Crops Analysis | August 8, 2023

Crops Analysis
Crops Analysis
(Pro Farmer)

Corn

Price action: December corn futures rose 3 cents to $4.98 3/4 today, ending nearer the session high.

Fundamental analysis: The corn futures market saw short covering today, but the modest gains were nonetheless impressive given solid gains in the U.S. dollar index, downbeat economic data coming out of China and better corn crop condition ratings.

USDA on Monday rated 57% of the U.S. corn crop as “good” to “excellent,” as of Sunday, which was a two-percentage-point increase from the previous week. The portion rated “poor” to “very poor” slid one point to 14%. On the weighted Pro Farmer Crop Condition Index (CCI; 0 to 500-point scale, with 500 representing perfect), the corn crop improved 4.4 points to 348.7, which was only 3.3 points (0.9%) below last year at this time.

World Weather Inc. today reported Midwest corn and soybean crop areas will all get a little rain at one time or another in the next ten days. The moisture should be sufficient to support favorable crop development. However, some of the precipitation may be a little sporadic and light in the northwest and there will also be warmer temperatures after day ten raising the need for greater precipitation for some areas. “No serious crop stress outside of a few pockets will occur during the next ten days to two weeks,” in the region, said the forecaster.

Grain traders are looking ahead to Friday’s USDA monthly supply and demand report. A Reuters polls shows analysts on average expect the agency to peg U.S. corn production at 15.135 billion bushels, which is slightly less than the July WASDE report. The average corn yield is seen at 175.5 bushels an acre compared to 177.5 in the July report.

Technical analysis:  The corn futures bears still have the solid overall near-term technical advantage. The next upside price objective for the bulls is to close December prices above solid chart resistance at $5.25. The next downside target for the bears is closing prices below chart support at the July low of $4.81. First resistance is seen at last Friday’s high of $5.06 1/2 and then at $5.10. First support is at this week’s low of $4.89 1/4 and then at $4.81.

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 rose 4 cents to $13.06 after testing the 100-day moving average for the first time since June 30. September soymeal fell 90 cents to $418.30, while September soyoil fell 10 points to 63.98 cents.

Fundamental analysis: Soybean futures managed to rebound from overnight weakness following better-than-expected readings in USDA’s crop ratings, in the wake of improving weather conditions across the Midwest. The modest gains in grain complex came despite notable strength in the U.S. dollar and recent data which points to a fading Chinese economy.

The government rated 54% of the soybean crop as “good” to “excellent,” which was a two-point increase from last week, while the amount rated “poor” to “very poor” fell one point to 14%. On our weighted CCI, the soybean crop improved 4.3 points to 340.1, but remains 11.1 points (3.2%) below last year. Meanwhile, Crop consultant Dr. Michael Cordonnier left his soybean yield unchanged at 50.5 bu. per acre, and now indicates a neutral to higher bias due to recent weather improvements into August; the most important month for soybeans. Cordonnier continues to estimate production at 4.17 billion bu.

China experienced a significant decrease in trade during July 2023, with both imports and exports recording double-digit declines due to weakening demand both domestically and internationally. The country saw a 14.5% year-on-year drop in sales, marking the steepest decline since the start of Covid-19 pandemic in early 2020. Exports also plummeted by 12.4%, marking the sharpest decrease since January, and were heftier than traders expected, signaling potential economic concerns in China.

World Weather Inc. states weather during the next ten days will feature multiple rounds of rain in nearly all areas along with a lack of heat, though a close watch will be made on rainfall distribution from northeastern North Dakota to south-central and southeastern Minnesota to east-central and northeastern Iowa where soil moisture is still short and rain is needed to improve conditions.  

Technical analysis: An early test of the 100-day moving average of $12.89 3/4 for the first time since June 30 was ultimately thwarted, as mild buying efforts ensued following the breach. The area will continue to serve as initial support, along with $12.86 1/4, $12.70 1/2 and $12.50 1/4. However, expanded upside momentum will find initial resistance first at $13.22 1/4, then at the 200-, 40- and 10- day moving averages of $13.33 1/2, $13.40 1/4 and $13.46, respectively. From there, additional resistance stands at $13.58 1/4 and then the 20-day moving average of $13.68. 

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 wheat closed up 1/2 cent at $6.81 1/2 and nearer the session high. December HRW wheat fell 3/4 cent to $7.81 1/2, a mid-range close. December spring wheat rose 5 cents to $8.45 1/2.

Fundamental analysis: Firmer corn and soybean futures prices today limited selling interest in the wheat markets, but a solid rally in the U.S. dollar index and dour economic news coming out of China kept the wheat bulls very timid. Traders continue to watch the Russia-Ukraine war situation and any new implications regarding grain shipments out of the Black Sea.

USDA on Monday rated 41% of the U.S. spring wheat crop as “good” to “excellent,” down one point from the previous week. The amount of the crop rated “poor” to “very poor” increased four points to 20%. The Pro Farmer spring wheat CCI rating fell another 5.2 points to 321.6, which was 46.2 points (12.6%) below year-ago. 

Wheat traders are looking ahead to Friday morning’s USDA monthly supply and demand report for August. The agency is expected to peg all U.S. wheat production at 1.739 billion bushels, unchanged from the July report. Just a slight uptick in U.S. wheat ending stocks is expected by the Reuters poll of analysts.

Technical analysis:  Winter wheat futures bears have the firm overall near-term technical advantage. SRW bulls' next upside price objective is closing December prices above solid chart resistance at $7.50. 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 $7.00 and then at $7.25. First support is seen at this week’s low of $6.61 3/4 and then at last week’s low of $6.54 1/4.  The HRW bulls' next upside price objective is closing December prices above solid technical resistance at $8.50. The bears' next downside objective is closing prices below solid technical support at the May low of $7.36. First resistance is seen at $8.00 and then at $8.10. First support is seen at this week’s low of $7.66 and then at $7.60 3/4.

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 cotton fell 14 points to 85.20 cents, marking a high-range close.

Fundamental analysis: Notable U.S. dollar strength triggered a mild retreat in cotton futures, though persisting weather concerns in Texas and technical support limited losses. Following Monday’s close, USDA updated its weekly ratings, leaving the “good” to “excellent” portion of the cotton crop unchanged from the previous week at 41%. However, the portion of the crop rated “poor” to “very poor” rose 3 points to 24%. Specifically, the Texas crop was rated 17% “good” to “excellent,” unchanged from the previous week, while the “poor” to “very poor” rating jumped five points to 55%.

World Weather Inc. reported a few showers and thunderstorms overnight in West Texas, and while the moisture was welcome, it was too light to have an impact on crops. The forecaster states there is not much potential for relief from dry and warm weather in Texas crop areas, while the Coastal Bend and South Texas production areas are benefitting from dry conditions with early harvesting getting underway in a favorable manner. Production in southern Texas will be down, though, due to dry biased conditions during much of the growing season. Meanwhile, the Delta and southeastern states should get a good mix of weather during the next ten days to support crops favorably.

Technical analysis: December cotton continued to trade mostly sideways between the 10-day moving average of 85.17 cents and the 20-day moving average of 84.27 cents. A breakout above the 10-day will find additional resistance serving at 86.07 cents, then at 86.80 cents and again at 87.70 cents. However, a breach of the 20-day moving average will find additional support at 83.54 cents, again at 82.81 cents and then at the 40- and 100-day moving averages of 82.08 and 81.72 cents, respectively. 

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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