Crops Analysis | May 17, 2023
Price action: July corn futures fell 19 3/4 cents to $5.61 1/2, with nearby corn futures sinking to a 1.5-year low today.
Fundamental analysis: Corn futures plunged as a proverbial perfect bearish storm cast a shadow over prices. Mostly favorable U.S. weather across the Midwest along with a stronger U.S. dollar and additional old-crop cancellations from China were the main drivers to the downside, though the two-month extension of the Black Sea grain-shipping deal eased global supply concerns, further pressuring prices.
China cancelled 272,000 MT of old-crop U.S. sales earlier today, with a recent string of cancellations totaling 1.104 MMT. USDA will also release its weekly export sales data early tomorrow, with traders expecting a range of sales between 500,000 MT of net reductions to 300,000 MT in the week ended May 11, and new crop sales between 50,000 and 300,000 MT. Last week, net sales of 257,279 MT were reported, which were down noticeably from the previous week but up 11% from the four-week average.
World Weather Inc. notes U.S. weather in the Midwest, Delta and southeastern states is expected to remain favorably mixed over the next ten days with periods of rai and sunshine occurring with near to above normal temperatures. The environment will promote aggressive early season crop development and support field progress.
Technical analysis: The corn futures bears have the solid overall near-term technical advantage and gained more power today. The next upside price objective for the bulls is to close July prices above solid chart resistance at $6.00. The next downside target for the bears is closing prices below chart support at $5.00. First resistance is seen at $5.69 1/4 and then at $5.80. First support is at today’s low of $5.54 1/4 and then at $5.50.
What to do: Get current with advised sales. Be prepared to make additional sales on a corrective price rebound.
Hedgers: You should be 75% sold in the cash market on 2022-crop. You should also be 25% forward sold on expected 2023-crop production for harvest delivery.
Cash-only marketers: You should be 75% sold on 2022-crop. You should also be 25% forward sold on expected 2023-crop production for harvest delivery.
Soybeans
Price action: July soybeans fell 27 cents at $13.37 and near the session low. Nearby soybean futures prices hit a 15-month low today. July soybean meal dipped $1.60 to $425.30 and nearer the session low. July bean oil closed down 104 points at 46.41 cents, nearer the session low and hit another 12-month low.
Fundamental analysis: The soybean and bean oil futures markets were hit hard again today amid the downdraft in corn and wheat futures markets. China’s cancellation of another previous U.S. corn purchase today set the bearish tone for all the grain markets. A resurgent U.S. dollar index that hit a six-week high today was also bearish for soybeans.
Weather in the Corn Belt still leans bearish. World Weather Inc. today reported weather in the Midwest is expected to remain favorably mixed over the next ten days, with periods of rain and sunshine occurring with near to above normal temperatures. “The environment will promote aggressive early season crop development and support field progress,” said the forecaster.
Traders are awaiting Thursday morning’s weekly USDA export sales report, which is expected to show U.S. soybean sales of zero to 300,000 MT in both the 2022-23 and 2023-24 marketing years.
Technical analysis: The soybean bears have the solid overall near-term technical advantage. Prices are in a four-week-old downtrend on the daily bar chart. The next near-term upside technical objective for the soybean bulls is closing July prices above solid resistance at $14.00. The next downside price objective for the bears is closing prices below solid technical support at $13.00. First resistance is seen at $13.50 and then at today’s high of $13.65 1/4. First support is seen at today’s low of $13.34 and then at $13.25.
The soybean meal bears have the overall near-term technical advantage. The next upside price objective for the meal bulls is to produce a close in July futures above solid technical resistance at this week’s high of $442.30. The next downside price objective for the bears is closing prices below solid technical support at the May low of $416.10. First resistance comes in at Tuesday’s high of $430.90 and then at $435.00. First support is seen at this week’s low of $424.50 and then at $420.00.
Soybean oil bears have the solid overall near-term technical advantage. Prices are in a 4.5-month-old downtrend on the daily bar chart. The next upside price objective for the bean oil bulls is closing July prices above solid technical resistance at 52.50 cents. Bean oil bears' next downside technical price objective is closing prices below solid technical support at 42.50 cents. First resistance is seen at today’s high of 47.99 cents and then at 49.00 cents. First support is seen at today’s low of 45.75 cents and then at 45.00 cents.
What to do: Get current with advised cash sales. Be prepared to advance sales.
Hedgers: You have 70% of 2022-crop sold in the cash market. No 2023-crop sales have been advised.
Cash-only marketers: You have 70% of 2022-crop sold. No 2023-crop sales have been advised.
Price action: July SRW futures fell 22 cents to $6.25 1/2, the lowest level since May 3. July HRW futures made a 6-month high early on before falling 11 1/4 cents to $8.85 1/2. Spring wheat futures XXXXX.
