Crops Analysis | August 9, 2023
Price action: December corn fell 4 1/2 cents to $4.94 1/4, ending near the session low.
Fundamental analysis: Corn futures continued to expand recent sideways consolidation as traders prepare for USDA’s updated supply and demand estimates on Friday, which will reflect the first survey-based estimates for corn and soybeans. On average, traders estimate a two-bushel yield reduction from USDA’s July estimate of 177.5 bu. per acre to 175.5 bu. per acre. Meanwhile, 2022-23 ending stocks are expected at 1.402 billion bu., down slightly from July, while traders forecast, on average, a near 100-million-bushel reduction in 2023-24 ending stocks to 2.168 million bu. Global ending stocks are expected to fall around 300,000 MT from July as well.
Weekly ethanol production for week ended Aug. 4 fell 44,000 barrels per day (bpd) to an average of 1.023 million bpd but was 1,000 bpd above last year. Ethanol stocks rose 20,000 barrels to 22.88 million barrels. The current pace would take final 2022-23 ethanol use to 5.188 billion bushels, which is below USDA’s last estimate of 5.225 billion.
Prior to Thursday’s open, USDA will report weekly export data for week ended Aug. 3, which is expected to show 2022-23 sales to range from 75,000 to 600,000 MT and new-crop sales to range from 200,000 to 600,000 MT. Last week, net old-crop sales of 107,521 MT were reported for the previous week, while new crop sales totaled 348,852 MT.
Technical analysis: December corn futures ultimately surrendered to the downside but were able to maintain a range above initial support of $4.92 1/2 after breaching the level in the two previous sessions. A successful breach of the level will find additional support at $4.86 and again at $4.81 1/2. Meanwhile, initial resistance of $5.03 1/4 was tested early in the session. Futile were efforts to move towards the 10-day moving average of $5.07 1/4. A turn above the level will then face resistance at $5.13 3/4, then at the 20- and 40-day moving averages of $5.22 1/4 and $5.33 1/4, respectively. From there the 200-day moving average of $5.67 1/4 serves as solid resistance and the top of the recent trading range.
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.
Price action: November soybeans rose 2 1/2 cents to $13.08 1/2 and nearer the session low. September soybean meal fell $5.60 at $412.70 and near the session low. Prices hit a three-week-low today. September bean oil rose 23 points to 64.21 cents and closed near mid-range.
Fundamental analysis: Soybeans saw slight gains today as Corn Belt weather forecasts for next week have turned warmer and drier. However, the soybean meal futures market is listing and that is limiting buying interest in soybeans. World Weather Inc. today said a drier weather pattern will occur Tuesday through Aug. 23, with temperatures expected to rise late next week into the following weekend.
Also supportive for the soy complex today, USDA this morning announced daily U.S. soybean sales of 251,000 MT to China for delivery during 2023-24.
Thursday morning’s weekly USDA export sales report is expected to show U.S. soybean sales in the 2022-23 marketing year of zero to 300,000 MT, and sales of 300,000 to 1.5 million MT in the 2023-24 marketing year.
Traders are also awaiting Friday morning’s monthly USDA supply and demand report. Since 2000 the USDA U.S. soybean production forecast has been above the trade average estimate eight times and below 15 times. However, six out of last eight years have flipped to USDA’s forecast exceeding trade averages. Of the 15 years the trade forecast was greater than the USDA forecast, soybean prices gained on report day 10 times and declined 5 times. There have even been price gains when the USDA production forecast was up to 150 million bushels more than expected. In general, daily price performance is generally a tossup between 50 million bushels plus or minus between trade and USDA differences for soybeans. Differences approaching 100 million bushels, plus or minus, start to move prices.
Technical analysis: The soybean bean bears have the slight overall near-term technical advantage. A fledgling downtrend is in place on the daily bar chart. The next near-term upside technical objective for the soybean bulls is closing November prices above solid resistance at $13.79. 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 this week’s high of $13.27 and then at $13.50. First support is seen at this week’s low of $12.82 1/2 and then at $12.70.
