Crops Analysis | July 18, 2023
Price action: December corn futures gained 28 1/2 cents to $5.34 1/2, near the session high and hitting a three-week high.
Fundamental analysis: Overnight news that Russia attacked Ukraine’s Odesa grain port appeared to be the fuel to spark a solid rally in the grain markets today. Short covering was featured in corn futures. Also, keener risk-on attitudes in the general marketplace, as U.S. stock indexes hit new highs for the year today, added to the bullish fervor in the grains today.
USDA Monday afternoon in its weekly updates raised its “good” to “excellent” rating for corn by two points to 57%. On the weighted Pro Farmer Crop Condition Index (CCI; 0 to 500-point scale, with 500 representing perfect) the corn crop improved 5.3 points to 349.9, though that was still 13.4 points (3.7%) below year-ago.
Corn Belt weather is neutral to maybe slightly bullish for corn prices, at present. World Weather Inc. today said mostly mild temperatures through Sunday along with soil moisture in place and showers and thunderstorms through Thursday “will maintain or improve conditions for corn pollination…into this weekend.” However, a transition to drier weather Friday through August 1, along with a return of hot temperatures next week, “will cause rapid drying of the soil across the Midwest and stress to crops will steadily increase with some declines in yield potentials likely,” said the forecaster.
Technical analysis: The corn futures bears still have the overall near-term technical advantage. However, recent price action suggests a market bottom is in place. The next upside price objective for the bulls is to close December prices above solid chart resistance at $5.70. The next downside target for the bears is closing prices below chart support at $5.00. First resistance is seen at today’s high of $5.40 3/4 and then at $5.50. First support is at $5.25 and then at $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.
Advice: Hedgers should claim the remaining premium in those calls and increase new-crop sales by 10% to get to 45% forward sold for harvest delivery. Our exit on the calls was 11 1/2 cents for a 25 1/2-cent loss. Cash-only marketers should sell another 15% of expected new-crop production to get to 40% forward sold. We also advise hedgers and cash-only marketers to sell another 10% of 2022-crop to get to 90% sold in the cash market.
Price action: November soybeans rose 17 1/4 cents to $13.95 1/4, after reaching the highest level since Dec. 30. August meal rose $8.30 to $442.70, while August soyoil fell 71 points to 64.05 cents.
Fundamental analysis: Soybean futures extended the recent rally to four consecutive days as traders seemingly shrugged off USDA’s improved condition ratings as surging soymeal futures overshadowed the government’s weekly update. Through much of the session, new-crop technical resistance at $14.00 curbed bull efforts, though the camp ultimately pulled off a late session breach to $14.05 late in the session.
Forecasts for hot, dry weather into early August is catching trade attention as concerns rise over possible reductions in production potential as soybeans enter their most crucial growth phase. World Weather continues to predict a transition to drier weather Friday through August 1, along with the return of hot temps next week, which will cause rapid drying of Midwest soils along with stress to crops, with some declines in yield potentials likely. The forecaster notes that soil moisture in place should keep most crops from seeing rapid declines in yields right away, but if rain and cooler temps do not return in early August, yields are likely to quickly decline.
USDA raised its “good” to “excellent” ratings by four points to 55%, though the rating remains below average. On the weighted Pro Farmer Crop Condition Index (CCI; 0 to 500-points scale, with 500 representing perfect), the soybean crop rose 7.6 points to 339.3, but is still 14.2 points (4.0%) below last year at this time. Of the top 18 soybean production states, 15 improved. Iowa and Illinois led the crop ratings gains.
Technical analysis: November soybeans fell short of closing above $14.00 after making a late session breach of the level. However, bulls were able to capture a close above resistance at $13.88 1/4, in an advancement of their near-term technical posture. Initial resistance now stands at $13.98 1/4, with $14.00 serving as psychological resistance, then at $14.07 3/4. From there the Dec. 30 high of $14.27 3/4 is the next significant level of resistance. Conversely, initial support will now serve at today’s failed resistance of $13.88 1/4, then at $13.68 1/4 and the 10-day moving average of $13.55 3/4. From there, solid support lies at the 20- and 200-day moving averages of $13.38 1/2 and $13.32 1/2, then at the 100-day moving average of $12.88 3/4.
