Crops Analysis | August 15, 2023

Crops Analysis
Crops Analysis
(Pro Farmer)

Corn

Price action: December corn futures dropped 12 1/2 cents to $4.75 1/2, nearer the session low and hit an 11-month low.

Fundamental analysis: The corn market was pressured sharply by a general “risk-off” day in the marketplace today, following more dour news on China’s economic front, which suggest less demand for raw commodities coming from the world’s second-largest economy. The China news helped sink raw commodity leader crude oil today, which also lent selling pressure to the grains.

Also a negative for corn today, USDA on Monday afternoon rated 59% of the U.S. corn crop “good” to “excellent,” a two-percentage-point increase from last week, while the “poor” to “very poor” rating fell one point to 13%. On the weighted Pro Farmer Crop Condition Index (CCI; 0-to-500-point scale, with 500 representing perfect) the corn crop improved 3.9 points to 352.5 and is now 3.7 points (1.1%) above last year at this time.

Corn futures traders today brushed aside weather forecasts for a heat wave to envelop the Plains and western Corn Belt this weekend through the middle part of next week. Temperature extremes of 100 to 110 degrees are likely in the Plains and 95 to 104 in the western Corn Belt. Dry weather is expected in the Plains and Midwest from the second half of this week through the first half of next week. 

Technical analysis: The corn futures bears 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 $5.07 1/2. The next downside target for the bears is closing prices below chart support at $4.50. First resistance is seen at today’s high of $4.85 1/3 and then at this week’s high of $4.92 1/4. First support is at $4.75 and then at $4.70.

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 3/4 cents to $13.05 1/4, near the session low, while September meal fell $11.50 to $403.80, the lowest close since July 12. September soyoil rose 81 points to 63.33 cents.

Fundamental analysis: November soybeans made an overnight breach of the 200-day moving average, despite a notable increase in USDA’s weekly condition ratings, though selling efforts ensued shortly thereafter, with meal weakness leading the complex lower. A weakening Chinese economy is casting a shadow over the broader marketplace as demand concerns continue to escalate following a wave of lackluster data over the past two days.

USDA updated its weekly condition ratings following Monday’s close, which reflected improved weather August weather conditions with a five-point increase from last week to 59% “good” to “excellent,” while the portion rated “poor” to “very poor” fell two points to 12%. On our weighted CCI, the soybean crop rose 9.2 points to 349.2, which is 0.1 point better than last year on this date. As a result of improving weather throughout much of Midwest, crop consultant, Dr. Michael Cordonnier, increased his yield estimate by 0.5 bu. to 51 bu. per acre and now forecasts the crop at 4.21 billion bu. He noted a neutral to slightly higher bias going forward, indicating yields and acreage could increase.

Meanwhile, World Weather Inc. expects a high-pressure ridge will evolve in the central Plains Friday and expand in the Midwest during the weekend and will prevail through the first half of next week and then shift to the southwest and weaken late next week and into the following weekend. The forecaster notes some rain is expected in the northern and eastern Midwest as the ridge slips out of the Midwest late next week, but until then rain will be limited. The west-central and southwestern Corn Belt along with the northern Delta and central two-thirds of the Great Plains will be among the driest and hottest areas for the longest period of time.

U.S. soybean processors crushed more beans than expected in July, according to the National Oilseed Processors Association (NOPA) data released earlier today. NOPA members, which account for 95% of soybeans crushed in the U.S., processed 173.33 million bu. of soybeans in July—the largest July crush on record and well above the average trade estimate of 171.337 million bu., according to a Reuters poll. The total reflected a 5.0% from 165.023 million bu. processed in June and was up 1.8% from the 170.220 million bu. processed in July 2022. Soyoil supplies among NOPA members as of July 31 fell to a 10-month low of 1.527 billion pounds, down from 1.69 billion at the end of June and 1.684 billion pounds in NOPA stocks at the end of July 2022.

Technical analysis: November soybeans continue to trade in the recent trading range between the 100-day moving average of $12.89 3/4 and the 200-day moving average of $13.32 1/2, which is serving up solid initial resistance. A turn below the 100-day will find additional resistance at the June 30 low of $12.66, then at the May 31 low of $11.30 1/2. However, a successful breach of the 200-day moving average will find additional resistance at the 40-day moving average of $13.46 1/2, again at the 20-day of $13.54 1/4 and then at the July 24 high of $14.35.

