Crops Analysis | August 10, 2023
Price action: December corn futures rose 2 cents to $4.96 1/4, ending nearer the intraday high.
Fundamental analysis: Corn futures saw slight corrective buying but remain limited to the same range for the sixth straight day as trader’s position ahead of Friday’s Crop Production and Supply and Demand reports. The reports released at 11 a.m. CT will be a key market mover and will likely determine the forthcoming trend in the market. Analysts are expecting old crop ending stocks to rise 8 million bushels from the USDA in July to 1,410 million bu. and new crop ending stocks to fall to 2,167 million bu. from 2,262 million bu. in July. This implies a cut to both production and use. Production is seen as falling from 15.32 billion bu. in July to 15.15 billion bu., dropping expected yield from 177.5 bu. per acre to 175.7 bu. per acre. Estimates are taken from a survey conducted by Bloomberg. The Crop Production report will be the first report of the crop year to use survey-based yield estimates alongside satellite imagery in an effort to peg production.
Rain remains in the forecast over the next couple weeks, though producers in the northwest may be left wanting more. Temperatures are expected to warm up in the second week of the outlook, increasing the need for additional precip, according to World Weather Inc. Conditions are favorable for crop development and should increase production prospects, the forecaster says. Despite recent rains, Iowa remains 100% “too dry”, according to the U.S. Drought Monitor. This is despite the Midwest declining more than 4% points as a whole to 72% “too dry.”
USDA reported net corn sales of 150,400 MT for 2022-23 in week ended Aug. 3, which rose 40% from the previous week but were down 47% from the four-week average. Net sales of 758,400 MT were reported for 2023-24, the highest amount ever for the crop year. Traders expected sales to range from 75,000 to 600,000 MT for 2022-23 and 200,000 to 600,000 MT for 2023-24. New crop outstanding sales are the worst since 2019 for this date, but this week’s impressive sales are pointing to importers “buying the dip,” a great sign amidst the pessimism that has surrounded the demand side of the corn market for the last several months.
Technical analysis: December corn futures remain supported by the same support zone that capped nearly all the downside in early July. Corn has ping-ponged between $4.92 and $5.00 all week, a trend that is almost surely to break tomorrow when prices are driven by the reports. Bears objective is weakness below $4.92 then the July 13 low at $4.81. If this level is broken on a closing basis, a trip to $4.50 will likely come sooner than later, though $4.63 support will offer some reprieve from selling pressure. Bulls are aiming to take out initial resistance at $5.00 before tackling the 20-day moving average at $5.13 1/2. A daily close above $5.35 would be beneficial for bulls, though that could prove an uphill battle.
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 9 3/4 cents to $13.18 1/4, a mid-range close, while September meal rose $2.30 to $415.00. September soyoil fell 3 points to 64.18 cents.
Fundamental analysis: November soybean futures posted additional followthrough gains, but a weak technical posture halted gains as traders remain cautious ahead of tomorrow’s supply and demand updates. Promising export data lent soybeans a more upbeat tone, with USDA reporting old crop export sales of 406,500 MT during the week ended Aug. 3, which were up noticeably from the previous week and the four-week average. Meanwhile, new crop sales totaled 1.096 MMT for the week, with China (753,000 MT) and unknown destinations (314,000) primary purchasers. Traders were expecting sales to range from 0 to 300,000 MT for 2022-23 and 300,000 MT to 1.5 MMT for 2023-24.
World Weather Inc. reports crop development and production potential has improved for many areas in the Midwest in recent weeks with the exception of some drier areas in northeastern Iowa, Minnesota and a handful of locations in Kansas, Illinois and Wisconsin. However, the forecaster continues to predict a drier weather pattern will occur Tuesday through Aug. 24 while temps begin to warm around Aug. 20. The forecaster notes some late-developing crops will be left in need of another round of timely rain late this month.
