Crops Analysis | July 6, 2023

Crops Analysis
Crops Analysis
(Pro Farmer)

Corn

Price action: December corn futures rallied 13 cents before closing at $5.06 1/2, near the intraday high.

Fundamental analysis: Corn futures surged on corrective buying as bears lost steam heading into oversold territory, retracing a portion of the $1.40 lost in the past nine trading sessions. Volatility remains elevated compared to historical norms, despite this being the most volatile time of the year. While buyers have stifled sellers today, the increased acreage and wet forecast are still going to weigh on prices in the coming weeks. Even with a 6 bushel per acre cut to yield, the balance sheet is set to expand by nearly 800 million bushels year over year. Barring another flash drought, the recent weakness is likely to continue unless crop damage is far more than the market currently anticipates.

Rain fell throughout portions of the eastern Corn Belt Wednesday as temperatures were in the upper 80s and lower 90s. Mild temperatures are expected over the next ten days along with regular bouts of precip into next Thursday, allowing pollination to occur in a mostly favorable environment, World Weather Inc says. Additional rainfall is needed to return soil moisture to favorable levels, but expected rains will help with near term continued development of the crop as rain is essentially falling on an “as needed” basis.

The USDA is set to release the delayed export sales tomorrow morning. Analysts expect 0 to 500,000 MT for both 2022-23 and 2023-24 crop years. Last week’s sales were 140,400 MT and 123,500 MT, respectively.

Technical analysis: December futures bid back above $5.00 in today’s bullish high range close. As it stands, it appears futures are forming a “bear-flag” pattern on the daily bar chart, which would be confirmed with a daily close below today’s low of $4.92 1/2 and would target $4.50 support. Additional support lies at $4.85 1/2 on the way. Bulls would invalidate this technical pattern with a daily close over $5.20 resistance in the next couple days. Additional resistance comes in at the 10-day moving average and the 40-day moving average at $5.28 and $5.42 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.

 

 

Soybeans

Price action: November soybeans fell 15 1/2 cents to $13.39 1/2, finishing nearer the session low. August meal fell $1.90 to $408.20. August soyoil fell 205 points to 62.98 cents.

Fundamental analysis: The soy complex faced pressure as profit-taking in soyoil futures steered losses. While late-morning trade witnessed the new-crop November contract edge below the 200-day moving average, notable technical support lingers in tandem with increasingly bullish fundamentals following USDA’s surprise acreage figure. Meanwhile, sideways consolidation will likely persist as traders digest forecasts in anticipation of the next move above the June highs, or toward the end-of-May lows.

Several areas of the Midwest are still drier than usual, despite recent rains. World Weather Inc. states northern production areas, along with a large portion of Missouri still need significant rain, especially once warmer weather returns to the region mid-to late-week next week. The forecaster notes, however, lower portions of the Midwest, Delta and Southeast will experience a favorable mix of weather.

USDA will release its weekly export sales data for the week ended June 29 tomorrow morning, delayed a day from its usual release due to Tuesday’s government holiday. Traders are expecting net old-crop sales to range between 100,000 and 350,000 MT and new-crop sales between 0 and 400,000 MT. Last week, USDA reported old-crop sales of 227,375 MT for the previous week, which were down 50% from the week and 28% from the four-week average.

Technical analysis: Attempts to turn below the November contract’s technically significant 200-day moving average of $13.35 3/4 were ultimately thwarted as a solid technical posture persists. However, an additional test of the area could relieve bulls of some confidence, with gathered momentum below the level then finding support at the 10-day moving average of $13.18 3/4 and again at the near convergence of the 100- and 20-day moving averages of $12.91 and $12.90, respectively. A turn below this area will then lend bears the edge toward the recent end-of-May low of $11.30 1/2 but will find support at the 40-day moving average of $12.42 3/4 prior to. Conversely, a move to the upside will continue to find resistance at Wednesday’s close of $13.55, again at $13.76 1/2, then at Monday’s high of $13.91 3/4, $13.98 and $14.17 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.

