Crops Analysis | August 16, 2023
Price action: December corn rose 6 cents to $4.81 1/2, notching a high-range close after posting the lowest intraday price since Sept. 2021.
Fundamental analysis: Corn futures were able to rally from overnight lows, with strength stemming from the soy complex as traders shift their focus to forecasts of hot, dry weather. However, a strengthening U.S. dollar and crude oil weakness limited gains across commodities.
An overnight Russian drone attack on grain silos and warehouses at the Ukrainian river port of Reni on the Danube, a vital wartime route for Ukrainian food exports, had little effect on the market as the port was able to continue to operate following the attack, according to Reuters. Offsetting the news was reports that a ship, trapped since the Russian invasion, was able to depart from the Odesa port via the “humanitarian corridor.”
World Weather Inc. expects corn maturation to be sped up by the coming period of warmer, drier weather, with a small reduction in kernel size possible in drier areas where the crop is least advanced. The forecaster indicates some cooling will arrive later next week.
USDA will release weekly export sales data early Thursday morning, with traders expecting 2022-23 sales to range from 0 to 250,000 MT, and 2023-24 sales between 500,000 MT and 1.0 MMT. Last week, USDA reported 2022-23 sales of 150,400 MT for week ended Aug. 3, which were up 40% from the previous week, but down 47% from the four-week average. Meanwhile, net sales of 758,400 MT were reported for 2023-24.
Technical analysis: December corn futures rebounded from the lowest intraday level since Sept. 28, 2021, but failed to secure a close above initial resistance at $4.82 3/4. However, persisting efforts to turn above the level will find further resistance at the 10-day moving average of $4.90 3/4 and again at the psychological $5.00 level, which will be a crucial area to secure a close above in order to prove today’s low a near-term bottom. From there, resistance serves 20-, 40- and 100-day moving averages of $5.13 1/4, $5.22 1/4 and $5.33 3/4. Conversely, near term support continues to serve at $4.71, then at $4.66 1/2 and $4.58 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 50% forward priced for harvest delivery on expected 2023-crop.
Cash-only marketers: You should be 100% sold on 2022-crop. You should be 35% forward priced for harvest delivery on expected 2023-crop production.
Price action: November soybeans rose 18 1/4 cents at $13.23 1/2 and nearer the session high. September soybean meal gained $0.70 at $404.50 and near mid-range. September bean oil closed up 87 points at 66.77 cents, nearer the session high and hit a three-week high.
Fundamental analysis: Soybeans and soybean meal futures saw short covering and corrective bounces today following Tuesday’s losses. Corn Belt weather forecasts lean bullish for soybeans and supported buying interest today. World Weather Inc. today said a drier and warmer weather pattern will occur through the next two weeks and nearly all of the Midwest will see significant declines in soil moisture during the period. “Some soybeans in the wetter areas will benefit from the coming warmer temperatures, but the dry weather expected should last long enough to stress the crop in the drier areas and minor declines in yields may result if rain does not increase in the last days of the month,” said the forecaster.
The general marketplace is still experiencing some risk-off trading attitudes at mid-week, following this week’s downbeat economic news coming from China, the world’s second-largest economy. If the risk aversion remains in the marketplace in the coming sessions, gains in soybeans will likely be limited.
Traders are awaiting Thursday morning’s weekly USDA export sales report, which is expected to show U.S. soybean sales of zero to 400,000 MT of soybeans in the 2022-23 marketing year and sales of 550,000 to 1.3 million MT in the 2023-24 marketing year, according to a Reuters survey of analysts.
Technical analysis: The soybean futures bean bulls and bears are on a level overall near-term technical playing field amid recent choppy and sideways trading. 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 last week’s high of $13.38 and then at $13.50. First support is seen at $13.00 and then at the August low of $12.82 1/4.
The soybean meal futures bears have the overall near-term technical advantage. Prices are in a downtrend on the daily bar chart. 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 $390.00. First resistance comes in at $410.00 and then at this week’s high of $417.10. First support is seen at this week’s low of $404.30 and then at $400.00.
