Crops Analysis | July 25, 2023
Price action: December corn futures fell 3 cents to $5.65 1/4, closing nearer the session high.
Fundamental analysis: The corn futures market saw a routine and not unhealthy corrective, profit-taking pullback today following Monday’s strong gains. The recent solid rebound in the U.S. dollar index was a mildly negative element for the grain markets today. The high-range close in December corn futures suggests the bulls will be back on the attack Wednesday.
Monday’s weekly crop progress reports showed USDA had left its “good” to “excellent” rating for corn unchanged at 57% versus expectations for a 1 percent increase from last week. When USDA’s weekly condition ratings are plugged into the weighted Pro Farmer Crop Condition Index (CCI; 0 to 500-point scale, with 500 representing perfect), the corn crop fell one point to 349.0, which is still 8.17 (2.3%) below a year ago.
Midwest weather still leans bullish for the corn market. World Weather Inc. today said a poor distribution of rain is expected into the weekend with temps very warm to hot especially in the western Corn Belt. The environment will prove to be stressful for many crops that are in the driest areas already. Though rains expected next week may offer some partial relief. The forecaster notes a general soaking rain is needed to get crops back into the best possible condition.
Technical analysis: The corn futures bulls have the overall near-term technical advantage. Prices are in a fledgling uptrend on the daily bar chart. The next upside price objective for the bulls is to close December prices above solid chart resistance at $6.00. The next downside target for the bears is closing prices below chart support at $5.25. First resistance is seen at this week’s high of $5.72 1/4 and then at $5.80. First support is at today’s low of $5.53 3/4 and then at $5.50.
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.
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 1/2 cents to $14.20, closing nearer the session high, while August meal rose $6.50 to $453.80. August soyoil rose 57 points to 72.56 cents.
Fundamental analysis: Soybeans surrendered a portion of Monday’s gains amid corrective selling following a reach to a near 14-month high in the previous session. Soyoil futures turned lower for the first time in five straight sessions, pressuring soybean futures, while strength in meal limited losses. USDA’s weekly condition ratings were reported slightly lower than traders expected, with the “good” to “excellent” rating declining one percentage point to 54%, while the “poor” to “very poor” rating rose one point to 14%. When USDA’s condition ratings are plugged into the weighted Pro Farmer Crop Condition Index (CCI; 0 to 500-point scale, with 500 representing perfect), the soybean crop declined one point to 338.3, and remains 12.4 points (3.5%) below a year ago.
Meanwhile, Midwest weather continues to lend conditions for potential production uncertainties. World Weather Inc. maintains there is still some concern about the long-term outlook for U.S. crops, especially in northwestern production areas. Restricted rain and warmer than usual temps will stress crops in the driest fields from the Dakotas through Minnesota to parts of Iowa, northwestern Illinois and a part of Missouri. The forecaster indicates rain should improve in the lower and eastern Midwest in the next couple of weeks, but the upper Midwest may struggle with dryness for a while longer.
Traders will continue to monitor the conflict in the Black Sea, which will continue to drive price direction across the grain/soy complex in addition to U.S. weather.
Technical analysis: November soybeans traded inside of Monday’s range, with an early breach of support at $14.05 1/2 proving futile. However, a continued test of the area will likely find bulls looking to work below the 10-day moving average of $13.90 1/4 towards support at $13.72 1/4. From there, support lies at the 20-, 200-, 40- and 100-day moving averages of $13.57, $13.34, $12.98 1/4 and $12.91, respectively. However, bulls continue to firmly grasp the near-term technical advantage, though Monday’s high of $14.35 serves as initial resistance. A turn above the level will find additional resistance at $14.39, and again at $14.53 3/4 and $14.72 1/2.
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 1/4 cents to $7.80 3/4 today and nearer the session high. Prices hit a five-month high early on today. December HRW wheat fell 4 1/2 cents to $9.20 3/4, near mid-range and hit an eight-month high early on. December spring wheat rose 1 1/4 cents to $9.48 1/4.
Fundamental analysis: The winter wheat futures markets today saw a normal pause and some chart consolidation, but an overall good day for the bulls considering Monday’s near-limit gains in December contracts. A rebounding U.S. dollar index today did somewhat limit buyer interest in wheat futures, but higher crude oil prices today that hit a three-month high mostly offset the bearishness of a firmer greenback.
The main bullish fundamental in the wheat markets at present is concerns about getting grain exports out of the Black Sea region amid an escalating Russia-Ukraine war that includes Russia attacking Ukraine grain facilities. Russia says it is impossible to return to the Black Sea grain-shipping deal until an agreement related to Russian interests is honored.
World Weather Inc. today said good harvest weather is expected in U.S. hard red winter wheat and soft wheat areas of the Midwest during the next two weeks. “Canada’s wheat and barley will continue stressed and vulnerable to production cuts,” said the forecaster. Europe remains dry from France to Poland, but these areas will trend wetter in the coming week to ten days, slowing small grain harvesting and possibly raising a little crop quality concern, said the forecaster. Australia wheat and barley crops are still mostly in good shape.
Technical analysis: Winter wheat futures bulls have the firm overall near-term technical advantage. SRW bulls' next upside price objective is closing December prices above solid chart resistance at $8.00. The bears' next downside objective is closing prices below solid technical support at $7.00. First resistance is seen at today’s high of $7.96 1/4 and then at $8.00. First support is seen at today’s low of $7.56 3/4 and then at $7.50. The HRW bulls' next upside price objective is closing December prices above solid technical resistance at $10.00. The bears' next downside objective is closing prices below solid technical support at $8.50. First resistance is seen at today’s high of $9.36 and then at $9.50. First support is seen at $9.00 and then at this week’s low of $8.67.
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 rallied 191 points to 87.07 cents, marking the highest close since Aug. 31.
Fundamental analysis: December cotton futures extended higher for the seventh straight session as weather concerns in key Texas growing regions increase potential for a curb in production. Continued strength in crude oil and generally positive sentiment across equities helped underpin the natural fiber, largely disregarding gains in the U.S. dollar.
USDA bumped the cotton crop’s “good” to “excellent” rating by one percentage point to 46%, while the portion of the crop rated “poor” to “very poor” declined four percentage points to 24% from last week’s rating.
World Weather Inc. notes crop moisture stress will continue daily in Texas through the next ten days, with significant rains needed soon. Irrigation systems are having trouble staying caught up with evaporation, while the expense of running pumps every day will continually cut into producer’s potential profit.
Technical analysis: December cotton bulls showed their strength in today’s session, with a close holding above resistance at both 85.77 and 86.38 cents. The next objective for bulls is to breach 87.26 cents, then 87.75 cents. A turn lower, will find support at today’s failed resistance levels, along with 84.89 cents, then 84.28 cents, then at the 10-day moving average of 83.37 cents and again at 82.79 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.