 

 

Wheat

Price action: December SRW wheat fell 13 3/4 cents to $6.76 1/2 and nearer the session low. December HRW wheat edged up 1/4 cent to $8.44 3/4 and near mid-range. December HRS wheat rose 1 1/4 cents to $8.64 3/4.

Fundamental analysis: The wheat market bulls stood on the sidelines today despite good price gains in the corn market. Commercial hedge pressure from the progressing U.S. winter wheat harvest is a bearish seasonal factor for wheat futures.

Weather in U.S. and Canada wheat country leans neutral to slightly bullish. World Weather Inc. today reported portions of U.S. HRW wheat country will be too wet in the coming week, resulting in some grain quality declines, especially in Kansas and northern Oklahoma. The forecaster said there is also concern over dryness in Canada’s Prairies as well as in a few far northern U.S. Plains locations.

Friday morning’s weekly USDA export sales report (delayed by one day due to this week’s holiday) is expected to show U.S. wheat sales of 50,000 to 350,000 MT in the 2023-24 marketing year. Recent weeks have seen disappointing U.S. wheat export sales numbers.

Technical analysis: SRW wheat futures bears have the overall near-term technical advantage. SRW bulls' next upside price objective is closing December prices above solid chart resistance at $7.25. The bears' next downside objective is closing prices below solid technical support at the May low of $6.08 1/4. First resistance is seen at $7.00 and then at $7.20. First support is seen at today’s low of $6.69 3/4 and then at this week’s low of $6.57 1/4.

HRW bulls and bears are on a level overall near-term technical playing field. The HRW bulls' next upside price objective is closing December prices above solid technical resistance at the January high of $8.93. The bears' next downside objective is closing prices below solid technical support at $8.00. First resistance is seen at today’s high of $8.54 1/4 and then at $8.65. First support is seen at today’s low of $8.30 3/4 and then at $8.25.

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.

 

 

Cotton 

Price action: December cotton fell 35 points to 79.88 cents.

Fundamental analysis: December cotton futures faced a second day of selling as weather conditions improve in key growing areas, while weakness in equities cast a further shadow. Stocks faced pressure amid hawkish sentiments stemming from the minutes of the Federal Reserve’s June meeting, which stated “some participants” favored a rate hike in June or could have supported one. Further, the Fed’s staff economist continues to forecast a “mild recession” to ensue later this year, but also noted the possibility that the economy will continue to grow slowly “was almost as likely” as a downturn.

World Weather Inc. states beneficial rain fell on large parts of the Panhandle, southwestern Oklahoma and northern portions of West Texas Wednesday with several areas seeing enough rain to induce at least temporary improvements in conditions for crop development. However, the forecaster indicates Texas cotton areas still need significant rain after recent weeks of hot, dry weather. Temperatures will not be as hot as last week, but a warmer-than-usual bias is expected along with little to no rain over the next ten days, which will prove stressful.

USDA will release its weekly export data for the week ended June 29 tomorrow morning. Last week, net sales of 125,600 RB were reported for 2022-23, which were up noticeably from the previous week but down 44% from the four-week average.  

Technical analysis: December cotton spent most of the session below the 20-day moving average of 80.00 cents, though enough strength was mustered to hold a close just above the level. A continued test of the area will likely increase bear efforts toward support at 79.39 cents and the 10-day moving average of 79.21 cents. A successful breach of the area will find bears battling support at 78.56 cents and again at 77.56 cents and the June 27 low of 76.81 cents. A move higher, however, will continue to face resistance at 80.39 cents and the 20-day moving average of 80.41 cents, then at 81.22 cents and the technically significant 100-day moving average of 81.60 cents. A move above the 100-day will find bulls regaining control with sights set on tackling resistance at 82.22 and 83.05 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.

 

 

 

 

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