Fundamental analysis: Wheat futures saw extensive selling throughout the day, although HRW futures fared better, sending the HRW-SRW spread to a fresh record. The annual Quality Council HRW tour is currently taking place with yield prospects well below last year’s crop thus far. Yesterday scouts found an average yield of 29.8 bu. per acre on samples taken from central and northern Kansas, down from 39.5 on the same route last year and the 2017-22 average of 43.4 bu. per acre. This supported HRW prices despite the overall grain markets plummeting lower, fueled by news of a Black Sea Grain Initiative two-month extension, according to Turkish President Erdogan. The current deal was set to expire tomorrow, May 18.
Soil conditions in much of the HRW region have been improving over the last couple weeks due to rounds of showers and thunderstorms, according to World Weather Inc. Though regions of West Texas, southeastern Kansas and the Oklahoma panhandle still have dry soil conditions. The forecaster expects rains in the Southern Plains throughout the rest of the week. While the recent precip is certainly beneficial, the crop will not make a recovery to top-end yield potential. The USDA accounted for this in Friday’s report, pegging winter wheat over 5.5 bu. per acre below trendline, the largest deviation ever in the May report.
USDA releases export sales tomorrow, with analysts expecting 2022-23 sales between 50,000 and 150,000 MT and 2023-24 sales between 200,000 and 400,000 MT. Sales have been winding down as the marketing year comes to a close, but more still needs to be done to hit the current USDA forecast.
Technical analysis: July SRW futures continue to fall under pressure with little support remaining until the recent move-low. SRW futures saw selling most of the session after failing to find sustained bids above coinciding resistance at the 20-day moving average and psychological $6.50 level. These levels will be key in the final two trading days of the week, but price is likely to revisit the May 3 low at $6.03 3/4 after putting in a lower high and lower low on the daily bar chart compared to the last couple weeks.
July HRW futures made a six-month high early on, but sellers overwhelmed buyers toward the close as price settled near the lows. Price has become fairly extended over moving average support over the rally that took place since the May 2 low, but solid support should emerge at $8.85 resistance that capped all other rallies since November. Price settled right on this level today, so tomorrow’s open will be important in deciding the next move in HRW prices. Additional support would be found at the 200-day moving average at $8.65. If bulls rebound tomorrow, resistance can be found at $9.00, followed by today’s high of $9.18 3/4.
What to do: Get current with advised sales. Be prepared to advance sales on additional corrective gains.
Hedgers: You should be 95% sold in the cash market on 2022-crop. You should also be 40% forward sold for harvest delivery on expected 2023-crop production.
Cash-only marketers: You should be 95% sold on 2022-crop. You should also be 40% forward sold for harvest delivery on expected 2023-crop production.
Cotton
Advice: We advise cotton hedgers and cash-only marketers to sell another 10% of 2022-crop in the cash market to get to 90% sold. We also advise selling another 10% of expected 2023-crop for harvest delivery to get to 40% forward-priced.
Price action: July cotton gained 356 points to 86.94 cents and nearer the session high. Prices hit a two-month high today.
Fundamental analysis: The cotton futures bulls today put in a very impressive performance, securing solid gains in the face of big selloffs in the grain futures markets the past two sessions and a resurgent U.S. dollar index that hit a six-week high today. Higher crude oil prices and a rally in the U.S. stock market today did work in favor of the cotton market bulls. The stock market was boosted today on news that President Biden and congressional leaders say they are moving closer to a deal to extend the U.S. debt limit.
World Weather Inc. today reported West Texas still has “a huge need for more moisture in unirrigated areas and some of that will come from periodic showers and thunderstorms later this week through all of next week.” The moisture in unirrigated fields will be favorable for planting, germination and emergence, but not great enough to recharge subsoil moisture. Cotton areas in the Delta “are still plenty moist while recent drying in a part of the southeastern states has been welcome and beneficial,” said the forecaster.
Traders are awaiting Thursday morning’s weekly USDA export sales report. Bulls are a bit worried about Chinese cancellations of recent U.S. cotton purchases, as China cancelled another previous U.S. corn purchase today, which helped to sink the grain futures markets.
Technical analysis: July cotton futures saw a bullish upside “breakout” from the recent sideways trading range on the daily bar chart. Cotton bulls own the overall near-term technical advantage and gained more power today. The next upside price objective for the cotton bulls is to produce a close in July futures above technical resistance at the January high of 89.59 cents. The next downside price objective for the cotton bears is to close prices below solid technical support at 80.00 cents. First resistance is seen at 87.00 cents and then at 87.50 cents. First support is seen at 85.00 cents and then at 84.00 cents.
What to do: Get current with advised sales. Be prepared to advance sales on a test of the winter highs.
Hedgers: NEW ADVICE -- Sell another 10% of 2022-crop in the cash market to get to 90% sold. Also sell another 10% of expected 2023-crop for harvest delivery to get to 40% forward-priced.
Cash-only marketers: NEW ADVICE -- Sell another 10% of 2022-crop to 90% sold. Also sell another 10% of expected 2023-crop for harvest delivery to get to 40% forward-priced.
