Crops Analysis | June 1, 2023
Price action: July corn fell 1 1/2 cents to $5.92 1/2, near the session low after marking an intraday high of $6.06.
Fundamental analysis: Nearby corn traded entirely opposite of Wednesday’s session, with an early run above $6.00 proving futile for bulls. However, a plummeting U.S. dollar ultimately underpinned gains across the grain complex as some Federal Reserve officials signaled they plan to keep interest rates steady in June, while retaining the option for further rate increases in coming months. The dollar’s downturn helped lift crude oil futures to regain a portion of the week’s losses, giving grains additional fodder for sustained upward momentum.
Weather remains questionable for early crop development throughout the Midwest, as a mostly drier weather pattern has set in. World Weather Inc. predicts much of the Corn Belt is expected to see two more weeks of below-normal rain, with moisture advertised for June 9-11 buying crops more time before stress increases—but confidence for this event remains low. Over the past week, dry areas increased by 9.5%, with half of the U.S. in a drought zone. Specifically, the Midwest saw a 41% increase in a dry category to about 72% of the region too dry, according to the Drought Monitor.
USDA’s weekly export sales data for the week ended May 25 will be delayed until tomorrow due to Monday’s Memorial Day holiday. Traders expecting net old-crop sales to range between 100,000 MT of net reductions to 400,000 MT, with 0 to 300,000 MT expected for new crop. For the previous week, USDA reported net old-crop reductions of 75,153 MT, and net new crop sales of 52,099 MT.
Technical analysis: July corn ended the session near the daily low, posting the only loss across the grain and soy complex today. Early tests of resistance at $6.00 and $6.06 were thwarted and will continue to serve up resistance in the event of an additional attempt to turn higher. A successful move above these particular levels will find bulls then battling at $6.17 1/4, then at the technically significant 100-day moving average of $6.25 3/4. A move to the downside, however, will find initial support at $5.88 3/4, with solid support around the near confluence of the 20- and 10-day moving averages of $5.84 1/4 and $5.82. A breach of these levels will likely lend bears increased momentum towards $5.71 1/2, $5.54 3/4 and the May 18 low of $5.47.
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 closed up 29 3/4 cents at $13.29 1/2. July soybean meal rose $8.00 to $401.40. July bean oil gained 166 points to 47.86 cents. Prices closed nearer their session highs in all three markets.
Fundamental analysis: Heavy short covering and speculative bargain hunting were featured in soybeans, meal and bean oil today after all three markets hit multi-month lows on Wednesday. A sharply lower U.S. dollar index and solidly higher crude oil prices were bullish outside market forces working in favor of the grain market bulls today. Good gains in the wheat futures markets today also spurred some buying interest in soybean complex futures.
This afternoon USDA was expected to report soybean crush totaled 185.0 million bu. during April. That would be a 12.9 million-bu. (7.0%) decline from March, but up 4.1 million bu. (2.3%) from a year ago.
The weekly USDA export sales report is out Friday morning, delayed one day by the holiday Monday. U.S. soybean export sales are expected to come in between a reduction of 100,000 MT and sales of 300,000 MT in the 2022-23 marketing year, and sales of zero to 450,000 MT in the 2023-24 marketing year.
Technical analysis: The soybean bears still have the firm overall near-term technical advantage. Prices are in a six-week-old downtrend on the daily bar chart. However, the bears now appear exhausted and more gains Friday and a bullish weekly high close would suggest a market bottom is in place. The next near-term upside technical objective for the soybean bulls is closing July prices above solid resistance at $13.83 3/4. The next downside price objective for the bears is closing prices below solid technical support at this week’s low of $12.70 3/4. First resistance is seen at this week’s high of $13.37 1/4 and then at $13.50. First support is seen at $13.15 and then at $13.00.
The meal bears still have the firm overall near-term technical advantage. Prices are in a six-week-old downtrend on the daily bar chart. 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 $380.00. First resistance comes in at today’s high of $404.40 and then at $410.00. First support is seen at today’s low of $392.80 and then at this week’s low of $386.30.
