Crops Analysis | August 11, 2023
Price action: December futures saw volatile action following today’s reports, but ultimately fell 9 cents before settling at $4.87 1/4, marking a 10-cent loss on the week.
5-day outlook: Corn futures were unsure of how to react directly following the reports today, immediately spiking higher and trending higher before breaking down this afternoon. Bulls were looking for a yield below the average analyst and were obliged with a 175.1 bu. per acre yield, below the average forecast at 175.7 bu. in the Bloomberg survey. This compares to 177.5 bu. per acre in the July report and ultimately led to the USDA balance sheet contracting 60 million bushels from July to 2.202 billion bu. Demand is also seen as falling, with exports falling 50 million bu. month over month, Food, Seed, and Industrial use falling 20 million bu., and the Feed and Residual estimate falling 25 million bu. This is likely in part due to the reduced production forecast and the poor export pace maintained thus far.
The report overall was not overly bearish, but corn is seasonally bearish throughout August and the report was not bullish enough to change that trend. Price has thus far been supported by the July 13 low at $4.81, a level that will be key to prevent a trip down to the $4.50 area. Today’s bearish momentum will likely continue over the next week.
30-day outlook: Condition ratings experienced a bump last week and are likely going to see another rise in Monday’s report. Rain and moderate temperatures have reduced crop stress and have opened the door for favorable finishing. While top-end yield prospects have been taken out, a record yield is still on the table. World Weather Inc says, “Yield potentials in nearly all of the Midwest will be maintained or improved during the next week,” though some heat is expected to come into the region late next week. Rising condition ratings over the month of August are against the seasonal bias, but when it does happen, the USDA has always raised yield in the September Crop Production report. Favorable finishing weather will likely continue to weigh on prices over the next month.
90-day outlook: Corn bulls will continue to fight an uphill battle as combines start to roll. Brazilian corn is hitting the world market and the U.S. faces logistical issues and more expensive prices than our South American counterpart. The U.S. continues to lose market share of the world export market and the Brazilian record crop will be no help in fixing that this crop year. Domestic demand is also seen as falling, evidenced in today’s Supply and Demand reports. The lack of demand and seemingly expanding balance sheet will weigh on prices over the next quarter, though demand, particularly export demand, can pick up at a moment’s notice.
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 fell 10 3/4 cents to $13.07 1/2, a 25 3/4-cent loss on the week, while soymeal fell $4.70 to $410.30, and $12.30 week-over-week. Meanwhile, September soyoil fell 5 points to 64.13 cents, marking a weekly loss of 126 points.
5-day outlook: After facing pressure in morning trade, USDA’s August reports helped breathe a bit of life into soybeans, sending the November contract to the highest level in over a week, though the push was ultimately thwarted. A 1.1 bu. yield cut from July led to a 95 million bu. production decrease, though old-crop ending stocks were raised 5 million bu. along with a 10 million bu. increase in imports put total supply to 4,496 million bu., down 79 million from July. On the demand side, exports were trimmed by 25 million bu. from July’s estimate, leaving total use at 4,251 million bu. and 2023-24 ending stocks at 245 million bu., down 55 million bu. from July and 22 million bu. below the average pre-report estimate. Global carryover for 2022-23 rose to 103.09 MMT, up from 102.90 in July, while 2023-24 carryover was pegged at 119.40, down from 120.98 in July. Following USDA’s release of the data, new-crop soybeans were able to test the 200-day moving average for the fist time in five sessions.
30-day outlook: Through virtually the middle of the most important month in the growing season for soybeans, overall mother nature has provided nearly ideal growing conditions through much of the Midwest. However, World Weather predicts a drier weather pattern will occur Tuesday through Aug. 25, while temps will begin to warm around Aug. 20. The change in weather pattern could affect some late-developing crops, which will need another round of timely rain later this month. Further, USDA’s weekly drought monitor continues to show 100% of key growing state, Iowa in a drought category despite recent rains. Meanwhile, key grower, Illinois is considered 85.4% too dry, which reflected a 10% decrease from the previous week. Pro Farmer’s upcoming crop tour, which begins Aug. 21 will help provide a bit more insight into the growing crop and the effects of varying weather conditions throughout the season.