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 fell 17 3/4 cents to $6.23 3/4, nearer the session low and hit a 2.5-month low. December HRW wheat dropped 13 3/4 cents to $7.45 1/2, nearer the session low and hit a 3.5-month low. December spring wheat fell 18 cents to $8.02, the lowest close since June 7.

Fundamental analysis: The wheat futures markets were hit again today by a “risk-off” day in the general marketplace following downbeat economic data coming out of China. News services continue to report that despite the recent escalation in the Russia-Ukraine war, grain is flowing out of the Black Sea region. SovEcon said Russian wheat shipments in the week ended Aug. 10 totaled 1.2 MMT, the highest level since August 2021.

USDA on Monday afternoon rated 42% of the U.S. spring wheat crop as “good” to “excellent,” up one point from the previous week. The portion of the crop rated “poor” to “very poor” was unchanged at 20%. The Pro Farmer weighted CCI showed the spring wheat crop slipped 0.9 points to 320.7, which was 47.7 points (12.9%) below last year.

World Weather Inc. today said that in the northern Plains the driest part of the region, central and northern Montana, will likely receive the greatest rainfall in the first week of the outlook. Most of this rain will occur Saturday through Monday and it won’t be enough to significantly raise soil moisture. “However, it will be better than none and should reduce late-season crop stress at least a little,” said the forecaster. Southeastern production areas have the greatest topsoil moisture, but it will be evaporating fast in the upcoming weekend as temperatures trend above average with dry weather.

Technical analysis: Winter wheat futures bears have the solid overall near-term technical advantage. Prices are in steep three-week-old downtrends on the daily bar charts. SRW bulls' next upside price objective is closing December prices above solid chart resistance at $7.00. The bears' next downside objective is closing prices below solid technical support at the May low of $6.08 1/4. First resistance is seen at today’s high of $6.44 1/2 and then at this week’s high of $6.61 1/2. First support is seen at today’s low of $6.21 3/4 and then at $6.08 1/4.  The HRW bulls' next upside price objective is closing December prices above solid technical resistance at $8.00. The bears' next downside objective is closing prices below solid technical support at the May low of $7.36. First resistance is seen at today’s high of $7.63 and then at this week’s high of $7.71 1/4. First support is seen at today’s low of $7.42 3/4 and then at $7.36.

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 137 points to 85.10 cents, ending the session below the 10- and 20-day moving averages for the first time since July 10.

Fundamental analysis: December cotton posted followthrough weakness amid a selloff across the broader marketplace amid weak economic data out of China. The country’s central bank unexpectedly cut rates overnight following weak retail sales data, in an effort to boost an economic recovery. The news enhanced demand concerns from the number-one importer of the natural fiber.

Meanwhile, USDA trimmed its “good” to “excellent” rating from last week by five percentage points to 36%, while the portion rated “poor” to “very poor” increased by nine points to 43%, with Texas rated 66% “poor” to “very poor,” while the “good” to “excellent rating was a meager 14%. USDA estimated 72% of the crop was setting bolls, with 13% opening bolls.

World Weather Inc. reports Texas crops and a few in the lower Delta have been stressed by dry and warm weather this season pressuring yields and quality, especially in unirrigated areas of Texas. Meanwhile, crops in the northern Delta and southeastern U.S. are suspected of developing well. The forecaster notes that a short-term break from the excessive heat is occurring in West Texas today and Tuesday, but the heat will return again late this week and last into early next week.

Technical analysis: December cotton futures lost technical traction with a close held below the 10- and 20-day moving averages of 85.51 and 85.37 cents. An extension lower will find additional support at 83.85 cents, again at the 40-day moving average of 82.80 cents and then the 100-day of 82.05 cents. An effort to recapture this week’s losses will find resistance at the 10- and 20-day moving averages, then at 86.48 cents, again at 87.73 cents, and the Aug. 11 high of 88.83 cents. Success above this area will then face resistance at 89.11 cents and 90.42 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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