Crops Analysis | May 22, 2023
Price action: July corn rose 16 1/2 cents to $5.71, nearer the session high.
Fundamental analysis: Corn futures found near-term corrective buying strength following a month-long selloff. Traders are eyeing weather closely as the growing season kicks off in earnest, with a drier-than-expected two-week outlook grabbing trade attention. World Weather Inc. notes planting should soon be completed in much of the Midwest while much of the region will experience net drying over the next two weeks and will be left in need of rain in early June to keep soil conditions favorable. The forecaster also notes June may be the driest and warmest of our summer months if Pacific Decadal Oscillation (PDO) continues to weaken and El Nino strengthens.
Crop Progress will update progress following today’s close, with a Reuters poll indicating traders expect a completion rate of 82%, which would be up from 65% last week and ahead of the 10-year average at 79%.
USDA released its weekly export inspection data midmorning, which showed inspections of 1.323 MMT (52.1 million bu.) in week ended May 18, which was up 149,334 MT from the previous week and near the top-end of the pre-report range of 700,000 MT to 1.425 MMT.
Technical Analysis: July corn made a solid rebound from last week’s low, closing above initial resistance of $5.67. An extension higher tomorrow could confirm a near-term bottom, though turnaround Tuesday trade could dampen upward efforts. A turn above the 10-day moving average of $5.76 1/4, which is serving as near-term resistance, and the 20-day moving average of $5.84 1/2 will be crucial for bulls in order to gain momentum for an attempt back above $6.00. If achieved, the 40-day moving average of $6.06 1/4 will then serve up resistance, with little resistance standing between the level and the 100-day moving average of $6.30 3/4. Conversely, a turn lower will find support initially at $5.46 3/4, again at $5.39 and $5.26 1/2.
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.
Price action: July soybeans rallied 34 cents and closed near session highs at $13.41 1/4. July meal traded just $3.10 higher before closing at $412.2, in the middle of today’s range. July soyoil closed 150 points higher at 48.77 cents.
Fundamental analysis: Soybeans posted impressive gains today, but still posted an inside day compared to Friday’s session. This week’s forecast remains favorable for planting in the Midwest and Northern Plains as we enter the latter half of the planting season. This afternoon, the USDA releases planting progress, analysts expect soybeans to be 66% seeded according to a Bloomberg survey, up from 49% last week and well ahead of the 10-year average at 49%.
This morning, the USDA reported soybean export inspections of 155,051 MT (5.7 million bu.) in week ended May 18, down 31,736 MT from the previous week and near the low-end of the pre-report range of 100,000 to 500,000 MT. While this is a period of weakening export inspections, this year is exceptionally weak due to the record Brazilian crop.
While exports for soybeans have taken a hit thanks to Brazil, meal exports are stronger than average thus far thanks to a decrease in production in Argentina, evidenced by today’s flash sale of 225,000 MT of meal to the Phillippines for the 2022-23 marketing year. Meal exports should remain strong throughout the summer.
Technical Analysis: July soybean futures saw impressive gains today but were unable to break above Friday’s high. Thus far, buying appears to a corrective bounce led by short covering. Additional buying will be met with resistance at $13.62 1/4, the 10-day moving average, which has capped all rallies in May. Additional resistance would be found at $13.90. Bears are looking to take out Friday’s low at $13.04 3/4 before challenging psychological support at $13.00.
July soymeal made a new move-low today despite bullish export news. A steep downtrend remains on the daily bar chart with initial support at $409.00, backed by today’s low of $407.50. Bulls aim to take out the 10-day moving average at $420.50 before challenging last week’s high of $442.30.
July soyoil saw impressive gains today, but buying was stalled by resistance at 48.99 cents, the 10-day moving average. This will remain key resistance with 50.50 resistance next that acted as significant support in the last week of April/first week of May. Bears are still in firm control of the technical advantage. The current relief rally appears to be a bear-flag on the daily bar chart, negated by a daily close above 50 cents and confirmed with a breakdown below 47 cents. A breakdown would likely lead to a test and eventual break of the recent move-low at 45.75 cents, with support on the way at 47.25 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 wheat rose 1 1/4 cents to $6.06 1/4. Prices closed near mid-range and hit a two-year low early on. July HRW wheat closed up 1 1/2 cents to $8.25 3/4 and nearer the session high. Spring wheat futures closed 5 1/2 cents higher at $8.09 1/2.
