Crops Analysis | July 12, 2023
Price action: December corn fell 17 3/4 cents to $4.83 3/4, ending near the session low.
Fundamental analysis: Corn futures succumbed to pressure amid an overall more bearish than expected tone in USDA’s supply and demand updates. Notable losses in soybeans and wheat pulled corn futures lower despite lower-than expected 2022-23 ending stocks at 1.402 billion bu. and a four-bushel yield reduction to 177.5 bu. per acre, which left ending stocks only 5 million bu. higher than the June estimate. Global ending stocks also fell short of pre-report estimates, with 2022-23 estimated at 296.30 MMT, down 1.25 MMT from June and 2023-24 at 314.12, up slightly from June, but below the average pre-report estimate.
With the July WASDE data now recorded, weather will jump back in the driver seat. World Weather Inc. indicates as long as showers and thunderstorms occur as advertised through next Wednesday, improving to favorable conditions for corn pollination and other crop development will continue in much of the Midwest while temps remain mostly mild through late next week. The forecaster notes, however, that a close watch will continue on rainfall distribution from eastern Kansas to southeastern Missouri where additional precip is needed to restore the soil moisture.
The government will produce its weekly export sales data for the week ended July 6. Traders are expecting both old and new crop sales to range from 50,000 to 400,000 MT. Last week USDA reported net sales of 251,693 MT for 2022-23 and 418,031 MT for 2023-24.
During the week ended July 7, ethanol production averaged 1.032 million barrels per day (bpd). That was down 28,000 bpd from the previous week but up 2.7% from the same week last year. Ethanol stocks rose 398,000 barrels to 22.658 million barrels.
Technical analysis: December corn carved a fresh contract low, with bears gaining technical traction with a close below support at $4.94 1/2, $4.87 3/4. A push lower will continue to find support at $4.82 1/4, with minimal support from there. Near-term oversold conditions since the end of June could spur correcting buying efforts, though solid technical headwinds are present. A turn higher will find resistance initially at today’s failed support levels, then at the 10-day moving average of $5.03 1/2, again at $5.07 1/4, $5.13 1/4 and $5.20.
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 fell 32 1/2 cents to $13.27 3/4 and near the session low. August soybean meal lost $5.30 to $410.90 and near the session low. August bean oil closed down 29 points at 64.34 cents, near mid-range and saw profit taking after hitting a seven-month high Monday.
Fundamental analysis: The soybean complex futures saw selling pressure today as weather in the Corn Belt has turned wetter. World Weather Inc. today said as long as showers and thunderstorms occur as advertised through next Wednesday, improving to favorable conditions for crop development will continue in much of the Corn Belt. Temperatures will remain mostly mild through late next week. A transition to drier weather will begin July 20 and continue through at least July 26, leaving much of the region in need of a boost of rain, as rain through next Wednesday is not likely to leave a large part of the region with an abundance of soil moisture, said the forecaster.
USDA’s monthly supply and demand report today (WASDE) was deemed neutral. The agency raised its old-crop U.S. soybean ending stocks 25 million bu. from last month. The agency left its old-crop average cash soybean price at $14.20. USDA cut projected new-crop soybean ending stocks 50 million bushels. Total supply was lowered 185 million bu. to reflect the smaller acreage estimate from the June 30 Acreage Report, although estimated yield was left unchanged at 52. USDA raised its 2023-24 soybean cash price forecast by 30 cents from last month to $12.40.
Soybean bulls were disappointed the steep drop in the U.S. dollar index to a two-month low today could not support the market. However, the down-trending USDX is likely to offer at least some support for the grain markets in the near term.
USDA earlier this morning also reported daily U.S. soymeal sales of 105,000 MT to unknown destinations for 2023-24.
Traders will closely examine Thursday morning’s weekly USDA export sales report, which is expected to show U.S. soybean sales of zero to 300,000 MT for the 2022-23 marketing year, and sales of 100,000 to 600,000 MT for the 2023-24 marketing year.
Technical analysis: November soybean futures prices scored a bearish “outside day” down on the daily bar chart today. The bean bulls still have the overall near-term technical advantage as prices are in a six-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 $13.50 and then at today’s high of $13.78. First support is seen at today’s low of $13.25 1/2 and then at $13.15 1/2.
