Crops Analysis | July 14, 2023
Price action: December corn rallied 13 1/4 cents on the session to $5.13 3/4, the highest level since the June 30 breakdown, and rose 19 1/4 cents on the week to settle near the weekly high.
5-day outlook: The aftermath of this week’s WASDE report showing higher ending stocks than expected is still shaking out in December futures, with trade in the latter half of the week proving bullish, albeit with some challenges today. Price has remained largely sideways since the June acreage report. The breakdown from the July 5 low on Wednesday this week indicated that more weakness was likely in store, but bulls proved stronger than expected, and were vindicated with a robust weekly export sales number on Thursday. Bulls’ followthrough buying today sent price through resistance zone that has capped all the upside since the June 30 report. Bulls have proved far more resilient than most would have thought, and while the overall tone remains bearish, additional buying is likely in store over the course of the next week.
30-day outlook: Weather will continue to be a driving force as production prospects are better realized over the course of the next month. The USDA cut expected yield 4 bushels this week to 177.5 bushels per acre. Many thought this was not enough, although the data only shows that there is no real correlation between additional cuts to yield or if the final yield will end up higher. This uncertainty will continue to add volatility in the market until a better idea of how yield will turn out is realized. Recent rains have reduced crop stress, but rains have come on an “as needed” basis and soil moisture is anything but abundant. Rain is expected to fall on a regular basis through next Friday, but conditions are expected to dry out after that, says World Weather Inc. Meanwhile, the northern Plains are expected to continue to dry out over the next week, although below average temperatures will help minimize evaporation, according to World Weather Inc.
90-day outlook: A record Brazilian crop, weakening domestic demand and harvest pressure will likely keep a lid on prices over the next quarter. The USDA slashed old crop exports in Wednesday’s supply and demand report but opted to leave new crop exports unchanged. As it stands, the balance sheet is expanding to the highest level since 2017. Unless the recent uptick in exports continues or domestic use rises more than expected, the oversupply of corn will continue to weigh heavily on corn prices in the intermediate future.
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 a penny to 13.70 3/4 and gained 53 cents on the week. August meal rose $1.50 to $423.80 and is up $18.00 on the week. August soyoil fell 64 points to 65.05 cents but rose 248 week-over-week.
5-day outlook: November Soybeans failed to muster the strength to make a move above stiff technical resistance around $13.85 in a run toward the July 3 high to end the week. Bulls may be pausing after recapturing mid-week losses from USDA’s more bearish-than-expected data, though the coming days will prove a testament to the bulls’ conviction of an earnest push towards the psychological $14.00 level. The technical near-term advantage certainly lies in bullish favor, with the 10-day moving average serving as solid initial support. In the near-term, soybeans will take direction from outside markets as well as NOPA crush data and implications of the possible nonrenewal of the Black Sea grain deal.
30-day outlook: Weather will be the main soybean market driver over the next month as the crop enters its crucial growing phase beginning the end of this month and into August. World Weather Inc. notes a transition to drier weather in the Northern Plains and upper Midwest, which will begin July 21 through at least July 28 and leave much of the region in need of a boost of rain, as warmer temps are expected. This will likely increase concern for crops in the Dakotas, Minnesota, Montana and possibly northern Iowa.
90-day outlook: U.S. exports will continue to be the long-term focus as the 2022-23 marketing year winds down and a fresh one begins. Importing countries have recently been looking to fresh Brazilian supplies amid a bumper crop. Customs data revealed this week that China imported 10.27 MMT of soybeans in June, which was up 24.5% from the 8.25 MMT imported in June 2022. Going forward, Chinese imports are expected to be between 10 and 11 MMT in July, but demand is likely to slow after that amid diminished feed demand from the hog industry. For the week ended July 6, USDA reported net sales of 80,600 MT for 2022-23, which were down 57% from the previous week and 76% from the four-week average. Meanwhile, net sales of 209,300 MT for 2023-24, with primary destinations being Japan, Mexico and Indonesia. Traders were expecting sales to range from 0-300,000 MT for 2022-23 and between 100,000 and 600,000 MT for 2023-24.