The soybean meal bulls have lost their slight overall near-term technical advantage and are fading. 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 this week’s high of $422.80 and then at $430.00. First support is seen at $410.00 and then at $405.00.
Soybean oil bulls still have the firm overall near-term technical advantage. A nine-week-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 last week’s high of 65.80 cents and then at 67.30 cents. First support is seen at this week’s low of 62.11 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.
Price action: December SRW fell 19 3/4 cents to $6.61 3/4, settling near the session low. December HRW fell 5 1/2 cents before settling at $7.76, nearer the session low. December spring wheat closed 10 cents lower at $8.35 1/2.
Fundamental analysis: Mild corrective selling which started the week ran out of steam as wheat futures faced stiff losses Wednesday. News of overflowing Russian ports with grain despite record shipments was enough news of continued Russian grain hitting the world markets to send domestic prices tumbling. The Turkish President Erdogan is also hard at work to start another Black Sea grain deal that has a broad scope, reviving hope of another deal that further pressured wheat futures today. A Russian court froze around $36 million of Goldman Sachs assets after a Russian bank claimed Goldman refused to honor a swap contract due to sanctions.
One market driver for the upcoming Crop Production report will be spring wheat production. Crop conditions point toward weak production, but market participants seem to be pricing in higher estimates, as predicted in the Wheat Quality Council’s tour at the end of July. The wheat balance sheet is already tight, and continued dryness in the northern Plains has not eased crop stress. The region is expected to receive some precip in the eastern half of the region, but rain in the western half will continue to be limited, according to World Weather Inc. Rain in the Canadian Prairies is also expected remain poor, below levels needed to combat evaporation.
The USDA is set to release export sales tomorrow morning, with analysts expecting net sales between 200,000 and 500,000 MT for the 2023-34 marketing year. Last week, net sales were announced at 421,282 MT, which was the highest of the marketing year. Outstanding sales remain at the lowest level since 2002-03. Export demand could pick up at a moment’s notice though, and wheat quality concerns as those seen in France and China could drive importers to the U.S. market.
Technical analysis: December SRW futures fell sharply on the session after failing to take out initial resistance at the 10-day moving average at $6.82 3/4. This was the first target of the bulls, failure to recapture which confirms the near-term technical advantage belonging to the bears. $6.82 3/4 will remain first resistance, backed by $6.91 1/2 then the psychological $7.00 level. Bears are targeting last week’s low at $6.54 1/4. Price appears to be in a bear-flag on the daily bar chart, loss of $6.54 1/4 on a closing basis would indicate a technical breakdown, pointing to a test of the May low at $6.08 1/4 with additional support at $6.41 1/2 on the way.
December HRW futures have spent nearly all of the last four days trading in the same range. This zone lies at the bottom of the sideways trading range that has capped nearly all the downside in prices over the last six months. Loss of $7.65 support would lead to a test of the May low at $7.36. Bulls are looking to reclaim the $8.00 level, which will be an uphill battle, especially ahead of the upcoming Crop Production and Supply and Demand reports.
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 15 points to 85.35 and closed nearer the session high.
Fundamental analysis: Consolidative price action continues this week, ahead of Friday’s monthly USDA supply and demand report and a fresh estimate on U.S. cotton production. U.S. cotton production is forecast at an average of 15.78 million bales, according to t a Bloomberg survey of cotton analysts. USDA pegged the U.S. cotton crop at 16.50 million bales in the July report.
The recent selling pressure in the U.S. stock indexes, which hit four-week lows today, also tempered buying interest in the cotton market, as did some more downbeat economic news coming out of China. China saw a decrease in both consumer and producer prices in July for the first time since November 2020, escalating concerns about deflation in the world’s second largest economy and a major cotton consumer.
Technical analysis: Cotton futures bulls have the slight overall near-term technical advantage. They are keeping alive a six-week-old uptrend on the daily bar chart. 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 88.39 cents. 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 today’s high of 85.55 and then at this week’s high of 85.90 cents. First support is seen at this week’s low of 84.27 cents and then at last week’s low of 83.25 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.