Fundamental analysis: The wheat futures bulls today were disappointed their markets did not post decent gains amid the solid rallies in corn and soybean futures. Looming U.S. wheat harvest pressure and a rallying U.S. dollar index that hit a seven-week high last Friday are also bearish elements for the wheat markets.
Weather in U.S. wheat country leans neutral to slightly bearish. World Weather Inc. today reported that topsoil moisture in HRW wheat country “has greatly improved across the region this month and more improvement is expected during the next two weeks. The addition rain will help to gradually increase the subsoil moisture which is still low.” The forecaster said drought conditions remain but are improving. While beneficial, the forecaster stated “the rain has come too late for a serious change in winter wheat production.”
USDA this morning reported U.S. wheat export inspections of 407,682 MT in week ended May 8, which were up 144,243 MT from the previous week and above market expectations.
This afternoon’s USDA weekly crop progress reports are expected to show U.S. spring wheat planted at 57% complete versus 40% last week and 49% last year at this time, according to a Bloomberg survey. Winter wheat condition is expected at 30% good to excellent compared to 29% last week and 28% last year at this time.
Technical Analysis: SRW bears have the solid overall near-term technical advantage. SRW bulls' next upside price objective is closing July prices above solid chart resistance at the May high of $6.69. The bears' next downside objective is closing prices below solid technical support at $5.50. First resistance is seen at $6.26 1/2 and then at $6.40. First support is seen at today’s low of $5.96 1/4 and then at $5.85.
HRW bears have gained the overall near-term technical advantage. A price uptrend on the daily bar chart has been negated. The HRW bulls' next upside price objective is closing July prices above solid technical resistance at $8.85. The bears' next downside objective is closing prices below solid technical support at the May low of $7.36 1/4. First resistance is seen at today’s high of $8.30 1/2 and then at $8.40. First support is seen at today’s low of $8.07 1/4 and then at $8.00.
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
Price action: July cotton fell 140 points to 85.32 cents after trading as high as 87.25 cents.
Fundamental analysis: Cotton futures encountered corrective selling following last week’s surge higher. Traders are also focusing on U.S. debt ceiling talks amid lingering concerns of default if an agreement is not reached before the end of the week. President Biden and House Speaker McCarthy are expected to meet this afternoon to discuss the issue. Investors are also looking to gain insight around the Fed’s monetary policy intentions from Federal Reserve speakers and April’s personal consumption expenditure (PCE) index and durable goods, due out Friday. The PCE is considered to be the Fed’s preferred inflation gauge.
World Weather Inc. notes West Texas, southwestern Oklahoma and the Texas Panhandle will see isolated to scattered showers most days through the next two weeks, slowing planting progress while improving conditions for cotton establishment and development in the region. The forecaster notes much of the region will receive enough rain to maintain soil moisture with a few areas seeing net increases in soil moisture. A drier weather pattern will occur during the next two weeks in the Blacklands and parts of the Coastal Bend and south Texas, where planting should advance well, while soil moisture in place today should be high enough to support cotton development.
Technical Analysis: July cotton gave back a portion of last week’s gains and ended the session below initial support of 85.91 cents. Additional support lies at 85.09 and 84.06 cents, though solid support lies at the 10- and 100-day moving averages of 83.32 and 83.20 cents, respectively. Though a turn below the area will find additional support at the 40- and 20-day moving averages of 82.24 and 82.04 cents. Upside efforts, however, will now face resistance at today’s failed support level of 85.91 cents, then at 87.76 88.79 and 89.61 cents.
What to do: Get current with advised sales. Be prepared to advance sales on a test of the winter highs.
Hedgers: You should be 90% sold in the cash market on 2022-crop. You should be 40% forward-priced on expected 2023-crop production for harvest delivery.
Cash-only marketers: You should be 90% sold on 2022-crop. You should be 40% forward-priced on expected 2023-crop production for harvest delivery.
