Crops Analysis | July 11, 2023
Price action: December corn futures closed up 2 cents at $5.01 1/2 and nearer the session high.
Fundamental analysis: The corn market saw more tepid short covering today after December futures hit a 21-month low last week. Moderate gains in soybean and wheat futures also supported some buying interest in corn today. The key outside markets were also friendly for corn as the U.S. dollar index was weaker and crude oil prices were solidly up.
USDA on Monday afternoon raised its “good” to “excellent” crop conditions rating for corn to 55%, a four-point increase and one percentage point more than traders expected. 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 improved 5.1 points to 344.6, though that was still 20.5 points (5.6%) behind last year at this time.
World Weather Inc. today reported that “as long as showers and thunderstorms occur as advertised through July 19, improving to favorable conditions for corn pollination and other crop development will continue” in much of the Corn Belt. Temperatures will remain mostly mild through early next week. A closer watch will continue for rainfall distribution from eastern Kansas to central and southeastern Missouri, “where additional rain is needed to restore the soil moisture to favorable levels,” said the forecaster.
Focus Wednesday will be on the late-morning monthly USDA supply and demand report, including fresh estimates on the size of the U.S. corn crop.
Technical analysis: The corn futures bears still have the solid overall near-term technical advantage. Prices are in a steep downtrend on the daily bar chart. A bear flag pattern has formed on the daily bar chart. The next upside price objective for the bulls is to close December prices above solid chart resistance at $5.40. The next downside target for the bears is closing prices below chart support at $4.75. First resistance is seen at $5.10 and then at $5.15. First support is at $4.92 1/2 and then at last week’s low of $4.85 1/2.
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 edged 14 3/4 cents higher to $13.60 1/4, while August meal rose $10.40 to $416.20. August soyoil fell 70 points to 64.63 cents.
Fundamental analysis: Meal strength along with USDA’s updated crop condition scores lent soybeans additional momentum, though position-squaring ahead of USDA’s supply and demand updates tomorrow likely bridled upside. In its weekly Crop Progress report, the government raised its “good” to “excellent” rating one percentage point to 51%, while traders were expecting a two-point increase from the previous week. On the Pro Farmer Crop Condition Index (CCI; 0 to 500-point scale, with 500 representing perfect), the soybean crop improved 3.3 points to 331.7, which was still 24.7 points (6.9%) behind a year-ago. Most of the improvements were found in the central and southern areas while declines were found in the northern areas, notes crop consultant Dr. Michael Cordonnier. He states the top five rated states are Louisiana, Mississippi, North Carolina, Tennessee and Arkansas, while the five lowest include Missouri, Michigan, Illinois, Wisconsin and North Dakota. Cordonnier kept his yield estimate unchanged at 50.5 bu. per acre, and projects production at 4.17 billion bu.
World Weather Inc. states northwestern U.S. production areas are not likely to see high volumes of rain for a while, with low moisture profiles in Minnesota, Wisconsin, parts of Iowa and Missouri causing concern. However, the forecaster notes Missouri rainfall may be significant later this week and relief in Iowa will likely be “partial.”
Following USDA’s Acreage Report, traders expect a large cut to 2023-24 ending stocks from 350 million bu. reported in June. Traders anticipate ending stocks of 199 million bu., which would include a half bushel yield reduction, though estimates ranged from 128 to 280 million bu.
Technical analysis: Bulls gained a bit more of an edge today, as evidenced by a close above initial resistance at $13.60. Initial resistance will now serve at $13.74 1/2, with the July 3 high of $13.91 3/4, the next major area of resistance for the bull camp. Success above here and then $13.95 3/4 will likely result in increased momentum above psychological resistance of $14.00. Conversely, initial support will continue to serve at $13.38 3/4, then at the 200-, 10- and 20-day moving averages of $13.32 1/4, $13.24 and $13.12 3/4, respectively. A move below these levels will find bulls handing over control to bears who would need to then press below the next areas of support at $13.03 1/4 and $12.88 1/2 in order to grasp the full near-term technical advantage.
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 up 14 1/2 cents at $6.78. December HRW wheat rose 6 1/4 cents at $8.20 1/2. December spring wheat rose 11 1/4 cents to $8.68. Prices closed nearer their session highs.
Fundamental analysis: Short covering was featured in the winter wheat futures markets today. The key outside markets were also friendly for wheat as the U.S. dollar index was weaker and crude oil prices were solidly up. World wheat supply concerns are still elevated as the deadline for the Black Sea grain-shipping deal expiration is less than one week away.
USDA Monday afternoon reported the U.S. spring wheat rating fell to 47% “good” to “excellent,” down one point from the previous week. On the Pro Farmer weighted CCI, the spring wheat crop dropped another 5.1 points to 328.4, which trails last year at this time by 47.2 points (12.6%).
World Weather Inc. today reported additional thunderstorm complexes in the first week of the outlook will further benefit the winter wheat crop. “Some areas may get too much rain again, leading to possible winter wheat crop quality decline and some additional flooding.” In the northern Plains, the forecaster said conditions will be mostly good in the next seven days. However, northern production areas of the region “could use greater rainfall, especially northern Montana. Unusually cool conditions will help limit evaporation rates.”
Wheat traders are awaiting the latest USDA monthly supply and demand report that is out late Wednesday morning.
Technical analysis: SRW bears still 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 today’s high of $6.82 1/4 and then at $7.00. First support is seen at last week’s low of $6.57 1/4 and then at $6.50.
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 this week’s high of $8.31 1/2 and then at $8.50. First support is seen at this week’s low of $8.13 1/2 and then at $8.00.
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 287 points to 82.12 cents, the contract’s largest daily gain since last November.
Fundamental analysis: Bulls were able to make a solid comeback, recapturing all of Monday’s losses in the December contract. Crude oil strength combined with more upbeat sentiments across equities and a weaker U.S. dollar amassed a recipe of positive energy for the natural fiber. Most notably, oil prices surged higher amid supply cuts by the world’s biggest exporters and hopes for higher demand in the developing world in the second half of 2023 despite a sluggish economic outlook.
Weather continues variable across key U.S. cotton-growing regions. World Weather Inc. states Texas crops will continue stressed for another ten days except in the Panhandle and Red River Valley where timely rain is expected. Rain will fall favorably in southwestern Oklahoma, the Delta and southeastern states while the far western U.S. crops will be very dependent upon irrigation water because of moisture shortages and excessive heat.
USDA reported 48% of cotton was in “good” to “excellent” condition, unchanged from the previous week and ahead of 39% at the same time a year ago. However, the portion of the crop rated “poor” to “very poor” rose 4 percentage-points to 25% and is on the heels of last year’s rating of 27% at the same time.
Technical analysis: Cotton bulls showed up in full force today, proving their work isn’t finished with a solid technical close above the 10-, 20-, 40- and 100-day moving averages of 79.76, 79.88, 80.74 and 81.47 cents, respectively. Additional upside momentum will find bulls encountering additional resistance at 82.09 and 82.94 cents, then again at the May 19 high of 84.30 cents. However, near-term oversold conditions could spur profit-taking, though today’s failed resistance levels will serve as support, along with 78.40 and 70.55 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.