Soybean oil futures bulls have the solid overall near-term technical advantage. A 2.5-month-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 the August low of 62.11 cents. First resistance is seen at today’s high of 67.80 cents and then at 69.12 cents. First support is seen at 65.00 cents and then at this week’s low of 63.51 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 futures ended the day 3/4 cent lower at $6.23, despite trading higher earlier in the session. December HRW futures rallied 7 cents before closing at $7.52 1/2. December spring wheat rose 4 1/2 cents to $8.06 1/4.
Fundamental analysis: Wheat futures saw corrective gains most of the session, though gains were pared toward the end of the session as corn and soybean counterparts encountered resistance. SRW futures made a new for-the-move low overnight before buying was spurred by continued Russian attacks on Ukrainian ports on the Danube River. Two ports were attacked, Reni and Izmail, both of which are on the Danube. This came after talks yesterday which included the U.S., Turkey, Ukraine and neighboring countries that explored different routes to get grain out of the nation. Solutions thus far include sending grain via the Danube and Black Sea to nearby Romanian ports, which is slower and more costly, but is an alternative to the Black Sea shipping corridor, according to a Wall Street Journal report.
USDA is set to release export sales tomorrow, with analysts expecting net sales between 200,000 and 525,000 MT. Last week, sales outpaced expectations at 567,574 MT, though numbers still remain historically low. As farmers are deciding on winter wheat acres, the lack of export demand and price destruction have led to a cut in acres historically, this year will likely be no different.
Technical analysis: December SRW futures struggled to hold onto gains today despite a worsening supply chain outlook surrounding the Black Sea. Bears remain in full control of the technical advantage. Bears are seemingly hunting the May low $6.08 1/4, which will act as firm support and the bulls line in the sand. Failure below which targets the psychological $6.00 level then $5.75. Bulls are aiming to reclaim initial resistance at $6.55, which entails August 8 low and the 10-day moving average. Further buying would see resistance at $6.60, then $6.71.
The bears control the advantage in December HRW futures as well, targeting the May 3 low of $7.36. Price is in the bottom of a sideways trading pattern if bears manage to close futures below $7.36 support, it is a bearish breakdown indicating much further losses at stake. Today’s low of $7.39 will offer minimal support on the way. Bulls are aiming to reclaim initial resistance at $7.75, which is last week’s support zone and the 10-day moving average. Additional strength seeks $7.95 1/2, quickly backed by the psychological $8.00 level.
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 fell 38 points to 84.72 cents and nearer the session low.
Fundamental analysis: The cotton futures market is getting hit hard this week by a bevy of bearish elements, including risk-off attitudes in the general marketplace, heading into what can be the historically turbulent months of September and October for the stock and financial markets. There has also been dour economic news coming out of China this week, suggesting the world’s second-largest economy and a major cotton importer will see less demand coming from consumers and businesses in the coming weeks/months. A firmer U.S. dollar index and lower crude oil prices today were also bearish outside market factors limiting buying interest in the cotton market.
Cotton bulls have been frustrated the past two sessions, as prices were not able to rally following Monday afternoon’s USDA crop progress reports that lowered the agency’s “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%. The Texas cotton crop was rated 66% “poor” to “very poor,” while the “good” to “excellent rating was only 14%.
Traders are awaiting Thursday morning’s weekly USDA export sales report.
Technical analysis: Cotton futures bulls still have the slight overall near-term technical advantage but are fading and appear exhausted. A six-week-old uptrend is still in place on the daily bar chart. However, the higher price volatility is one warning signal of a market top being in place. The next upside price objective for the cotton bulls is to produce a close in December futures above technical resistance at last week’s high of 88.83 cents. The next downside price objective for the cotton bears is to close prices below solid technical support at the August low of 83.25 cents. First resistance is seen at today’s high of 85.50 cents and then at Tuesday’s high of 86.78 cents. First support is seen at 84.00 and then at 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.
