Crops Analysis | July 20, 2023
Price action: December corn futures saw early gains before falling 6 3/4 cents to settle at $5.46 1/4, nearer the session low.
Fundamental analysis: Corn futures traded in a wide range but ultimately succumbed to selling pressure in the latter portion of the session as geopolitically driven uncertainty was unable to keep prices bid. This morning, the Defense Ministry in Kyiv said any ships heading into ports in Russia and Ukrainian occupied areas by Kremlin troops would be considered potential carriers of military supplies, enabling them to be legitimate military targets. This is considered a tit-for-tat response following a similar warning that came out of Moscow yesterday, warning any ships near the ports of Ukraine.
The drought across the Midwest is easing, though 84.9% of the area remains in a drought zone according to U.S. Drought Monitor. That is down three points from last week, but 100% of Iowa along with most of Illinois remains too dry. Mild temperatures are expected to continue until Sunday, limiting further crop stress. Some precip is expected in parts of the lower and eastern Midwest which will maintain favorable conditions for pollination, World Weather Inc says. After this weekend, precip is expected to dry up and temperatures are expected to turn warmer into August, causing additional crop stress and potential yield loss, the forecaster says.
Export sales came in average for old crop but near the upper end of expectations for the 2023-24 marketing year. For week ended July 13, USDA reported net corn sales of 236,800 MT for 2022-23, which were down 49% from the previous week but up 6% from the four-week average. Net sales of 491,600 MT were reported for 2023-24. Traders expected sales to range from 200,000 to 500,000 MT for 2022-23 and 50,000 to 500,000 for 2023-24.
Technical analysis: December corn futures traded in a volatile 21-cent range, but remained within Wednesday’s high and low. While today’s price action was not favorable, the bulls maintain the technical advantage as today looks like mild profit taking following an 80-cent rally in the prior five days. How prices end the week will be important, with a daily close above $5.60 giving bulls a clear advantage heading into next week. That will mark initial resistance, backed by the 200-day moving average at $5.72. Additional buying will see resistance at $5.95, quickly backed by the psychological $6.00 level. Selling pressure will encounter support at today’s low of $5.42 1/4, backed by the 40-day moving average at $5.32. Additional selling pressure will find support at the converging 10- and 20-day moving averages at $5.25.
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 4 cents to $14.04 3/4, a low-range close, while August meal futures lost $3.30, closing at $440.59. August soyoil rose 159 points to 67.64 cents, marking the highest close since Nov. 4.
Fundamental analysis: Soybean futures faded for the first time in six sessions, as mild profit taking prevailed amid weakness in meal futures and strength in the U.S. dollar. Trade focus will continue on U.S. weather as the soybean crop enters its crucial growth phase beginning the end of the month into August.
World Weather Inc. indicates a possible increase in rainfall during weeks 2 and 3 in future model runs, while the National Weather Service is predicting below normal temps for the western Corn Belt in August with greater than usual rainfall in lower parts of the Midwest. World Weather Inc. believes cooler weather will evolve, but mostly late in August at which time some increase in rain is expected to evolve, but early August weather may not be quite so relieving.
USDA reported net weekly old-crop sales of 127,000 MT in the week ended July 13, which were up 58% from the previous week, but down 43% from the four-week average. Meanwhile, net new-crop sales totaled 760,300 MT. Traders were expecting sales to range between 0 to 300,000 MT for 2022-23 and 150,000 to 700,000 MT for 2023-24. Soymeal export sales were reported at 272,500 MT, which were up noticeably from the previous week and from the four-week average. Sales topped pre-report trade expectations ranging from 25,000 to 250,000 MT.
Technical analysis: November soybeans remained within Wednesday’s 38 3/4-cent trading range throughout the session, with $14.28 3/4, the previous session high, serving as initial resistance. However, a test of the area will then find resistance at $14.47 3/4 and again at $14.67. However, extended profit-taking will continue to find support at $13.89 1/2, then $13.70 1/4, with the 10-,20- and 200-day moving average serving up solid support at $13.67 3/4, $13.43 1/4 and $13.33, respectively. A turn below these levels will find bears gaining momentum toward the 100- and 40-day moving averages of $12.89 1/4 and $12.80 3/4.
August meal futures held inside Wednesday’s range, with initial resistance of $450.70 and support at $438.00 the seeming near-term trading range. A breakout above initial resistance will find additional resistance at $457.50 and again at $463.40. An edge below initial support will then face support at $432.10, $425.20, with solid support near the 100-, 10 and 200-day moving averages of $425.20, $424.30 and $423.00, respectively.
