Crops Analysis | August 31, 2023
Price action: December corn futures fell 2 1/2 cents to $4.78 1/4 and nearer the session low.
USDA this morning reported U.S. corn export sales of 71,700 MT for 2022-23 and sales of 991,800 MT for 2023-24 for the week ended Aug. 24. New-crop sales were a marketing-year high. The numbers were within the range of trader expectations.
As the calendar turns to September on Friday, grain traders are starting to look ahead to the monthly USDA supply and demand report (WASDE) that comes out September 12. As our crop tour discovered last week, USDA may trim its corn-production estimate after last week’s scorching heat wave over most of the Corn Belt.
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 fell 18 cents before settling at $13.68 3/4, near the session low. December meal futures fell $6.2 to $404, nearer the session low. December soyoil saw relative strength, though still closed 15 points lower at 62.48 cents.
Fundamental analysis: Late-session selling in soybeans continued today for the third straight session. New-crop export demand has been beneficial for bulls, with today’s daily export sale report of 132,000 MT to China marking the fifth trading day in a row of daily sale announcements. This morning, USDA reported net soybean sales reductions of 50,700 MT for 2022-23 – a marketing-year low. Net sales of 1.1 MMT for 2023-24 were led by unknown destinations (399,400 MT) and China (392,500 MT). Traders expected 50,000 to 300,000 MT for 2022-23 and 600,000 to 1.4 MMT for 2023-24. New crop sales were a marketing year high. While export demand has ramped up lately, outstanding sales for new-crop beans are still well below year-ago as Brazil has taken significant market share from U.S beans. Soymeal on the other hand has the highest outstanding sales since 2015-16 as the U.S. takes market share from a depressed Argentine crush.
The Midwest, Great Plains and northern Delta are seen as facing net drying over the next full week and, for many areas, at least ten days, World Weather Inc says. Paired with temperatures increasing Friday and into the weekend, crop stress is likely to return, potentially reducing yield due to pod abortion and reduced pod size.
The USDA releases the monthly Oilseeds Crushings report tomorrow; analysts expect 184.2 million bushels of soybeans to be crushed, which would be a record for July. U.S. soyoil stocks are expected to have declined to 2.203 billion lbs., according to a Reuters survey.
Technical analysis: November soybeans fell under pressure for the third session in a row, falling below $13.81 and $13.71 1/2 support, which will both now stand as resistance. While the bulls still retain the technical advantage, the bears are garnering momentum to negate the uptrend on the daily bar chart. Next support stands at $13.60 1/4, then $13.47.
December meal futures have continued their downward slide as well, challenging the bulls’ technical advantage. Bulls are looking to defend support at $402, quickly backed by the psychological $400 level, then $395. Bulls are aiming to recapture yesterday’s low at $405.5 before challenging $410 resistance.
December soyoil saw relative strength today thanks to a surging crude oil market, but futures have still put in a series of three lower highs over the past month. Price has also put in a series of higher lows throughout August, as price tightens. A close above 64 cents or below 62 cent will determine medium term direction, but until then, price is likely to continue to chop largely sideways.
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 closed down 5 cents at $6.02 and hit a contract low. December HRW wheat fell 4 1/2 cents to $7.27 1/4 and hit a 21-month low. December spring wheat futures closed 12 cents lower at $7.67 1/2 and hit a contract low.
Fundamental analysis: Technical selling was featured in the winter wheat futures markets today as the chart postures remain fully bearish. A solid rally in the U.S. dollar index today was also a daily negative for the wheat markets. Selling interest was a bit limited by end-of-the-month position squaring. Traders continue to monitor the Ukraine-Russia war and its implications on grain shipping out of the Black Sea region. Reports said Turkish President Tayyip Erdogan will meet Russian President Vladimir Putin in Russia’s resort of Sochi on Sept. 4 to discuss Black Sea grain exports. Meantime, Russia’s IKAR consultancy raised its forecasts for Russia’s wheat crop to 91 MMT from 89.5 MMT previously. It also raised its Russia export forecast to 49.5 MMT from 47.5 MMT.
USDA this morning reported U.S. wheat export sales of 329,100 MT for 2023-24, down 19% from the previous week and 25% below the four-week average. The number was at the bottom end of trade expectations.
World Weather Inc. today reported that in the northern Plains, a rain event late Sunday into Tuesday “will be important for providing some dryness relief.” This rain could be greatest in northwestern production areas, “which will be good since this is where some of the lowest soil moisture is located.” The rain is not expected to be enough to cause any notable fieldwork delays, said the forecaster. A broken line of some showers and thunderstorms will also occur today in the eastern part of the region.
Technical analysis: Winter wheat futures bears have the solid overall near-term technical advantage. Prices are in steep four-week-old downtrends on the daily bar charts. SRW bulls' next upside price objective is closing December prices above solid chart resistance at $6.60. The bears' next downside objective is closing prices below solid psychological support at $6.00. First resistance is seen at today’s high of $6.15 3/4 and then at this week’s high of $6.28 1/2. First support is seen at today’s contract low of $5.93 1/2 and then at $5.80. The HRW bulls' next upside price objective is closing December prices above solid technical resistance at $7.80. The bears' next downside objective is closing prices below solid technical support at $7.00. First resistance is seen at Tuesday’s high of $7.49 3/4 and then at last week’s high of $7.71 3/4. First support is seen at today’s low of $7.15 1/4 and then at $7.00.
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: U.S. dollar strength seemed to undercut cotton futures Thursday, with most-active December futures dipping 6 points to 87.82 cents.
Fundamental analysis: This morning’s weekly USDA Export Sales report wasn’t supportive of cotton futures, since the 2023/24 sales figure reached just 62,400 running bales. The grain and soybean markets also dipped, which probably discouraged cotton buying as well. Bulls may have hung their hats on fresh energy market strength, but today’s strong U.S. dollar advance likely offset such supportive influences (since a rising greenback tends to increase the cost of U.S. commodities on international markets).
Still, the underlying cotton situation seems supportive. As mentioned previously, we expect USDA analysts to substantially reduce their estimate of U.S. planted and harvested cotton acres in forthcoming reports; this is based upon the FSA plantings data published early this month. Potential damage to the Georgia crop done by Hurricane Idalia, as well as extreme Texas heat, could also reduce yields. But cotton acreage abandonment in Texas due to droughty summer weather may be the key to the fall/winter outlook.
Technical analysis: Bulls still seem to own the short-term technical advantage in December cotton futures, but today’s failure to challenge the mid-August high and the subsequent weaker close might be interpreted as forming the second shoulder of a head-and-shoulders top. Today’s high marked initial resistance at 88.45, with backing from the August 11 high of 88.83. A push above that point would have bulls targeting the psychologically important 90.00-cent level. Today’s low placed initial support at 87.41, with backing from yesterday’s low of 86.86. That’s backed by its 10-, 20- and 40-day moving averages near 86.29, 85.72 and 84.68, respectively.
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.