The soybean meal bulls and bears are on a level overall near-term technical playing field. 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 today’s high of $425.60. First support is seen at $410.00 and then at Tuesday’s low of $405.90.
Soybean oil futures bulls still 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 this week’s high of 66.27 cents and then at 67.50 cents. First support is seen at this week’s low of 62.57 cents and then at 61.00 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 led the wheat complex lower, falling 27 3/4 cents to $6.32 3/4. September HRW futures fell 14 cents on the session before settling at $8.03. September spring wheat futures fell 8 1/2 cents to $8.59 1/2.
Fundamental analysis: Wheat bulls lost their footing as USDA came in with higher production estimates than the market anticipated. Wheat stocks for the 2023-24 marketing year came in a little higher than trade expected at 592 million bushels. This is largely due to an increase in production for winter wheat. Winter wheat production came in 50 million bushels higher than trade expected at 1,206.4 million bushels, led by increases in HRW and SRW production. Other spring wheat production came in line with trade expectations at 479 million bushels. USDA opted to hold off on making any significant changes to other spring wheat production despite crop conditions being well below average, which sent prices lower following the report. Durum production came in below trade estimates at 54 million bushels.
USDA matched the June 30 Quarterly Stocks report for ending stocks, bringing carry-in lower for the 2023-24 marketing year. The new crop balance sheet was left unchanged on the demand side, apart from a 20 million-bushel jump to 90 million bushels in the Feed and Residual category. This is likely due to the relative “cheapness” of wheat for cattle feed, as well as any potentially damaged wheat used for feed from the recent excessive wetness in the Plains. USDA now sees the balance sheet as expanding over the next year, but that can change if production hits are realized in the northern Plains, due to excessive dryness thus far this summer.
Harvest of winter wheat will continue at a stop-and-go pace as thunderstorms will continue to roll through the Plain states. Storms are expected to occur most days through next Tuesday, along with high temperatures in the 80’s and 90’s, reaching well into the 100’s in some of the southernmost states, World Weather Inc says. Some concerns remain over quality, but a large portion of the unharvested crop is still in good condition.
USDA is set to release export sales tomorrow morning with analyst’s expecting sales of 50,000-550,000 MT for the 2023-24 marketing year, last week saw net sales of 405,763 MT.
Technical analysis: September SRW futures led the wheat complex lower today as prices underwent a technical breakdown on the daily bar chart. Bears are in control of the technical advantage, targeting the June 1 low of $5.87 3/4. Additional support will come in at $6.25 on the way, as well as the psychological $6.00 level. Bulls are targeting a retest of the converged 10-, 20- and 40-day moving averages at $6.58 1/2, 6.64 3/4 and $6.66, respectively. Further selling would target the July 5 high of $6.80.
September HRW futures saw losses on the day but remain in a largely sideways pattern. Price will be supported by nearby $8.00 support, backed by the July 3 low of $7.87 1/4. Further selling will target the May 31 low at $7.61 3/4. Bulls are aiming to take out $8.20 resistance, backed by $8.45 then the key $8.75 level.
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 47 points to 81.65 cents and near the session low. Prices hit a six-week high early on today.
Fundamental analysis: The cotton market fell victim to solid losses in the corn, soybean and wheat futures markets today. A bearish monthly USDA report late this morning added to the selling pressure in cotton. USDA raised its old-crop cotton ending stocks estimate by 50,000 bales from last month. USDA left its old-crop cotton cash price forecast at 82.0 cents. The agency raised projected new-crop cotton ending stocks 300,000 bales from last month. USDA cut the yield projection by 10 lbs. to 831 lbs. per acre. Overall, that resulted in a 50,000-bale increase in total supply. Total use was cut 250,000 bales due to a smaller export projection. USDA lowered its 2023-24 cash cotton price forecast by a penny to 76.0 cents.
Selling interest in cotton was limited today by a sharp drop in the U.S. dollar index to a two-month low and a rally in crude oil prices to a 2.5-month high.
Traders will closely examine Thursday morning’s weekly USDA export sales report, especially numbers from China.
Technical analysis: Cotton futures bulls and bears are on a level overall near-term technical playing field amid choppy and sideways trading. 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 82.50 cents and then at today’s high of 83.10 cents. First support is seen at 81.00 cents and then at 80.00 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.