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 rose 21 1/4 cents to $6.80 3/4 and near the session high. For the week, December SRW rose 14 1/4 cents. December HRW wheat gained 22 3/4 cents to $8.33 1/2, near the daily high and for the week up 14 cents. December spring wheat rose 22 1/4 cents to $8.89 1/2, a 35-cent gain on the week.
5-day outlook: Friday’s technically bullish weekly high closes in winter wheat futures suggest follow-through chart-based buying next week. Wheat traders will continue to follow the lead of the corn futures market, which has rebounded smartly from this week’s low, to suggest more upside for that market, too.
Weather and winter wheat harvest progress will continue to be on the front burner of the futures markets next week. The HRW harvest progress has been slow, as seen by the Kansas harvest at 59% complete as of last Sunday, versus the five-year average at 84%. World Weather Inc. today said some localized pockets of HRW country may still get too much rain, leading to possible winter wheat quality declines and some additional flooding. Still, a majority of the unharvested wheat will remain in favorable condition, said the forecaster. In the northern Plains, World Weather said dryness will become more of a concern in the next seven days due to limited rainfall. “A heavier, more widespread rain event is needed and is unlikely in the next two weeks; though, some shower and thunderstorm activity will occur, especially in eastern production areas.” Alberta declared an “agricultural disaster” this week, with the HRS situation in Saskatchewan said to be even worse. The North Dakota wheat crop is also beginning to deteriorate. The drought may power an HRS rally in the near term and in turn support winter wheat prices.
30-day outlook: The keen uncertainty around the extension of the Black Sea grain-shipping deal will likely keep a floor under wheat futures prices in the coming weeks. Turkey’s President Tayyip Erdogan said today the Black Sea grain deal will hopefully be extended beyond the July 17 deadline due to efforts by Turkey and the United Nations.
90-day outlook: The U.S. dollar index dropped sharply and hit a 15-month low this week. Meantime, USDA this week reported U.S. wheat export sales of 395,700 MT for 2023-24, down slightly from the previous week. The depreciation of the greenback should make U.S. wheat more price-competitive on the world trade markets in the coming weeks.
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 46 points to 81.22 cents and for the week rose 5 points.
5-day outlook: December cotton extended lower for the third straight session and edged below the 100-day moving average to end the week. Stabilization in the U.S. dollar index today and weakness in crude oil weighed on the natural fiber, along with lingering effects of USDA’s bearish supply and demand data reported at mid-week and a sharp drop in U.S. export sales. Next week, the natural fiber will continue to find direction from outside markets and weekly export sales data.
30-day outlook: Weather will continue to prove a market driver as the growing season progresses. World Weather Inc. indicates short soil moisture, hot to excessively hot temps and a lack of significant rain during the next two weeks in much of West Texas will lead to rising levels of stress and declines in yield potentials in dryland areas. The forecaster notes the Panhandle and southwestern Oklahoma will experience showers through Sunday which will bring enough rain along to adequately support cotton development when drier weather returns next week with a growing need for rain later this month. Meanwhile, stress to cotton is expected to 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.
90-day outlook: Traders will continue to closely monitor U.S. export business as the 2023-24 marketing year approaches. Earlier in the week, in its China Agricultural Supply and Demand Estimates (CASDE), the country reported cotton imports are expected to fall 400,000 tons from last month to 1.45 MMT. The cut stemmed from expectations of a 100,000 MT drop in consumption to 7.4 MMT, due to less raw material demand from textile manufacturers. Meanwhile, for week ended July 6, USDA reported weekly export sales of 23,100 RB, which were down 79% from the previous week and 76% from the four-week average. Net sales of 51,000 RB were also reported for 2023-24. Shipments totaled 208,300 MT during the week, which were down 20% from the previous week and 14% from the four-week average.
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.
