1.25 from last week’s high and prices are oversold, which could indicate a corrective bounce in the next week. Price is quickly approaching the May low as well which will act as significant support. Acres had a great effect on price today, but this continues to be a weather driven market. Technically oversold conditions could favor the bulls in the week ahead, but this continues to be the most volatile time of the year and next week is likely to be no different.
Next week’s shortened schedule will likely have lower volume than normal as many will take Monday off ahead of Independence Day. The USDA is set to release crush for ethanol use on Monday, with a Bloomberg survey of analyst showing an expected 431.3 million bushels crushed, down from last year at 446.6 million bushels.
30-day outlook: Weather will continue to drive corn prices over the next month. Rain along with severe thunderstorms are expected to roll across the Corn Belt in the coming week, supporting pollination for a large part of the crop, World Weather Inc says. Rain prospects remain better than most of June for the middle and latter half of July, but it will not be perfect as some dryness is expected to prevail, the forecaster says. The crop is certainly not made and additional acres are not as productive as the baseline. Historical data suggests this crop is not going to make a record yield, which the USDA has yet to budge on. Timely rains throughout July will certainly help the crop, but it is uncertain how much of top end yield prospects have already been taken out due to prolonged dryness in the late spring and early summer.
90-day outlook: While recent price action has been weather driven, there was significant selling earlier this year due to waning demand prospects. Demand has not had a noticeable improvement on exports or corn-for-ethanol, but today’s Quarterly Stocks report showed a tightening balance sheet none-the-less. June stocks came in at 4.106 billion bushels, well below the trade average at 4.255 billion bushels. This is due to feed and residual use coming in higher than expected and may indicate a cut to old crop production in the coming months. If rain comes throughout pollination and grain fill stages, the market is back at the demand problem that drove price lower this spring. Unless demand improves, recent weakness is likely to continue into harvest.
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: November soybeans surged 77 1/2 cents to $13.43 1/4, gaining 33 1/4 cents on the week and a whopping $1.96 3/4 on the month. August meal rose $17.00 to $413.90, for a $6.50 week-over-week gain, and $26.10 increase on the month. August soyoil rose the limit of 400 points to 61.70 cents, rising 370 points on the week and notching a solid monthly gain of 1,539 points.
5-day outlook: USDA’s Acreage Report sent bullish shockwaves across the market in the wake of a 4-million-plus acre variance from the average pre-report estimate. The survey-based report projected 2023 U.S. planted acreage of 83.5 million, well below expectations of around 87.7 million and down 5% from year-ago. Soybean acreage was reported to be unchanged or lower in 21 of 29 surveyed states. USDA also noted that at the time of the survey, conducted from May 30 to June 15, 8.22 million acres of soybeans were yet to be planted. Furthermore, June 1 stocks landed lower-than-expected at 796 million bu., which was below pre-report estimates of 812 million bu. and is down 18% from a year ago. Shortened by the Fourth of July holiday, next week will see follow-up trade from today’s data.
30-day outlook: With notably smaller soybean acres, weather over the next month will be especially significant. Market volatility could prove unprecedented as the most crucial growing phase will occur in the days to come. The Midwest weather pattern has seemingly done an about-face in the past week, turning from terribly dry throughout most of June to stormy and wet to the end of the month. Rains are expected to continue into July, further bolstering soil moisture, but could likely be accompanied by severe weather, as seen throughout the Corn Belt over the past few days.
90-day outlook: Export activity will remain a focus as the 2022-23 marketing-year nears its end, and a fresh one begins. The data will continue to help provide insight into global demand and the world economy. Since Brazilian harvest efforts of a record crop began earlier this year, U.S. export business has largely dwindled as importing countries look to South America’s fresh supply to fulfill their needs. Export commitments are running 12.8% behind year-ago and lag USDA’s projections for the year by nearly 10% with two months remaining in the marketing year.
