Crops Analysis | May 31, 2023
Price action: July corn closed unchanged at $5.94, finishing near the session high after trading as low as $5.77 1/2.
Fundamental analysis: Nearby corn futures rebounded solidly from early lows which were forged in the wake of a surging U.S. dollar index and persisting crude oil weakness. Tuesday afternoon’s initial USDA crop condition report showed the corn crop is off to a slightly less robust start than anticipated, but the rating had only a minor impact on the market. USDA reported 69% of the nation’s crop as “good” to “excellent,” below expectations and the five-year average. When USDA’s initial weekly condition ratings are plugged into the weighted Pro Farmer Crop Condition Index (CCI; 0 to 500-point scale, with 500 being perfect), the corn crop began the season with a rating of 375.9. That’s down 6.7 points from last year’s first rating, though it came one week later. USDA reported estimated emergence at 72%, up from 52% the previous week and the five-year average of 63%. Plantings were estimated to have advanced to 92% through May 28, up from 81% a week earlier, and still ahead of the five-year average of 84%.
World Weather Inc. notes Midwest drying has left topsoil moisture rated short to very short and subsoil moisture marginally adequate to short, and while rain is needed, the forecaster indicates it is unlikely to occur for another ten days. The forecaster indicates quite a few areas are already trending too dry, making the timeliness of rain critically important in early June.
Technical analysis: July corn made a notable recovery from an early test of support at $5.88 1/2, $5.83 1/4 and the 10-day moving average of $5.78 3/4, which will continue to serve as support. A turn to the upside, however, will find initial resistance at the 40-day moving average of $5.00 1/4, then at Tuesday’s high of $6.05, again at $6.10 1/4 and $6.15 1/2. A turn above these areas will find bulls setting their sights towards the 100-day moving average of $6.26 1/4.
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 rose 3 1/4 cents to $12.99 3/4 and near the session high. Prices hit a 16-month low early on today. July soybean meal rose 80 cents to $393.40 and nearer the session high. Prices hit a nine-month low early on. July bean oil closed steady at 46.20 cents. Prices closed near the session high and hit a more-than-two-year low early on.
Fundamental analysis: Today’s high-range closes in soybeans, meal and bean oil futures gives the bulls a bit of hope the bears are finally exhausted and that near-term market price bottoms are close at hand. However, more price strength is needed yet this week to better suggest market bottoms are indeed in place.
Buying interest in the soybean complex was limited today by a slumping crude oil market this week, as Nymex futures dropped to a nearly four-week low and are trading below $70.00 a barrel. Some weak manufacturing data out of China today spooked the commodity market bulls a bit, as China is a major importer of raw commodities, including soybeans and crude oil. A stronger U.S. dollar index that today hit a 2.5-month high was also a bearish outside market element helping to squelch buying interest in the grains.
A big South American soybean crop this year is also weighing on soybean prices.
Technical analysis: The soybean complex bears have the solid overall near-term technical advantage. Prices are in downtrends on the daily bar charts. The next near-term upside technical objective for the soybean bulls is closing July prices above solid resistance at $13.50. The next downside price objective for the bears is closing prices below solid technical support at $12.00. First resistance is seen at $13.00 and then at $13.15. First support is seen at today’s low of $12.70 3/4 and then at $12.50. The next upside price objective for the meal bulls is to produce a close in July futures above solid technical resistance at $418.00. The next downside price objective for the bears is closing prices below solid technical support at $375.00. First resistance comes in at today’s high of $394.20 and then at $400.00. First support is seen at today’s low of $386.30 and then at $380.00. The next upside price objective for the bean oil bulls is closing July prices above solid technical resistance at 50.00 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 47.50 cents and then at this week’s high of 49.06 cents. First support is seen at today’s low of 44.53 cents and then at 44.00 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 rose 3 1/4 cents to $5.94 1/4 after making a new for-the-move low early in the session. July HRW futures rallied over a quarter off intraday lows to close 6 3/4 cents higher at $7.90 1/2. July spring wheat futures fell 13 cents to $7.80.
