Crops Analysis | September 7, 2023
Price action: December corn rose 1/2 cent to $4.86 1/2, ending the session above the 10-day moving average for the first time since Aug. 28.
Fundamental analysis: Corn futures spent the session trading either side of unchanged and repelled general weakness across commodities remarkably well. Outside markets were especially negative for commodities as the U.S. dollar index edged higher and corrective selling plagued crude oil futures. With corn exports at an 11-year low, a higher U.S. dollar doesn’t bode well for new-crop exports, which are projected to increase slightly in 2023-24. In recent months, top corn importer China has turned to Brazil for cheaper supplies. In August alone, China imported 8.7 MMT of corn from Brazil, and only 139.6 thousand tons from the U.S.
USDA will release its weekly export sales data early tomorrow morning, delayed a day due to Monday’s government holiday. For week ended Aug. 31, traders anticipate 2022-23 sales to range from (200,000) to 100,000 MT and 2023-24 sales to range from 400,000 MT to 1.0 MMT. Last week, USDA reported net old-crop sales of 71,700 MT for 2022-23 and net sales of 991,800 MT for 2023-24 during week ended Aug. 24.
Technical analysis: December corn continues to consolidate sideways in narrow trade, with bull and bear efforts hemmed by initial resistance at $4.89 1/2 and initial support at $4.82 1/2. An extension above initial resistance will then need to work above $4.93 1/2, then $4.96 1/2, with the 40-day moving average of $5.04 serving as the next major target for bulls, then the 100-day of $5.22 1/4. Meanwhile, a turn below initial support will then find bears targeting $4.79 1/4, and the Aug. 17 low of $4.73 1/2. A breach of the level will likely find increased selling pressure towards $4.50.
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 16 3/4 cents to $13.59 1/2 and nearer the session low. December soybean meal dropped $3.90 to $395.30 and nearer the session low. December bean oil closed down 160 points at 60.78 cents, near the session low and hit a two-week low.
Fundamental analysis: The soy complex saw some technical selling pressure today as the near-term chart postures for beans, meal and bean oil have deteriorated a bit recently. Late this week it appears soybean traders figure they have factored into futures prices the recent scorching heat and winds that have hit the Midwest the past couple weeks. StoneX brokerage has estimated U.S. soybean production at 4.144 billion bu. and an average yield of 50.1 bu. per acre, up from its August forecasts of 4.173 billion bu. and 50.5 bu. per acre. In August, USDA estimated the soybean crop at 4.205 billion bu. on a yield of 50.9 bu. per acre.
World Weather Inc. today said showers returning to the U.S. Midwest forecast in the next two weeks will come too late to seriously change summer soybean crop production except in a few late-season crops in the south. Meantime, harvest weather in Canada’s Prairies for its canola crop should be favorable. Weather in canola areas of southern Australia will be mostly good as well, although some increase in rainfall would be best for future production.
Soybean traders will have to wait an extra day for weekly USDA export sales, which are out Friday morning due to the Labor Day holiday. A Reuters survey of analysts expects U.S. soybean export sales of negative 200,000 MT to zero for the 2022-23 marketing year and sales of 1.4 million to 2.0 million MT for the 2023-24 marketing year.
Technical analysis: The soybean futures bulls still have the overall near-term technical advantage but a price uptrend on the daily bar chart has been negated. The next near-term upside technical objective for the soybean bulls is closing November prices above solid resistance at the August high of $14.09 1/2. The next downside price objective for the bears is closing prices below solid technical support at $13.00. First resistance is seen at today’s high of $13.78 and then at $13.85. First support is seen at $13.50 and then at $13.32 1/2.
The meal futures bulls have lost their overall near-term technical advantage. A price uptrend on the daily bar chart has been negated. The next upside price objective for the meal bulls is to produce a close in September futures above solid technical resistance at the August high of $421.00. The next downside price objective for the bears is closing prices below solid technical support at the August low of $379.00. First resistance comes in at today’s high of $400.00 and then at this week’s high of $405.10. First support is seen at today’s low of $394.40 and then at $390.00.
