Crops Analysis | September 1, 2023

Crops Analysis
Crops Analysis
(Pro Farmer)

Corn

Price action: December corn futures marked a 3 1/4 cent gain on the day, settling at $4.81 1/2. That marked a 6 1/2 cent loss on the week.

5-day outlook: Corn futures saw corrective buying but were unable to overcome initial resistance on Friday, trading in a tight range between initial support and the 10-day moving average, as neither bulls nor bears were able to garner momentum to break prices out of that range. Prices remain in a slight uptrend from the August lows, but futures have made a string of lower highs across the same period as well. This type of consolidation generally leads to an extended move, but the direction can be either way. The market is likely to stay choppy over the coming week unless Crop Conditions fare far worse than expectations or nearby technical support gives way. Production woes battle poor demand, even with yield coming in well below current USDA expectations the balance sheet is likely to expand, which has deterred rallies in recent weeks.

30-day outlook: The September seasonal remains bearish for corn futures as combines start to roll. River levels are unlikely to improve in the coming weeks, which will bring basis lower as well as it is difficult to move grain down rivers. Conditions are likely to remain dry over next the two weeks across the Corn Belt and temperatures are rising Friday through mid-next week, which is likely to speed up crop maturation and potentially impact yield as the grain-fill stage does not finish properly. It will take time to know the full impact of early crop maturation and the impact would have to be widespread in order to have a meaningful impact on futures prices, but the Crop Tour showed widespread premature ears dropping across the Corn Belt as hot temperatures essentially killed the crop. The coming month is likely to remain bearish, barring any realized negative impact upon production.

90-day outlook: At this point, it is clear that Brazil has taken meaningful market share of U.S. corn. Even with yield coming in far below trend, the balance sheet is expanding due to the resulting negative impact on demand. Export sales for new crop are at the lowest level since 2019 and over 20% below the ten-year average. Ethanol demand has seen challenges in recent months and is running below the required pace to hit U.S. estimates, which the USDA is seen as even higher for new crop. With bearish seasonals from combines rolling, potential woes on moving grain due to river levels, increased overseas demand and waning ethanol use, corn futures are likely to remain under pressure 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.

 

 

Soybeans

Price action: November soybeans closed up 1/2 cent at $13.69 1/4 and nearer the session low. For the week, November beans fell 18 1/2 cents. December soybean meal futures dropped $4.40 to $399.60 and near the session low and on the week down $15.40. December soybean oil futures rose 81 points to 63.29 cents and near mid-range. On the week, December bean oil fell 7 points.

5-day outlook: The soybean and soybean meal futures markets ended the week with a whimper, including December meal closing at a technically bearish weekly low close today. Such suggests the soybean and meal markets will likely see some more selling pressure when trading resumes next Tuesday (the Labor Day holiday is Monday). It appears soybean traders have already factored into prices the recent extreme heat and dryness in the Corn Belt, including forecasts for the same for at least the next week. World Weather Inc. today reported that in the Midwest, Great Plains and northern Delta weather conditions will see net drying through the coming full week and for some areas at least ten days. “The drier bias will come with warmer-than-usual temperatures as well, which will add stress to the most immature summer crops, including soybeans,” said the forecaster.

30-day outlook: The September 13 monthly supply and demand report will be coming into keener focus. Given the recent extreme heat and dryness in the Corn Belt, including what we saw on the Pro Farmer Crop Tour last week, the September WASDE report will likely be extra soybean-price-sensitive. Seasonal commercial hedge pressure and farmer selling as the soybean harvest moves into full swing in the coming weeks will likely limit the price upside in the soybean futures markets.