August meal secured a close above resistance of $438.00 and $441.50, leaving $448.10 as the next area of resistance, then $456.00 and the March 7 high of $472.10. A turn lower, however, will find initial support at today’s failed resistance levels, then at $431.40, $427.90 and the 100- and 200-day moving averages of $425.50 and $422.50.
August soyoil closed below the 10-day moving average 64.44 cents for the first time since June 22, though initial support will continue at 63.91 cents, then at 63.06 and 61.85 cents. From there support is layered at the 20-, 200-, 40- and 100-day moving averages of 61.35, 58.70, 56.00 and 55.11 cents, respectively. Conversely, initial resistance will now stand at the 10-day moving average, along with 66.00 cents and the July 14 high of 66.62 cents. From there resistance stands at 67.24 and 68.09 cents.
What to do: Get current with advised sales/positions. Be prepared to advance sales on additional price strength.
Hedgers: NEW ADVICE -- Claim the remaining premium in the November $14.00 short-dated calls purchased on 25% of 2023 crop. Our exit on the calls was 11 1/2 cents for a 25 1/2-cent loss. Sell another 10% of expected 2023-crop to get to 45% forward sold for harvest delivery. Also sell another 10% of 2022-crop to get to 90% sold.
Cash-only marketers: NEW ADVICE -- Sell another 10% of 2022-crop to get to 90% sold. Sell another 15% of expected 2023-crop production to get to 40% forward sold for harvest delivery.
Price action: December SRW wheat rose 16 3/4 cents at $6.90 1/2. December HRW wheat gained 12 1/4 cents at $8.32 1/4. Prices closed nearer their session highs today. December spring wheat rose 3/4 cent to $8.86 1/2.
Fundamental analysis: Overnight news that Russia attacked the major grain port of Odesa boosted the grain markets today by adding keener uncertainty to grain being shipped out of the Black Sea region. Short covering was featured in wheat futures today. Better trader and investor risk appetite in the general marketplace also provided the bullish grain market speculators the opportunity to climb on board the long side today. Wheat traders will likely continue to look to the corn and soybean futures markets for daily price direction. Corn and soybeans posted solid price gains today, with corn leading the way.
USDA Monday afternoon raised its “good” to “excellent” rating for U.S. spring wheat by four points to 51%. The spring wheat crop jumped 10.9 points on the Pro Farmer Crop Condition Index, to 339.2, though that was still 37.8 points (10.0%) below year-ago.
World Weather Inc. today said that in HRW regions, favorable conditions are expected the next seven days in most of the region. Temperatures this weekend into next week will trend hotter and topsoil moisture will quickly deplete which will support more aggressive fieldwork. In the northern Plains, concern continues to grow 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 through the next seven days and temperatures will warm above average starting this weekend. Eastern areas will receive some rain. The need for more rain will rise as well in the east, but not as quickly as the west, said the forecaster.
Technical analysis: SRW wheat futures bears still have the slight 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 this week’s high of $7.08 1/4. First support is seen at $6.71 and then at today’s low of $6.62 1/2.
HRW futures bulls and bears are on a level overall near-term technical playing field amid choppy price action. 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 this week’s high of $8.51. First support is seen at today’s low of $8.11 1/4 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 12 points to 82.25 cents after reaching as high as 83.00 cents.
Fundamental analysis: New-crop cotton futures extended Monday’s gains overnight, but ultimately faded to post slight gains despite notable strength in crude oil futures and equities. Spurring overnight gains were USDA’s updated crop condition ratings, which indicated the crop was declining, with a three-percentage point drop in the “good” to “excellent” category to 45%. Meanwhile, the portion of the crop rated “poor” to “very poor” rose three percentage points to 28%. Further reductions are likely as World Weather Inc. continues to forecast hot, dry weather in Texas. The forecaster notes some production cuts are expected from South Texas and the Texas Coastal Bend and may soon evolve in the Blacklands and West Texas. However, cotton in the Delta and southeastern states will develop relatively well, along with the far western U.S.
Technical analysis: December cotton made an overnight breach of initial resistance of 82.78 cents, though bull efforts faded into the open. Initial resistance will continue to serve at 82.78 cents, then 83.44 and 84.32 cents. Conversely, initial support will serve at 81.90 cents, then at the 100-day moving average of 81.44 cents, again at 81.24 cents and the 10-day moving average of 81.16 cents. A breach of these areas will then find bears battling at the 40-day moving average of 80.67 cents, 80.36 cents and the 20-day moving average of 80.24 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.
