Crops Analysis | July 5, 2023
Price action: December corn was unchanged at $4.93 1/2, marking a mid-range close after posting the lowest intraday level since October 2021.
Fundamental analysis: Selling into the close dampened confidence around corn futures seemingly discovering a near-term low this morning, as notable strength in the wheat complex pulled futures from early losses around mid-morning. Pressure likely continues to stem from last week’s acreage surprise along with improved condition ratings in the wake of weekend rains across the Corn Belt. When USDA’s weekly condition ratings are plugged into the weighted Pro Farmer Crop Condition Index (CCI; 0-to-500-point scale, with 500 representing perfect), the corn crop gained 1.8 points to 339.6, but is still 24.5 points under year-ago.
Crop consultant Dr. Michael Cordonnier kept his yield estimate unchanged at 175 bu. per acre due to increased moisture across the Corn Belt, though he adopted USDA’s updated acreage estimates and now projects the 2023-24 crop at 15.1 billion bushels.
World Weather Inc. notes mild temps through the next ten days, combined with regular rounds of showers into late next week will allow corn pollination and crop development to occur in a mostly favorable environment. However, a close watch will continue on the rainfall distribution from eastern Kansas to central and southeastern Missouri where additional rain is needed to restore the soil moisture to favorable levels. The forecaster indicates much of the rain during the next two weeks is not likely to be heavy and many areas should dry down overall, leading to a need for timely rain to continue late this month to prevent an increase in crop stress.
USDA’s Weekly Export Sales Report will be delayed until Friday due to Tuesday’s holiday.
Technical analysis: December corn carved a choppy range following the Independence Day holiday, with an early breach of support at $4.86 1/2, a level not traded since mid-October of 2021. While the level provided notable support in today’s session, a consecutive test of the area will find bears then targeting $4.79 1/2, $4.70 1/4 and $4.65. However, near-term oversold conditions could spark corrective buying, though efforts will likely continue to be stifled at $5.02 3/4, then $5.12 and $5.19. A turn above these levels will then find solid resistance at 40-day moving average of $5.36 1/4, then at the 100-, 10- and 20-day moving averages of $5.52 1/4, $5.53 1/4 and $5.54 1/4, respectively.
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 rose 1 1/4 cents to $13.55 and near mid-range. August soybean meal fell $1.60 at $410.10 and near mid-range. August bean oil rallied 136 points to 65.03 cents. Prices closed nearer the session high and hit a seven-month high.
Fundamental analysis: The soybean bulls got no more traction today from last Friday’s surprisingly bullish USDA planted acres report. That suggests the bullish news was quickly factored into futures market prices. The slumping corn futures market has limited speculator buying interest in soybeans.
USDA Monday afternoon rated 50% of the U.S. soybean crop as “good” to “excellent” as of last Sunday. Weather in the U.S. Midwest leans neutral at present. World Weather Inc. today said mild temperatures in the region through the next ten days and regular rounds of showers into late next week will allow crop development to occur “in a mostly favorable environment.” Temperatures will be mild through much of the next week and highs in the middle 70s to the middle 80s will be most common overall. Much of the rain during the next two weeks is not likely to be heavy and many areas should dry down overall, “leading to a need for timely rain to continue late this month to prevent stress to crops from increasing.”
Because of the Independence Day holiday Tuesday, soybean traders this week will have to wait an extra day for the weekly USDA export sales report, which is out Friday morning.
Technical analysis: November soybean futures prices hit a more-than-four-month high Monday and have since backed off, suggesting the bulls are exhausted. The bean bulls still have the overall near-term technical advantage. Bulls have restarted a four-week-old uptrend on the daily bar chart. The next near-term upside technical objective for the soybean bulls is closing November prices above solid resistance at $14.00. The next downside price objective for the bears is closing prices below solid technical support at $13.00. First resistance is seen at today’s high of $13.78 3/4 and then at this week’s high of $13.91 3/4. First support is seen at today’s low of $12.38 and then at $13.25.
The meal bulls and bears are on a level overall near-term technical playing field. However, the bulls appear exhausted. The next upside price objective for the meal bulls is to produce a close in August futures above solid technical resistance at the June high of $438.90. The next downside price objective for the bears is closing prices below solid technical support at the May low of $381.80. First resistance comes in at $420.00 and then at $425.00. First support is seen at today’s low of $406.10 and then at $400.00.
