Crops Analysis | July 17, 2023
Price action: December corn fell 7 3/4 cents to $5.06, after trading the highest level since June 30 earlier in the session.
Fundamental analysis: Corn futures retreated from overnight highs as outside market pressure and forecasts for mostly favorable weather through much of the Midwest weighed on prices. USDA’s weekly inspection data also failed to spark trade enthusiasm, though traders will continue to closely monitor Ukrainian grain exports following Russia’s suspension of the Black Sea grain deal.
World Weather Inc. notes mostly mild temperatures through Sunday along with daily rounds of showers and thunderstorms through Thursday will induce favorable conditions for corn pollination and crop development in much of the region. However, there are still several locations in Iowa, Minnesota, the Dakotas and neighboring areas where moisture shortages are persisting despite recent rainfall. The forecaster indicates a transition to drier weather will occur Friday through July 31 along with warmer temps next week, which will cause rapid drying of the soil and increase crop stress in areas.
USDA reported export inspections of 363,818 MT (14.3 million bu.) for week ended July 13, which were up 14,231 MT from the previous week, but near the low end of the pre-report range from 275,000 to 850,000 MT.
Following the close, USDA will update its condition ratings through Sunday. Traders are expecting a two-percentage point increase in the “good” to “excellent” rating to 57%.
Technical analysis: Overnight, December corn gained momentum to breach resistance at $5.20 1/2 for the first time since June 30. While efforts ultimately failed, a continued test of the area would likely see greater momentum toward additional resistance at $5.27 1/4. From there, bulls have significant work to do in order to move above the 40-, 20- and 100-day moving averages of $5.33 1/2, $5.36 1/2 and $5.44 3/4, respectively. Success above these levels will find bulls gaining the full near-term advantage toward the 200-day moving average of $5.75 1/2, then the June 21 high of $6.29 3/4. Conversely, initial support continues to hold at $5.02, along with the 10-day moving average of $4.99 1/4. From there, additional support lies at $4.90 1/2, $4.83 1/2 and at the July 13 low of $4.81.
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 7 1/4 cents to $13.78, the highest close since Feb. 23. August soymeal rallied $10.6 to $434.4. August soyoil fell 29 points before settling at 62.57 cents.
Fundamental analysis: November soybean futures continue to climb higher but were unable to maintain last night’s gap higher caused by increased geopolitical risk around the Black Sea. Strength in corn and wheat following Russia’s formal notification to Ukraine, Turkey and the United Nations that they would suspend their participation in the Black Sea grain deal until the agreement surround Russian agricultural exports is fulfilled.
The National Oilseed Processors Association released the June soybean crush total this morning at 165.023 million bushels. This came in well below expectations of analyst’s expectations of 170.568 million bushels from a Reuters survey. Soyoil stocks came in well below expectations of 1.816 billion pounds to 1.69 billion pounds, a seven-month low. While this month missed expectations, the recent crush pace still exceeds that needed to reach the current USDA estimate and today’s miss should not have any negative impact on next month’s Supply and Demand report. While crush was more bearish for soybeans, meal rallied after the report due to implied tightness in the soymeal balance sheet from decreased production.
Rain fell throughout portions of the Corn Belt over the weekend, with portions of central into southern Iowa and nearby Missouri receiving rains up to three quarters of an inch. Weather conditions are forecast to remain favorable for the southern two thirds of the Corn Belt for the next couple weeks with mild temperatures and daily rounds of precip. Concern lies in early August as current precipitation prospects are not enough to wain production prospects for the soybean crop, World Weather Inc says.
USDA reported export inspections of 155,556 (5.7 million bu.), which were down 145,209 MT from the previous week and near the low end of the pre-report range from 175,000 to 400,000 MT.
Crop progress is released this afternoon with analyst’s seeing soybean crop conditions rising two percentage points to 53% “good” to “excellent” according to a Reuters survey. This would still be the lowest rating since 2012.
Technical analysis: November soybeans managed to close higher but were well off intraday highs. Bulls continue to struggle against resistance stemming from $13.80, closely backed by the key $14.00 level. Additional resistance comes in at the December 30 high of $14.27 3/4. Bulls are still in control of the technical advantage as prices closed at the highest level since February. Bears are looking to take out today’s low of $13.69, then $13.60 before targeting stiffer support at last week’s low at $13.17 3/4.