Soybean oil bulls still have the overall near-term technical advantage but faded today. A 2.5-month-old uptrend on the daily bar chart has stalled out. Also, a bearish double-top reversal pattern appears to be forming on the daily chart. The next upside price objective for the bean oil bulls is closing September prices above solid technical resistance at 68.00 cents. Bean oil bears' next downside technical price objective is closing prices below solid technical support at the August low of 57.86 cents. First resistance is seen at today’s high of 62.52 cents and then at this week’s high of 63.39 cents. First support is seen at today’s low of 60.62 cents and then at 60.00 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 fell 9 1/4 cents to $5.99 3/4 and settled near the session low. December HRW futures fell 12 1/2 before settling at $7.76. December spring wheat futures fell 7 3/4 cents to $7.74 3/4.
Fundamental analysis: Wheat futures struggled to continue Wednesday’s strength as outside markets were unsupportive, lacking the catalyst needed to break through technical resistance. Wheat futures are seemingly immune to continued attacks on Danube port infrastructure in Ukraine. Ukrainian officials state that grain has begun export from Croatian Black Sea ports. The continued attacks lead to concerns over logistical issues in transporting grain. The United Nations’ Agricultural Market Information System revised global wheat production lower from the July forecast amidst drought damage in Canada and the EU and heavy rains in China. This had little effect on the market as abundant wheat remains in the U.S., despite a drought ridden crop year in the Plains.
Eyes have quickly turned to winter wheat seeding. The Great Plains are expected to receive some rainfall in the first week of the outlook, raising topsoil moisture and improving HRW planting conditions. Cooler temperatures should help conserve the moisture that does fall, but follow up precipitation will be needed, World Weather Inc says. Weather will need to continue to improve to encourage producers to sow HRW as prices are over $2 below year-ago.
The USDA releases its delayed export sales report in the morning. A Reuters survey expects net sales between 250,000 and 600,000 MT, compared to 329,141 a week ago.
Technical analysis: December SRW futures once again failed at 10-day moving average resistance, currently at $6.09. This level has capped nearly all the upside since late July and marks the first meaningful resistance that bulls need to overcome to indicate a potential low is in place. Bears currently retain full control of the technical advantage. A trip to the recent contract low and nearest support is likely at $5.92 1/4.
December HRW futures attempted a rally above the 20-day moving average resistance (currently at $7.53) this morning, though rally sellers took advantage and sent prices lower for the remainder of the session. Bears retain full control of the technical advantage, though HRW shows relative strength compared to SRW futures. Initial support stands at $7.30 and is backed by the contract low of $7.13 3/4.
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 162 points to 85.38 cents, ending nearer the session low. Prices hit a two-week low today.
Fundamental analysis: The cotton futures market was pressured today by China getting more downbeat economic news as the world’s second-largest economy’s exports dropped 8.8% in August, year-on-year and contracting for a fourth consecutive month. China’s imports fell 7.3% in August, year-on-year. While these numbers were slightly better than market expectations, they do not paint a good picture for China’s overall economic growth in the coming months and that’s also a negative for Chinese demand for U.S. cotton.
The strong U.S. dollar index that today hit a six-month high was also a bearish outside market element working against the cotton market bulls.
World Weather Inc. today said that in the southwestern U.S. several more days of hot and dry weather will impact much of the region before rain and cooler temperatures arrive Sunday into next Thursday, inducing some improvements in conditions for irrigated cotton while the rain will come too late for most dryland cotton. Some cotton should be discolored as well, said the forecaster.
Cotton traders will have to wait an extra day for weekly USDA export sales, which are out Friday morning due to the Labor Day holiday Monday. Traders are also awaiting next Tuesday’s monthly USDA supply and demand report.
Technical analysis: This week’s big losses suggest a near-term market top is in place for December cotton futures. However, a nine-week-old uptrend is still in place on the daily bar chart. 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 90.00 cents. The next downside price objective for the cotton bears is to close prices below solid technical support at 82.00 cents. First resistance is seen at 87.00 cents and then at today’s high of 87.55 cents. First support is seen at 85.00 cents and then at 84.00 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.