Soybean oil bulls have the solid overall near-term technical advantage. Prices are in a steep five-week-old uptrend on the daily bar chart. The next upside price objective for the bean oil bulls is closing August prices above solid technical resistance at the November 2022 high of 68.52 cents. Bean oil bears' next downside technical price objective is closing prices below solid technical support at 60.00 cents. First resistance is seen at today’s high of 65.67 cents and then at 66.00 cents. First support is seen at today’s low of 63.88 cents and then at 63.00 cents.
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: September SRW futures rose 32 1/2 cents before settling at $6.74 1/4. September HRW futures led the complex higher, rallying 49 3/4 cents before closing at $8.46 1/4. September spring wheat futures rose 48 1/4 cents to $8.57 1/2.
Fundamental analysis: Wheat futures surged today amid corrective buying after plunging over a dollar in the prior six trading sessions. Spring wheat condition ratings continue to deteriorate despite rains in the northern Plains over the past week, a bad sign potentially indicating crops have irreversible damage. USDA now has its spring wheat crop rating at 48% “good” to “excellent,” down two points from the previous week. On our CCI, the spring wheat crop fell another 4.8 points to 333.5, which was 34.9 points (9.5%) lower than last year.
Heavy rain continues to fall over Kansas and Oklahoma, delaying harvest and raising concerns over crop quality. Excessive rain and heat can lead to head sprouting, which would likely not affect the futures market, but would affect local cash markets. World Weather Inc. says “showers and thunderstorms are expected to continue today through Saturday from Nebraska to the Texas Panhandle with a brief break in the rain Sunday and Monday.” Harvest is already off to the slowest start since 2019 and rain shows no signs of letting up anytime soon.
Technical analysis: September SRW futures surged on corrective buying, although Friday’s high pared gains. Price is now looking to break either below the June 14 low of $6.36 3/4 or above the June 30 high of $6.80 3/4 to determine the next leg of this move. A break higher will target 100-day moving average resistance at $6.94 before the recent high-close at $7.52 3/4. Bears are looking to take out support at $6.36 3/4 before targeting further support at $6.25.
September HRW futures remain in a volatile sideways range. Price settled just below the 200-day moving average at $8.49 1/4 today which will act as first resistance. Last week’s high of $8.88 1/2 is the bull’s ultimate target, a daily close above which will target the May 17 high at $9.02. Bears are looking to defend the 200-day moving average and break price back below 40-day moving average support at $8.21 3/4 before targeting Monday’s low of $7.87 1/4.
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 118 points to 80.23 cents and nearer the session low.
Fundamental analysis: It appears last Friday’s price-friendly USDA cotton acreage data was quickly factored into futures as prices sold off today. Solid gains in could failed to help the cotton market bulls, as it appears the stronger U.S. dollar index offset the higher oil prices.
World Weather Inc. today reported most U.S. cotton areas were dry Monday into Tuesday, with beneficial rain noted in southwestern Oklahoma and parts of the northern Coastal Bend. Rain will be too light and infrequent in much of West Texas, southwestern Oklahoma, and the Texas Panhandle during the next two weeks to prevent many areas from seeing increases in crop stress, especially when temperatures warm this weekend into next week. “Stress to cotton should increase overall during the next two weeks in the Blacklands, Coastal Bend, and south Texas, where mostly dry and hot conditions during much of the period will erode the remaining soil moisture with showers into Friday not likely to do more than temporarily improve conditions for cotton.”
The weekly USDA export sales report will be delayed one day, to Friday morning, due to the Independence Day holiday on Tuesday.
Technical analysis: Cotton futures bulls and bears are on a level overall near-term technical playing field. The next upside price objective for the cotton bulls is to produce a close in December futures above technical resistance at the April high of 84.50 cents. The next downside price objective for the cotton bears is to close prices below solid technical support at the June low of 76.81 cents. First resistance is seen at today’s high of 81.38 cents and then at 82.00 cents. First support is seen at 79.00 cents and then at 78.00 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.
