Crops Analysis | August 18, 2023
Price action: December corn futures rose 7 1/4 cents before settling at $4.93, marking a 5 3/4 cent rise on the week.
5-day outlook: Corn futures ended the week strong despite a lackluster start to the week, testing the first level of meaningful resistance, pressuring bulls to follow through on Monday to confirm an interim low is in place. Commodity markets as a whole rose today with concerns over the world economy easing into the weekend, with crude oil continuing yesterday’s bounce from a two week low. The U.S. dollar index has also struggled to overcome 103.5 resistance, which has proved beneficial for risk assets, alongside the ten-year treasury rate falling on the session to 4.25%. It will be key to see how corn reacts when the overall market is not trading in its favor, so bulls are not out of the woods yet. Weather and forecasts will be key in Monday’s price action, but price is likely to be partially dictated by the Pro Farmer crop tour, taking place from August 21-24. This will give the first widespread look into objective field data across the corn belt, utilizing more than 1,600 samples of corn. Much of next week’s price action is likely to be determined on Monday, with a close higher signaling more strength and weakness indicating a trip to the recent low at $4.73 1/2, though choppy trade can be expected.
30-day outlook: A hot and dry forecast over the next week has added some weather premium into the market over the past week, proving the crop is not made and concerns still remain over production potential. History has told us that late summer weather can add a lot of strain on corn futures, with the best example likely being the 2020 derecho that rolled through the Corn Belt in the second week of August. Temperatures are expected to turn hot in the Plains and western Corn Belt due to a high-pressure ridge across the central United States, and the eastern Corn Belt is also expected to be warmer than usual. Paired with dryness, World Weather Inc. says soil moisture is expected to fall over the period, though current moisture levels are expected to continue to support crop development. The forecaster says warmer conditions will speed up crop maturation, but no meaningful impact should be expected on yield.
90-day outlook: The influx of corn acres this year—our analysis has planted acres rising even mor—pared with recent demand destruction will likely keep pressure on prices over the coming quarter. Harvest pressure will also be of no help to corn bulls once combines start to roll. While new crop corn sales have been strong recently, outstanding sales are at the lowest level since 2019. Today’s report of 112,000 MT of corn to Mexico for the 2023-24 crop year was a sight for sore eyes, but the trade dispute of GMO corn between the U.S. and Mexico has unknown effects. The conflict seems to have no resolution in sight, with Mexico’s president AMLO stating they are not in violation of the USMCA trade agreement and the U.S. escalating the dispute to a resolution panel of the agreement. The expanding balance sheet and potential of a record yield amidst weakening demand will likely keep downward pressure on the market over the coming months.
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 23 1/4 cents to $13.53 1/4, closing above the 200-, 20- and 40-day moving averages and gaining 45 3/4 cents on the week. September meal rose $4.30 to $403.90, losing $6.40 week-over-week. September soyoil rose 53 points to 68.29 cents and gained 416 points on the week.
5-day outlook: Soybean futures notched solid gains to end the week, with the November contract gaining an improved technical posture through a close above the 200-day moving average. The area has served as solid resistance and the top-end of the trading range since the beginning of the month, while the 100-day moving average has lent solid support at the low-end of the August range. However, increasing production concerns due to a return of heat and dry weather into the end of the month has handed bulls the needed momentum to extend above the level. World Weather Inc. notes heat and dryness is expected to build across the U.S. Plains and Midwest during the weekend and next week, raising the potential for crop moisture and heat stress as time moves along. However, the forecaster indicates rain has been increased since Thursday’s forecast for Aug. 26-27, with portions of the central and southern Midwest seeing at least some rain that should halt declines in yields.
Traders will also be tuned in for Pro Farmer’s annual crop tour next week, which will provide insight into how varying weather conditions have affected crops throughout the growing season.
30-day outlook: South American weather will become increasingly important as the Brazil and Argentina begin to plant their soybean crops in the coming weeks. However, plantings in Brazil could take off at a slower-than-usual pace due to a slower than normal safrinha corn harvest. Weather in Brazil has proven favorable overall, with regular rains occurring throughout the country, which is further hindering safrinha harvest efforts. Meanwhile, Argentina continues to receive limited rainfall, with World Weather noting the western region is critically dry. Traders will continue to monitor forecasts over the next month as El Niño is expected to evolve in October, which could bring heavy rainfall in Argentina following an extended period of dry weather, which notably reduced 2022-23 production.