90-day outlook: A recent uptick in daily new-crop export sales has failed to boost soybean futures much in the wake of mostly favorable U.S. weather and a surging dollar. However, as the current marketing-year winds down and harvest approaches, traders will increasingly gain a better grasp on the size of the U.S. crop in addition to South American weather as Brazil and Argentina begin to plant their soybean crops. Traders will continue to monitor weekly export data into the new marketing year in order to gain insight into global demand.
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 futures fell 10 cents to $6.53 3/4 and hit a four-week low. For the week, December SRW lost 6 1/2 cents. December HRW wheat lost 13 1/4 cents to $7.66 and hit a nine-week low. On the week, December HRW fell 3 1/4 cents. December spring wheat fell 3 cents to $8.30 1/4, a 7 1/2 cent loss on the week.
5-day outlook: Friday’s technically bearish weekly low closes set the stage for follow-through speculator chart-based selling pressure in the winter wheat futures markets early next week.
Wheat traders got a mostly neutral monthly supply and demand report today but selling pressure in corn and soybeans spilled over into the wheat markets. USDA cut its all-wheat production estimate 5 million bu. from last month. The all-wheat yield estimate of 45.8 bu. per acre declined 0.3 bu. from last month. Wheat carryover for 2023-24 is up 23 million bu. from last month and 17 million bu. above the average pre-report trade estimate. Total supplies are down 5 million bu. from last month amid a cut to the 2023 wheat crop. The agency put the national average on-farm cash wheat price for 2023-24 at $7.50, unchanged from last month. The report will be quickly digested and traders will move on to other fundamentals next week, including any fresh news from the Black Sea region.
World Weather Inc. today reported improving harvest weather is expected in Europe during the next week to ten days while conditions in the western CIS may deteriorate a bit as wetter biased conditions evolve, slowing the harvesting and planting of winter crops. Argentina’s western drought remains serious with little chance for significant change in the next couple of weeks. Brazil’s wheat and that in South Africa is still rated well with little change expected for a while. U.S. harvest weather is good in the northwestern Plains and Pacific Northwest and progress a little slower in the Midwest.
30-day outlook: The Russia-Ukraine war and Black Sea grain-shipping developments will continue near the front burner of the wheat markets in the coming weeks. Seasonal harvest pressure is likely to continue as spring wheat combining hits its stride.
90-day outlook: Look for increasing attention on planting conditions for the 2024 HRW wheat crop. The crop outlook has improved, but the appreciation of the U.S. dollar in the foreign exchange markets may be an anchor on price gains in the coming months. Wheat futures will likely be a follower in the coming few months, as U.S. corn and soybean harvests and early yield results will be closely monitored.
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 174 points to 87.89 cents, after trading the highest level in nearly a year earlier in the session. December futures gained 360 points on the week.
5-day outlook: December cotton futures rocketed to the highest level in nearly a year following USDA’s August reports. While old-crop ending stocks were raised 450,000 bales to 3.7 million bales amid a cut in exports of 100,000 bales and a 350,000 bale cut to unaccounted use, 2023-24 ending stocks were lopped by 700,000 bales to 3.1 million bales. Total 2023-24 supplies were slashed 2.06 million bales from July, though larger beginning stocks were more than offset by a 2.51 million-bale reduction in the 2023 crop. On the demand side, USDA trimmed domestic use by 50,000 bales, while exports were cut by 1.25 million bales. Traders will continue to mull over USDA’s August data into next week, with an increasing focus on weather as harvest nears.
30-day outlook: Weather over the next month will be increasingly important in the wake of today’s USDA data. World Weather Inc. reports a few showers and thunderstorms will impact West Texas infrequently over the next couple of weeks, but they will have a minimal impact on crops. Overall, there is not much potential for relief from any of the dry and warm weather in Texas crop areas. The forecaster continues to maintain the Coastal Bend and South Texas production areas are benefiting from dry conditions with early harvesting underway. Southern Texas will experience production drags, though, due to dry biased conditions during much of the growing season. Weather in the Delta and southeastern states is expected to be favorably mixed over the next ten days.
90-day outlook: USDA’s weekly export data will continue to prove important as the new marketing year, which began Aug. 1, progresses. Traders will continue to look to the data to gauge the world and top importer, China’s economy as data continues to point to persisting deflationary issues, which could lead to reduced purchases of the natural fiber. In the week ended Aug. 3, USDA reported net sales of 277,700 RB for 2023-24. Top purchasers included China, Pakistan and Vietnam.
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.
