Crops Analysis | September 6, 2023
Price action: December corn fell 1/4 cent to $4.85 3/4, ending near the session low.
Fundamental analysis: Corn futures rose on early spillover strength from notable gains in the soy and wheat complexes, though momentum faded into late-morning as the U.S. dollar index pushed to a six-month high. Persisting strength in the U.S. dollar, amid looming inflationary concerns, has bulls lurking in the shadows, fearful of future export business. While Mexico is poised to set a record for corn imports from the U.S., having purchased $3.027 billion, a 15.1% annual increase, in the first half, sales to Japan and China totaled $1.536 billion and $1.242 billion, respectively, which were down 32.9% and 59.7% annually. Other notable year-over-year declines include shipments to Columbia ($576 million, down 34.8%) and Canada ($407 million, down 62.7%).
Meanwhile, market participants are anxiously awaiting yield reports as harvest begins to progress in earnest, following various weather anomalies which occurred throughout the Midwest during the growing season. USDA updated its weekly condition scores, which are the lowest for this time of year since 2012. The corn crop’s “good” to “excellent” rating fell three percentage points from the previous week to 53%, while the portion rated “poor” to “very poor” rose one point to 18%. When plugged into the weighted Pro Farmer Crop Condition Index (CCI; 0 to 500-point scale, with 500 representing perfect) the corn crop dropped 7.7 points to 337.1, which was 2.9 points (0.9%) below last year at this time.
Technical analysis: December corn futures continue to edge sideways, with bulls failing to secure a close above the 10- and 20-day moving averages which have converged around $4.86 1/4. A push above the area would find additional resistance at $4.90 1/4, again at the 40-day moving average of $5.03 3/4 and then the 100-day moving average of $5.23 1/4. Conversely, initial support lies at $4.80, then at Tuesday’s low of $4.78 1/2, then at $4.74 1/4 and $4.69 3/4.
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 rallied 11 1/4 cents before closing at $13.76 1/4. December soybean meal futures closed $1.60 higher at $399.2 but ended nearer the session low. December soyoil futures fell 43 points to 62.38 cents.
Fundamental analysis: Soybean futures gapped higher overnight and continued to show strength throughout the session, though closed off intraday highs. Concerns over crop quality and early maturation continue to fuel bulls, despite last week’s turn lower. Prices have held up well though as sellers struggle to break meaningful levels of support. USDA rated the soybean crop as 53% “good” to “excellent,” a five-percentage point drop from last week. The portion of the crop rated “poor” to “very poor” rose three points to 17%. When plugged into our CCI, the crop fell 8.5 points to 335.5, down 8.1 points (2.3%) from last year. Conditions fell more than expected, which fueled Tuesday night’s gap higher.
Lack of precip across the Great Plains and Midwest has left soil moisture depleted and in need of rain. World Weather Inc reports summer crops as stressed and having lost yield. It is quickly becoming too late in crop development for any upcoming rains to have much of an effect on yield, as soybeans are quickly maturing, early enough that concerns arise on pod weights which is likely to cause phantom yield loss, despite pod counts remaining high and allowing a near record yield.
The Argentine government launched a new “soy dollar” scheme through Sept. 30, which allows exporters to obtain an exchange rate higher than the official rate to encourage them to move inventories. This has drawn bushels from Argentine producers in the past, but the program has found less success in more recent efforts. Crush plants in the nation have already begun importing at near-record levels due to the recent drought ridden crop, a practice that will likely have to continue as producers hold crops to hedge against the nation’s hyperinflation.
Technical analysis: November soybeans gapped higher but faced “rip sellers” throughout the session, stifling gains. Price struggled above the resistance zone at $13.81, though remained above the 10-day moving average at $13.70 1/2. These levels will remain important into the latter half of the week, a daily close on either side of which will help determine the interim direction. Bulls are ultimately targeting breach over $14.00 for an extended move to the upside, while bears are seeking failure below $13.00.
