Crops Analysis | August 2, 2023

Crops Analysis
Crops Analysis
(Pro Farmer)

Corn

Price action: December corn fell 6 3/4 cents to $5.00 1/2, the lowest close since July 13.

Fundamental analysis: Corn futures failed an overnight attempt to regain a portion of recent losses in the wake of a Russian attack on Ukraine’s main inland port across the Danube River from Romania earlier today.  Strong gains in the U.S. dollar since mid-July continue to cast a shadow over commodities along with forecasts of mostly favorable weather across the Midwest through the next ten days. World Weather Inc. notes overall, Midwest weather will be good during the next ten days to two weeks, though there will be some concerns over dryness in the upper Midwest, but the situation should not be as critical to crops as it was in July as the heat will not be as extreme. The forecaster states areas in the northern Midwest will still need greater rainfall, but the situation will be far less critical than that of late July.

Ethanol production for the week ended July 28 averaged 1.067 million barrels per day (bpd), which was down 27,000 bpd from the previous week but 46,000 bpd (4.5%) above the same week last year. Ethanol stocks declined 368,000 barrels to 22.86 million barrels.

USDA will release its weekly export sales data prior to tomorrow morning’s open. Traders are expecting sales to range from 150,000 to 500,000 MT for 2022-23 and 200,000 to 700,000 MT for 2023-24.

Technical analysis: December corn failed to secure a close above support at $5.02 3/4, giving bears a greater technical advantage in the camp’s likely endeavor of breaching next support of $4.98 1/4 and $4.91, from there the July 13 low of $4.81 will serve as the next major area of support. A turn higher, however, will be met with resistance at today’s failed support level, then at $5.10 and $5.14 1/2. From there the 20-day moving average of $5.22 1/2 serves as resistance, then at $5.26 1/4, with solid resistance standing at 10-, 40- and 100-day moving averages of $5.35 3/4, $5.38 1/4 and $5.40 1/2.

What to do: Get current with advised sales.

Hedgers: You should be 90% sold 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 90% sold on 2022-crop. You should be 35% forward priced for harvest delivery on expected 2023-crop production.

 

 

Soybeans

Price action: November soybeans fell 20 cents to $13.21 1/4, nearer the session low and hit a four-week low. September soybean meal lost $4.20 at $423.90 and nearer the session low. September bean oil closed up 27 points at 64.66 cents and near mid-range.

Fundamental analysis: A risk-off trading day in the general marketplace helped to pressure the grain markets today. The Fitch credit rating agency downgraded the U.S. credit rating by a notch, which unsettled the marketplace a bit after trader and investor attitudes had been upbeat the past few weeks. A stronger U.S. dollar index and lower crude oil prices today were bearish outside market forces working against the grain market bulls.

Weather also leans bearish for soybean prices. World Weather Inc. today reported “additional relief from dryness will occur through this weekend in the western Corn Belt, while the Corn Belt as a whole sees mostly favorable conditions for crop development during the next two weeks.” The lingering dry areas from northern to eastern Missouri to southern Illinois will benefit from rain into Thursday before the driest areas from the eastern Dakotas and northeastern Nebraska to Wisconsin receive rain Friday through Sunday, said the forecaster. 

Thursday morning’s weekly USDA export sales report is expected to show U.S. soybean sales of 50,000 to 400,000 MT in the 2022-23 marketing year, and sales of 1 million to 2.5 million MT in the 2023-24 marketing year.

Technical analysis: The soybean bulls have the slight overall near-term technical advantage but have faded badly to suggest a near-term market top is in place. A six-week-old uptrend on the daily bar chart has been negated. The next near-term upside technical objective for the soybean bulls is closing November prices above solid resistance at $14.00. The next downside price objective for the bears is closing prices below solid technical support at $12.56 3/4. First resistance is seen at today’s high of $13.54 and then at this week’s high of $13.75 1/2. First support is seen at today’s low of $13.15 and then at $13.00.

The meal bulls have the overall near-term technical advantage. Prices are in a four-week-old uptrend on the daily bar chart, but now just barely. The next upside price objective for the meal bulls is to produce a close in September futures above solid technical resistance at the March high of $454.40. The next downside price objective for the bears is closing prices below solid technical support at $400.00. First resistance comes in at $430.00 and then at this week’s high of $433.60. First support is seen at this week’s low of $420.70 and then at $415.00.

Soybean oil futures bulls have the firm overall near-term technical advantage. A two-month-old uptrend is in place on the daily bar chart. The next upside price objective for the bean oil bulls is closing September prices above solid technical resistance at the July high of 69.12 cents. Bean oil bears' next downside technical price objective is closing prices below solid technical support at 60.00 cents. First resistance is seen at today’s high of 65.12 cents and then at this week’s high of 65.80 cents. First support is seen at this week’s low of 62.19 cents and then at 61.00 cents.

What to do: Get current with advised sales.

Hedgers: You should be 100% 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 100% sold on 2022-crop. You should be 40% forward sold for harvest delivery on expected 2023-crop production.

 

 

Wheat

Price action: December SRW futures fell 11 cents before settling at $6.67 1/4, nearer the session low. December HRW futures fell 16 3/4 to $8.01 and settled in the bottom third of today’s range. December spring wheat fell 7 1/4 cents to $8.62 1/4.