90-day outlook: Thursday’s weekly USDA export sales report showed soybean export demand improving, after recent disappointing results. Today’s daily export sale report of 198,000 MT to unknown destinations (likely to China) marked the sixth trading day in a row of daily U.S. soybean sales announcements. While export demand has increased recently, outstanding sales for new-crop beans are still below year-ago. Brazil has taken away significant market share from U.S soybeans. A recently appreciating U.S. dollar on the foreign exchange market will make it tougher for U.S. soybean sales abroad to show marked improvement. Soybean sales abroad will have to keep improving in the coming months in order for soybean prices to remain elevated.

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 futures fell 6 1/2 cents before settling at $5.95 1/2, near the session low and marking a 26 1/4-cent loss on the week. December HRW futures closed 4 1/2 cents lower at $7.22 3/4, marking a 41 3/4 cent loss on the week. December spring wheat futures fell 7 cents to $7.59 3/4, marking a 42 1/4 cent loss on the week.

5-day outlook: Wheat futures saw corrective overnight buying that continued after this morning’s session, though rally sellers stepped in at the first meaningful resistance and sent prices lower to close below the $6 level for the first time in the contract’s history. Price has largely been supported by the psychological $6 in SRW futures this week, a level that ultimately failed today. The rejection off 10-day moving average resistance confirmed that more selling is likely in store, despite the constant threats and recent uptick in Chinese demand for U.S. wheat. Prices are getting to the point where U.S. shipments are more competitive on the world market, but this week’s export sales showed that U.S. wheat is still the wet blanket of the ag market. Selling is likely to continue over the next week as technical selling is likely to push to the $5.75 level, barring any sustained strength in the corn market.

30-day outlook: While technical pressure is likely to power prices lower in the next week, September is a fairly bullish month for wheat futures as a whole. The last ten years have seen prices rise eight times, a bounce after some additional price pressure seems likely. The daily bar chart is quickly becoming oversold, eventually corrective buying will overcome initial resistance and likely snowball into more short covering. Once spring wheat harvest prospects are better realized, a depressed crop in North America is also likely to support wheat futures as conditions throughout the northern Plains and Canadian Prairies have likely produced a poorer than expected crop.

90-day outlook: Wheat prices have been in a downtrend since the war-driven peak in May 2022, despite bullish attempts to break the downtrend in June and July. Winter wheat acres are likely to drop significantly for the 2023-24 crop year as prices are not doing a good job of buying acres and drought conditions remain throughout the Plains. This may provide some long-term support, but the expanding balance sheet and lack of demand are likely to weigh on prices over the coming quarter.

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 futures rose 213 points to 89.95 cents, near the daily high and hitting a 12-month high. For the week, December cotton gained 264 points.

5-day outlook: Today’s technically bullish weekly, monthly, quarterly and yearly high close in December cotton futures sets the table for follow-through chart-based buying next week. A “goldilocks” monthly U.S. employment report today that showed U.S. economic growth not too hot or not too cold boosted ideas the Federal Reserve may be near the end of its interest-rate-increase cycle. That would be bullish for cotton, implying better consumer and commercial demand in the coming months. Improving manufacturing data out of China Friday also benefitted the cotton market bulls.  Next week cotton traders will get more details on the potential damage to the Georgia cotton crop done by Hurricane Idalia.

30-day outlook: World Weather Inc. today reported Texas over the next 10 days will see “only a few showers of limited significance expected and temperatures will be near to above normal. Dryland crops will remain seriously stressed and destined to yield poorly. Irrigated crops may be performing a little better now that the excessive heat has abated from the region, but there is need additional mild weather and more rain,” said the forecaster. The excessively hot, dry summer in Texas cotton country will make the level of abandonment of Texas acreage key to the fall outlook. The September 13 USDA supply and demand report will be a key focal point for cotton traders.

90-day outlook: Thursday’s weekly USDA Export Sales report showed 2023/24 cotton sales of just 62,400 running bales. For U.S. cotton prices to remain at their presently elevated levels, U.S. sales abroad will have to significantly improve in the coming months. A recently appreciating U.S. dollar index will only make cotton less competitive on the world trade market.

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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