December soybean meal futures continue to trade in a largely sideways range and are near the midpoint of that range. The $400.00 mark is an important pivot and failed today, pointing to a test of $394.00 support, bears are seeking a test of the $380.00 level. Bulls target a daily close above today’s high of $405.10, eventually targeting the $420.00 level.
December soyoil continue to fall under pressure despite a surging crude oil market. Price remained largely supported by the 20-day moving average at 62.43 cents, which will mark initial support on Thursday. Further selling would indicate a technical breakdown with bears targeting 60.50 cents. Bulls are looking to reclaim 62.75 cent resistance before a run towards 64.41 resistance.
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 rose 9 3/4 to $6.09, a mid-range close, while December HRW wheat rose 25 cents to $7.49 1/2, above the 10-day moving average. December spring wheat rose 20 1/4 cents to $7.82 1/2, a high-range close.
Fundamental analysis: SRW wheat futures were able to extend Tuesday’s follow-through strength, with HRW wheat futures leading the complex higher. The move came despite continued strength in the U.S. dollar amid reports of potential harvest disruptions in Russia and production downgrades in Australia. Earlier today, Russian Agriculture Minister Dmitry Patrushev noted that fuel shortages threaten to disrupt harvest and sowing efforts and urged a suspension of petroleum product exports. Furthermore, Australia’s weather bureau reported areas of severe rainfall deficiency had expanded and soil moisture was below average across large parts of the country.
Overnight attacks also occurred on the Ukrainian region of Odesa, damaging several agricultural and port facilities, with multiple fires reported in the Izmail district, an important grain exporting hub on the Danube.
USDA reported 74% of the U.S. spring wheat crop was harvested as of Sunday, a 20-point increase from the previous week, but was still three points behind the five-year average for early September. Meanwhile, winter wheat planting efforts are off to a slow start, with 1% of the crop planted, two percentage points behind last year and the three-year average.
Technical analysis: December SRW wheat reached as high as $6.15 1/2 and posted a close above resistance of $6.05 3/4. Initial resistance will now be represented by the 10-day moving average of $6.12 1/4, then at $6.19 1/4 and the 20-day moving average of $6.24 3/4. The psychological $6.00 level will likely serve as initial support, with backing at $5.92 1/4 and $5.85 1/2.
December HRW wheat bulls were able to improve their technical posture with a close above resistance at $7.32 3/4 and the 10-day moving average of $7.42 1/2. Initial resistance is now marked by the 20-day moving average of $7.50, with little additional resistance emerging until the 40-day moving average $7.93 3/4 and the 100-day moving average of $8.08. Conversely, initial support will now serve at today’s failed resistance levels, then at $7.23 1/4, then $7.15 and $7.05 1/2.
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 futures fell 176 cents points, closing at 87.00 cents.
Fundamental analysis: Cotton fell under pressure today despite a surging crude oil market. The U.S. dollar index made a new high today as well, adding further pressure to cotton prices which see most of the demand coming from exports, as a stronger dollar discourages overseas buyers. Volatility has remained high in cotton futures as a lot of uncertainty lies in U.S. production. While cotton crop conditions fell two-points “good” to “excellent,” the “poor” to “very poor” ratings dropped as well, which partly negated the bullish catalyst of the report. Next week, the USDA will give a fresh look into planted acres, expected abandonment and expected yield. Prices are likely to stay volatile and elevated until the September 12 Crop Production report. Weather is likely to remain hot and dry over the coming weeks, World Weather Inc. says. The southern Plains is set to see highs in the 100’s this week. Some areas are expected to see some rain next week, though it is likely too late for most of the dryland crop.
Technical analysis: December cotton futures saw profit taking that took price back below 88-cent support level that stifled sellers on Tuesday. This is the same level that capped gains throughout July and August. Bulls will look to rebound prices tomorrow, which would indicate a bullish “false breakdown” on the daily bar chart. Above 88.00 cents, bulls target the psychological 90.00 cent level that capped buying last week, to the tick. Bears are aiming to keep prices below 88.00 cents and take out 86.50 cent support.
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.