Fundamental analysis: Wheat futures continue under pressure despite continued attacks on either side of the Russia-Ukraine war. Russia attacked Ukraine’s main inland port on the Danube River overnight. The port lies across the river from NATO backed Romania. Russia continues to reiterate that they will revamp the Black Sea grain deal if demands are met surrounding the nation’s agricultural exports.

BRICS, a group made up of Brazil, Russia, India, China and South America, are expected to expand their coalition when they meet August 22-24. Twenty-two nations have formally petitioned to become a part of the group with an additional twenty submitting informal requests. The group has seemingly blocked out the U.S. and members of the European Union. A growing BRICS puts global demand for U.S. commodities at risk, as well as threatening the U.S. dollar. The group has notably done trade without the U.S. dollar in the past, bringing worries of dethroning the dollar as the world’s reserve currency, though that is a battle fighting heavily upstream and unlikely to have any meaningful impact in the next few years.

Rain is expected to come into the northern Plains towards the end of the week. The rain is welcomed as it will provide relief to stressed crops and help increase topsoil moisture. The rain is too little too late though, as spring wheat production has already taken an irreversible hit. Temperatures are also expected to cool in the coming weeks, according to World Weather Inc, further reducing evaporation and crop stress.

The USDA is set to release their export sales number tomorrow, with analysts expecting sales from 200,000 to 500,000 MT for the 2023/24 marketing year. Last week, export sales were announced at 233,203 MT. Outstanding sales are at the lowest level for this date since 2002 as an abundance of cheap wheat overseas dampens demand for U.S. wheat.

Technical analysis: December SRW futures remain in a volatile range. Prices have fallen over $1.30 in seven sessions and is quickly approaching oversold levels. An uptrend remains on the daily bar chart stemming from the May lows, price closed nearly right on this trendline, so any additional weakness would indicate a bearish breakdown leading to further weakness. Support lies at $6.50-54 which has been an accumulation zone in the past for bulls. Additional selling would test support at $6.35, then the May 31 low at $6.08 1/4. Bulls are targeting $6.90 resistance, backed by the psychological $7.00 level. Bulls are fighting an uphill battle and will struggle to garner momentum, especially as corn and soybeans are unlikely to see late growing season strength.

December HRW futures remain in a volatile sideways trading range and are approaching the lower end of that range. Support remains at $8.00, though a poke to $7.75 is likely. Further selling would find support at the May 3 low at $7.36. Bulls are targeting a retrace to $8.50 with the next resistance at $8.75. As a testament to the sideways nature of HRW futures, the 10-, 20-, 40-, 100- and 200-day moving averages are all between $8.35 1/2 and $8.46 1/2. This zone will remain an important pivot, but until a trend is established, moving averages will not provide much of an edge.

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.

 

 

Cotton 

Price action: December cottonfell163pointsto84.59cents and nearer the session low.

Fundamental analysis: Risk aversion was keener in the marketplace at mid-week following the Fitch ratings agency downgrade to the U.S. government’s credit rating. That pressured U.S. stock indexes and rallied the U.S. dollar index, which in turn lent selling pressure to the cotton market. Lower crude oil prices today were also a bearish “outside market” force working against the cotton market bulls.

 

Traders continue to closely monitor weather in U.S. cotton country. World Weather Inc. today said in the southern U.S. plains, “another day of increasing stress to cotton and declines in yield potentials occurred Tuesday as the weather remained hot and mostly dry.” High temperatures in the west were in the upper90s to the middle 100s, with a few middle 90s in the northeastern Panhandle while other areas saw highs in the lower to middle 100s with some middle and upper 90s near the coast. “Short soil moisture, hot temperatures, and a lack of significant rain during the next two weeks across much of the southern Plains will lead to rising levels of stress and declines in yield potentials in dryland areas,” said the forecaster. USDA earlier this week said Texas cotton conditions for the “very-poor to poor” categories were increased to 50%. That is up from 40%last week and only 30%at the end of June. This year is the fourth-worst rating for this time of the year in records going back to 1986. They were exceeded only by a 52% “poor” to  “very poor” rating in 2006, 54% in 1998 and 57% in 2011. Thursday morning’s weekly USDA export sales report is the data point of the day for the cotton futures market. Traders are hoping for better sales numbers after last week’s disappointing sales figures.

Technical analysis: Cotton futures bulls have the overall near-term technical advantage. Prices are in a five-week-old uptrend on the daily bar chart, but now just barely. The next upside price objective for the cotton bulls is to produce a close in December futures above technical resistance at the July high of 88.39cents. The next downside price objective for the cotton bears is to close prices below solid technical support at 82.00 cents. First resistance is seen at 85.00 cents and then at this week’s high of 86.31 cents. First support is seen at this week’s low of 83.75 cents and then at 83.00 cents

What to do: Get current with advised sales.

Hedgers: You should be 100% priced on 2022-crop in the cash market. You should have 60% of expected 2023-crop production forward sold for harvest delivery.

Cash-only marketers: You should be 100% priced on 2022-crop. You should have 60% of expected 2023-crop production forward sold for harvest delivery.

 

 

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