August soyoil was able to extend Wednesday’s strength, with bulls notching close above initial resistance at 67.43 cents. A push higher will find additional resistance at 68.82 and 70.46 cents. Initial support lies at Wednesday’s close of 66.05 cents, then at the 10-day moving average of 65.01 cents. From there support serves at the 20-day moving average of 62.36 cents, then at 61.37 cents and again at the 200-day moving average of 58.78 cents.
What to do: Get current with advised sales/positions. Be prepared to advance sales on additional price strength.
Hedgers: You should be 90% sold in the cash market on 2022-crop. You should be 45% forward sold for harvest delivery on expected 2023-crop production.
Cash-only marketers: You should be 90% sold on 2022-crop. You should be 45% forward sold for harvest delivery on expected 2023-crop production.
Price action: December SRW wheat rose 3/4 cent to $7.46 1/4, near mid-range and hit a three-week high early on. December HRW wheat gained 8 1/4 cents to $8.80 3/4, near mid-range and hit an eight-month high. December spring wheat rose 5 3/4 cents to $9.11 3/4.
Fundamental analysis: Buying interest was limited in SRW futures today by weaker corn and soybean futures prices. HRW appeared to see continued support from escalating tensions between Russia and Ukraine. Reports said Russia attacked Odesa and Mykolaiv on Thursday in a third straight night of air strikes on southern Ukrainian port cities. A rally in the U.S. dollar index today was also a daily negative for the wheat markets.
Weather for the wheat futures markets is neutral, overall. World Weather Inc. today reported that in HRW country good harvest conditions will occur in winter wheat areas in the near term. In the northern Plains, net drying in the next two weeks “will cause concerns of crop stress to grow more, especially in western areas where conditions are already driest and where the least amount of rain is expected to occur.” Some increase of rain may occur in the second week of the outlook; though, this would be mostly in eastern production areas, said the forecaster.
USDA this morning reported U.S. wheat sales of 170,700 MT for week ended July 13, which were notably lower from the previous week and below the pre-report range of 200,000 to 500,000 MT.
Technical analysis: Winter wheat futures bulls have the overall near-term technical advantage with this week’s gains. SRW bulls' next upside price objective is closing December prices above solid chart resistance at the June high of $7.84 1/4. The bears' next downside objective is closing prices below solid technical support at the July low of $6.41 1/2. First resistance is seen at today’s high of $7.68 3/4 and then at $7.84 1/4. First support is seen at today’s low of $7.29 3/4 and then at $7.08. The HRW bulls' next upside price objective is closing December prices above solid technical resistance at $9.00. The bears' next downside objective is closing prices below solid technical support at this week’s low of $8.11 1/4. First resistance is seen at today’s high of $8.96 3/4 and then at $9.00. First support is seen at today’s low of $8.59 and then at $8.50.
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 56 points to 84.31 cents, the highest close since early March.
Fundamental analysis: December cotton extended gains for the fourth straight session as persisting record heat along with dry weather in key growing areas ignites production concerns. However, a gaining U.S. dollar likely curbed upside momentum.
World Weather Inc. notes short soil moisture, 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. Some soil moisture is in place and showers in part of the region each day into Saturday in the Panhandle and southwestern Oklahoma should keep soil moisture supportive of cotton development for a little while longer. Though stress will increase 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. The forecaster continues to note cotton in the Delta and southeastern states will develop relatively well, as will be the case in the far western U.S.
USDA reported weekly export sales of 67,100 RB in the week ended July 13, which were up noticeably from the previous week but down 11% from the four-week average. Meanwhile, shipments totaled 233,100 RB during the week, which rose 12% from the week prior, but remain unchanged from the four-week average. Top destinations for the week were China (86,800 RB), Pakistan (31,100 RB) and Turkey (26,200 RB).
Technical analysis: December cotton gathered a bit more momentum today, though a close above initial resistance of 84.52 cents indicates bull efforts may be fading as near-term overbought conditions persist. However, an additional test to the area will then face resistance at 85.28 cents and again at 86.57 cents. A turn lower, however, will find initial support at Wednesday’s close of 83.75 cents, then at 82.47 cents, with solid support around the 10-, 100-, 40- and 20-day moving averages of 81.95, 81.46, 80.69 and 80.58 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.