Fundamental analysis: Wheat futures closed higher after making a move-low early in the session, diverging from a weak crude oil market and a stronger U.S. dollar index. Despite yesterday’s condition rating coming in higher than expected at 34% good/excellent, winter wheat futures led the complex higher. Traders appear to be concerned with a wetter forecast met with warm temperatures, according to World Weather Inc. The forecast is conductive to head sprouting, which will lead to further loss in production, hit already from the prolonged drought earlier in the growing season.
Despite wheat production areas receiving too much rain, the corn belt is faced with a drier bias over the next few weeks with temperatures above normal, says World Weather Inc. As SRW futures are still on recent lows, a sympathy rally may be ripe if corn and beans run on production worries. Corn appears to be in the first summer rally of the year, also conducive for wheat bulls.
Technical analysis: July SRW futures made a for-the-move low this morning before rebounding and closing on the highs. May was still a bloody month, closing 39 1/4 cents lower and closing red for the eighth straight month. Today appears to be a “hammer reversal” on the daily bar chart. This would have to be confirmed in the coming days with continued upside. Tuesday’s closing price of $5.90 1/4 will mark initial support, backed by today’s low of $5.73 1/4, the move low. Additional support is unlikely to be found until $5.50. Bulls are looking to test initial resistance at the 10-day moving average, currently at $6.09 3/4, which capped all upside last week. Next up is the 40-day moving average, currently at $6.45, which has served as stiff resistance since the breakdown in mid-February. Above there, bulls are targeting the May high at $6.69.
July HRW futures saw similar aggressive buying this morning, pushing the market up nearly 30 cents from this morning’s low. Price retested the March low of $7.63 3/4 which will serve as the line in the sand for bulls. Additional support would be found at the May low of $7.36 1/4. HRW futures have been in a volatile range all this year, the market is currently in the bottom end of that range giving the near-term edge to the bulls. Initial resistance comes at Tuesday’s high of $8.19 which coincides with the 10-day moving average. Next resistance comes in at the May 23 close of $8.41 1/2, backed by the 200-day moving average at $8.53 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 40% 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.
Cotton
Advice: We advise cotton hedgers and cash-only marketers to make the final 10% 2022-crop sale to get to 100% priced in the cash market. We also advise all cotton producers to sell another 10% of expected 2023-crop to get to 50% forward-priced for harvest delivery.
Price action: July cotton fell 40 points to 83.59 cents, a mid-range close after trading as low as 82.56 cents.
Fundamental analysis: Cotton futures edged lower, with pressure stemming from continued U.S. dollar momentum, which marked more than a two-month peak, making cotton more expensive for other currency holders. Adding fuel to the fire was weakness in crude oil and equities. Oil prices fell following reports of a faster-than-expected contraction in China’s manufacturing during May. The Bureau of labor statistics also reported U.S. job openings rose in April after three months of declines, reflecting a strong labor market despite mass layoffs, a banking crisis and widespread economic uncertainty. The news could point to an additional rate hike in June.
World Weather notes West Texas cotton has become plenty wet, with some areas becoming too wet. The forecaster notes there have been a number of complaints this week that fieldwork will not proceed without a break in the weather. West Texas has another 10 days of daily showers and thunderstorms, although not all areas will get rain each day and much of the precip will be light. Other crop areas are likely to experience mostly good weather this week.
Technical analysis: After testing support at the 100- and 20-day moving averages of 83.22 and 82.91 cents, respectively, July cotton was able to end the session above each level to forge a mid-range close. These areas will continue to serve as support, along with 82.32 and 80.65 cents. Conversely, any upward momentum will find a persisting battle at the 10-day moving average of 84.28 cents, then at 86.10 cents, the May 30 high of 86.54 cents and again at the May 19 high of 87.98 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 the final 10% of 2022-crop to get to 100% priced in the cash market. Also sell another 10% of expected 2023-crop to get to 50% forward-priced for harvest delivery.
Cash-only marketers: NEW ADVICE – Sell the final 10% of 2022-crop to get to 100% priced. Also sell another 10% of expected 2023-crop to get to 50% forward-priced for harvest delivery.