August soymeal charged higher today, closing at the highest level since the June explosion higher. Bulls are targeting the June 21 high of $438.90, backed by $450.00. A close above that level would open the door to test the contract high of $472.10 made in early March. Bears are targeting initial support at $422.00 before firm support at $416.00, loss of which will likely test the uptrend line stemming from the June 14 low, currently at $409.00.
August soybean oil fell sharply, though price remained in Friday’s range. Bulls are still in firm control of the technical advantage as they are targeting Friday’s move-high of 66.62 cents before additional resistance at 68.5 cents. A reversal would encounter support at the 10-day moving average at 63.72 cents, backed by the 20-day moving average at 61.28 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: December SRW wheat fell 7 cents to $6.73 3/4. December HRW lost 13 1/2 cents at $8.20. Prices closed near their session lows. December spring wheat futures fell 3 3/4 cents to $8.85 3/4.
Fundamental analysis: Wheat market bulls got no traction today from news that Russia formally notified Ukraine, Turkey and the United Nations that it is suspending its participation in the Black Sea grain-shipping deal. That news was not at all surprising to traders and was already factored into the futures markets. Still, there is greater uncertainty regarding grain movement out of the Black See region, which should work to keep a floor under wheat futures prices.
USDA this morning reported U.S. wheat export inspections of 253,409 MT for the week ended July 13, which were down 165,917 MT from the previous week and in the lower end of the pre-report expectations.
World Weather Inc. today reported conditions in HRW country through the next seven days will be mostly favorable. There is some concern that enough rain could occur in localized pockets of the region for winter wheat quality declines and additional flooding, especially Thursday. Warm temperatures and high evaporation rates though will help to counter this. In the northern Plains, the forecaster said concern is growing of dryness in the western half of the region, such as Montana and the western Dakotas. Little to no rain will occur in this area in the next seven days and temperatures are likely to warm above average next week. Cooler than normal temperatures this week will help to temporarily limit evaporation rates.
This afternoon’s USDA crop progress reports are expected to show U.S. spring wheat condition ratings at 47% good to excellent versus 47% last week. U.S. winter wheat harvested is expected to be 57% complete as of Sunday versus 46% done last week.
Technical analysis: SRW wheat futures bears have the overall near-term technical advantage but trading has been choppy. 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 today’s high of $7.08 1/4. First support is seen at today’s low of $6.71 and then at $6.57 3/4.
HRW wheat bulls and bears are on a level overall near-term technical playing field amid choppy trading. 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 $5.40 and then at today’s high of $8.51. First support is seen at today’s low of $8.15 3/4 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 91 points to 82.13 cents and finished above the 100-day moving average.
Fundamental analysis: December cotton futures rallied despite little support from outside markets, as production concerns increased amid forecasts of hot, dry weather in key growing areas.
World Weather Inc. states short soil moisture, hot temperatures 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. Some soil moisture in place and showers Thursday into Saturday in the Panhandle and southwestern Oklahoma should keep soil moisture supportive of cotton development for a while longer with a growing need for rain later this month. 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. Meanwhile, the forecaster notes cotton in the Delta and southeastern states will develop relatively well as will the case in the far western U.S.
USDA will update condition ratings following the close—last week 48% of the crop was rated as “good” to “excellent,” while 25% of the crop was rated “poor” to “very poor.”
Technical analysis: December cotton was able to edge back above the 100-day moving average of 81.44 cents after ending last week below the technically significant level. An extension higher will continue to find initial resistance at 82.30 cents, then at the July 12 high of 83.10 cents. A move above both areas will then find bulls targeting 83.39, 84.30 and 84.16 cents. A turn lower, however, will continue to find support at the 10-day moving average of 81.07 cents, again at the 40-day day of 80.71 cents, then at 80.44 cents and the 20-day moving average of 80.12 cents. A move below psychological support at 80.00 cents, will then find support at 79.67 and 78.58 cents, and then at the June 27 low of 76.81 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.