Technical analysis: November soybeans were able to secure a close above initial resistance of $13.18 3/4, with an earlier test of the 10-day moving average of $13.27 1/4 proving unsuccessful. A turn above the level, however, will find additional resistance at the 200-day moving average of $13.33 1/4 and again at the 40-day moving average of $13.44 3/4. From there, the 20-day moving average will serve as resistance around $13.64 1/2, then at the gap between $13.79 and $13.75 1/2, formed on July 31 and then the July 24 high of $14.35. Conversely, initial support will now serve around $13.12, then at $13.02 1/4, $12.95 3/4 and the 100-day moving average of $12.89 1/2.
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 wheat rose 2 cents to $6.63 3/4. December HRW wheat gained 3 1/4 cents to $7.79 1/4. December spring wheat fell 2 1/4 cents to $8.33 1/4. Prices closed nearer their session lows.
Fundamental analysis: The wheat futures markets today saw more choppy and consolidative trade, with position evening featured, ahead of Friday morning’s monthly USDA supply and demand report. Wheat traders will focus on U.S. spring wheat production. Crop conditions that are less than ideal point to less production, but market participants appear to be pricing in higher estimates from the agency, as predicted in the Wheat Quality Council’s tour at the end of July.
Traders continue to monitor developments regarding the Russia-Ukraine war and grain shipments coming out of the Black Sea region. Reports said the Ukrainian navy announced a temporary humanitarian corridor in the Black Sea is operational. The first ships are expected to use this corridor in the coming days.
World Weather Inc. today said that in the northern Plains a mostly favorable mix of rain and sunshine will still occur in the next seven days in the eastern half of the region. Rainfall in the western half will continue to be limited, “which will be a problem for central and northern Montana since this area has the lowest topsoil moisture in the region,” said the forecaster.
USDA this morning reported better-than-expected U.S. wheat export sales of 567,000 MT for 2023-24--a marketing-year high, up 35% from the previous week and 86% above the four-week average.
Technical analysis: Winter wheat futures bears have the firm overall near-term technical advantage. A bear flag pattern has formed on the daily bar chart for SRW, while a bearish pennant has formed on the daily HRW chart. 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 this week’s high of $6.87 1/4 and then at $7.00. First support is seen at the August low of $6.54 1/4 and then at $6.50. 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 this week’s high of $7.89 1/4 and then at $8.00. 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.
Price action: December cotton rose 80 points to 86.15 cents, marking the highest close since July 26.
Fundamental analysis: December cotton futures notched solid gains amid U.S. dollar weakness and an increase in export sales. Stumbling crude oil futures did little to slow the natural fiber down as the new-crop contract touched the highest level since July 27. The dollar retreated following the release of July’s Consumer Price Data (CPI), which showed a slight 0.2% increase in July to 3.2%, while core prices also rose 0.2%. Traders attribute the month-over-month rise to a quirk in the data related to increasing energy prices off a very low base in July and likely August, as it occurred in July and August of 2022. Core inflation will remain at the forefront of the Fed’s decision to raise interest rates at the upcoming September meeting.
World Weather Inc. states Texas drought will prevail during the next ten days to two weeks, with good early season harvest weather expected in southern Texas. West Texas and the Texas Blacklands will continue to experience declining crop conditions, however, due to persistent heat and dryness. The forecaster states yields will continue to fall until rain evolves which is unlikely in the near-term.
At the start of a fresh Augst 1 marketing year, USDA reported net sales of 277,700 RB in week ended Aug. 3 for 2023-24. Primary purchasers for the week included China, Pakistan and Vietnam.
Cotton traders are awaiting Friday morning’s monthly USDA supply and demand report and a fresh estimate on the size of the U.S. cotton crop.
Technical analysis: December cotton gained technical ground with bulls capturing a close above resistance at 85.72 and 86.08 cents. Initial resistance will now serve at 86.62 cents, and at the July 27 high of 88.39 cents. A turn lower, will find support at today’s failed support levels, then at the 10-day moving average of 85.09 cents and the 20-day moving average of 84.68 cents. Additional support lies at 84.28 and 83.92 cents, then at the 40- and 100-day moving averages of 82.31 and 81.83 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.