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 futures fell 15 1/4 cents to $6.69 ¼, finishing near the session low. For the week, December SRW lost 92 1/2 cents. December HRW wheat futures fell 1 1/4 cents to $8.00 1/4, near the session low. On the week, December HRW dropped 62 3/4 cents. Spring wheat futures fell 13 1/4 to $8.21 3/4, losing 58 cents on the week.
5-day outlook: The low-range closes in winter wheat futures today that also included technically bearish weekly low closes in December contracts set the table for follow-through selling pressure early next week. Trading volumes Monday will likely be lighter ahead of the Independence Day holiday on Tuesday when markets are closed. History shows trading in the days just after the July Fourth holiday can set the tone for grains price action the rest of the summer. Wheat futures will continue to be heavily influenced by the corn market.
USDA today reported all U.S. wheat acres declined 227,000 acres from March intentions to 49.628 million, which was 28,000 acres less than traders expected. U.S. wheat stocks in all positions are down 16.9% from year-ago and are 31 million bu. below the average pre-report trade estimate. However, the huge drop in corn futures prices today, following a surprisingly bearish U.S. corn-planted acreage number, usurped the friendly USDA wheat numbers.
30-day outlook: Traders will continue to monitor winter wheat harvest progress as it moves north in the coming weeks. World Weather Inc. today reported conditions in the first week of the outlook will be mostly favorable. “The extreme heat is exiting, and timely rain is expected. Conditions in the second week may become too wet in some areas, though. Some of the greatest rainfall is likely to occur Tuesday through July 10. Significant rain is expected with this which could lead to flooding in some parts of the region and will likely cause fieldwork delays. Portions of the region, particularly in Kansas and Nebraska, are still in a drought due to long-term moisture deficits that have not been fully replenished yet. The rain in the next two weeks will further reduce the remaining drought,” said the forecaster.
90-day outlook: USDA again this week reported uninspiring U.S. wheat sales abroad, at 155,200 MT for 2023/2024. Exports were 157,600 MT. These numbers will have to improve in the coming months for U.S. wheat prices to make sustained advances. The recent rebound in the U.S. dollar index only makes U.S. wheat less price-competitive on the world market.
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 rose 134 points to 80.37 cents, gaining 170 points on the week and marking a 90-point monthly gain.
5-day outlook: Cotton extended higher amid follow-through corrective buying and USDA’s release of lighter-than-expected 2023 acres. The natural fiber had already achieved a leg up in the previous two sessions as traders expected smaller acres from the government’s initial estimate at the end of March but found reason to move higher on news that acres were even less than the already-lower-expectations. USDA’s projection of 11.1 million acres is down 19% from last year. The updated data will continue to be traded into next week, which is shortened due to the Fourth of July holiday.
30-day outlook: With lighter U.S. acres, weather through the remainder of the growing season will prove especially important. Volatility could increase amid varying weather patterns throughout key growing areas. World Weather Inc. notes Most Texas crop areas continue to get beat up by excessive dryness, a pattern that will linger for another day or two, before some cooling along with showers and thunderstorms occur. The forecaster states that while the rain will be welcome, it will be poorly distributed leaving many areas in need of moisture while others get a short-term period of crop improvement. West Texas will be included in some of the rain with Friday not Saturday the wettest.
90-day outlook: Traders will continue to closely monitor U.S. exports as the 2022-23 marketing year inches closer to its end. Exports have recently proven stable despite concerns of a lackluster Chinese economy and demand in recent weeks. Export data will ultimately help paint the global demand picture and provide insight into the world economy. For the week ended June 22, USDA reported net sales of 125,600 RB for 2022-23, which were up noticeably from the previous week, but down 44% from the four-week average. Top purchasers for the week were China, Vietnam and Taiwan. Meanwhile exports for the week totaled 225,200 RB, a 5% reduction from the previous week and was 17% less than the four-week average. The main destinations included China (53,600 RB), Turkey (46,600 RB) and Vietnam (44,700 RB).
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.