90-day outlook: Recent economic data has shed light on a faltering Chinese economy as the country emerges from its Zero-Covid policies. The persisting news has heightened demand suspicions across the marketplace but raises specific concern to the amount of soybeans the country will import as a fresh marketing-year approaches. A string of recent new-crop purchases indicates there is demand, though new crop export sales are lagging nearly 40% behind this time a year-ago. In week ended August 10, USDA reported export net new crop sales of 1.407 MMT, topping the pre-report range by over 100,000 MT. China was the top purchaser during the week at 940,000 MT, while 258,000 MT were to “unknown destinations.”
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 rose 23 3/4 cents to $6.39 and nearer the session high. For the week, prices lost 14 3/4 cents. December HRW wheat futures gained 19 1/4 cents to $7.60 3/4, near the session high and fell 5 1/4 cents on the week. December spring wheat rose 14 1/4 cents to $8.17 3/4 but lost 12 1/2 cents week-over-week.
5-day outlook: The wheat futures markets today saw short covering from recent selling pressure and were also supported by higher corn and soybean futures prices. Trading in the wheat markets next week will likely be dictated at least in part by the corn and soybean markets, as scorching heat is forecast for the Corn Belt for at least the next week. Also, the annual Pro Farmer Midwest Crop tour of corn and soybeans will be in keen focus. Any fresh developments on the Russia-Ukraine war and Ukraine gain-shipping fronts will be grain-market-sensitive. Romanian Prime Minister Marcel Ciolacu said today he hoped 60% of Ukrainian grain exports will transition through Romania but said that is an ambitious goal.
World Weather Inc. today said that in the northern Plains shower and thunderstorm activity in the next seven days will still likely be greatest in northwestern production areas, which will be good for central and northern Montana where soil moisture is lowest. Drier weather in southeastern production areas will be good for greater fieldwork advancement. However, this area will eventually need more rain in the latter part of next week to better support late season crops.
30-day outlook: World Weather Inc. also today reported India is heading for its driest August in more than a century, with only scant rainfall likely to occur across large areas of the country, partly because of the El Niño weather pattern. August rainfall is expected to be the lowest since records began in 1901, threatening the country’s crops, including wheat. Traders will continue to monitor this situation closely in the coming weeks.
90-day outlook: With the HRW harvest winding down and the spring wheat harvest at 24% complete as of Aug. 13, wheat traders will be looking to fall HRW planting conditions. At present conditions favorable, but the weak U.S. export prospects and recent sell off in prices suggest wheat plantings will drop next season.
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 4 points to 83.65 cents but lost 424 points week-over-week.
5-day outlook: December cotton futures ended the week mostly unchanged following four consecutive days of heavy selling. Lackluster economic news from the number one importer of the natural fiber pressured futures, largely overshadowing likely U.S. production curbs due persisting extreme heat in Texas. Traders will continue to monitor news from China and as well as the U.S. dollar and the direction of crude oil futures.
30-day outlook: As harvest nears, traders will continue to monitor weather despite recent offsetting demand sentiments from China. World Weather Inc. notes Texas crops and a few in the lower Delta have been stressed by warm, dry weather this season, which has pressured yields and quality lower, especially in unirrigated areas of Texas. The forecaster emphasizes very warm to hot temperatures will impact Texas for a few days. Meanwhile, crops in the northern Delta and southeastern U.S. are suspected of developing well.
90-day outlook: U.S. exports will continue to be a main market driver as the new marketing year continues to progress. With dour economic news seeping from China, traders will closely monitor U.S. export sales which will help provide insight into the global economy. On Thursday, USDA reported weekly export sales data for week ended Aug. 10, which showed net sales of 186,300 RB for the week, of which, China was the primary purchaser (138,400 RB, including decreases of 2,100 RB), along with Turkey (13,200 RB) and El Salvador (10,500 RB).
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.