Soybean oil bears still maintain the solid overall near-term technical advantage. Prices are in a five-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 52.00 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 this week’s high of 49.06 cents and then at 50.00 cents. First support is seen at today’s low of 46.16 cents and then at this week’s low of 44.53 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 rallied 16 1/2 cents before settling at $6.10 3/4. July HRW futures rallied 12 cents to $8.02 1/2, settling in the middle of today’s range. July HRS futures closed 9 cents higher at $7.89.
Fundamental analysis: Wheat futures managed to continue yesterday’s reversal from recent lows, but bulls were still unable to overcome initial resistance despite surging soybean and crude oil markets. Strengthening technicals pointed to a continued bounce through today’s session, but the overwhelming bearish seasonality and looming winter wheat harvest continue to weigh on prices. Weather quickly went from too dry to too wet in regions in central and southwestern Plains as frequent rain is expected to fall from western Texas to Montana for the next ten days, World Weather Inc reports. At this stage of wheat development, too much moisture can lead to head sprouting, adding further pressure to production prospects of winter wheat.
News out the Black Sea has been bullish the past few days, headed by Russia blocking registration of ships to all Ukrainian ports. The duo signed a grain deal, extending it to July 18. Russia has long voiced concerns that restrictions were not sufficiently lifted on their grain and fertilizer exports. Ukraine’s combined grain and oilseed output is also expected to drop, due to the ongoing war. Production is expected to fall 5.8 MMT (7.9%) to 68 MMT this year, according to Ukrainian grain traders’ union UGS forecasts. UGA also said combined exports of grains and oilseed could total 43.9 MMT in 2023-24, down 12.5 MMT (22.2%) from this year. Trade partners have been concerned over Ukrainian grain lowering prices for domestic producers, making it difficult to find a market for wheat.
USDA is set to release export sales tomorrow, with trade expecting net sales between -100,000 and 100,000 MT for the winding down 2022-23 marketing year, and 200,000 – 450,000 MT for the 2023-24 marketing year. Last week, USDA announced net reductions of 45,083 MT and net sales of 245,136 MT, respectively.
Technical analysis: July SRW futures rose on the session but were unable to overcome Tuesday’s high. Today’s green candle confirmed yesterday’s hammer reversal, leaving a battle to be fought tomorrow between technical resistance and a technical reversal. If price overcomes resistance at Tuesday’s high at $6.16 3/4 and preferably the 20-day moving average at $6.21 3/4, bulls will likely have enough momentum to target the downtrend drawn from the February and April highs, currently at $6.44. If bears maintain the bearish momentum, $6.04 will act as first support, backed by Tuesday’s close at $5.91. Further weakness will target Wednesday’s for-the-move low at $5.73 1/4.
July HRW futures, the recent market leader, also struggled against initial resistance today. Price remains at the lower end of a volatile sideways range. A continuation of recent strength will face resistance at the 10-day moving average at $8.15 1/4, coinciding with last week’s support. Further strength will be met with 40-day moving average resistance at $8.28. Bears are looking to take out today’s low at $7.83 1/2 before yesterday’s low at $7.63 3/4. Further weakness targets the May low at $7.36 1/4.
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
Price action: July cotton closed up 294 points at 86.42 cents and nearer the session high.
Fundamental analysis: The cotton futures market was boosted today by a solid rally in the crude oil futures market, good gains in the U.S. stock indexes and a big drop in the U.S. dollar index. Some better manufacturing data out of China today also supported the natural fiber, on notions of potentially better demand coming from the world’s second-largest economy.
Today’s gains in cotton futures came despite recent plentiful rains in Texas cotton country. A Pro Farmer source says it’s now a “foregone conclusion” the U.S. cotton production estimate is going up in the June WASDE report.
The weekly USDA export sales report is out Friday morning (delayed one day by the holiday Monday). U.S. cotton export sales overall have been a bit disappointing recently, but the bulls are hoping China steps up the pace of U.S. purchases in the coming weeks.
Technical analysis: Cotton futures bulls have regained the overall near-term technical advantage. A price uptrend is in place on the daily bar chart. The next upside price objective for the cotton bulls is to produce a close in July futures above technical resistance at the May high of 87.98 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 87.98 cents and then at the January high of 89.59 cents. First support is seen at 85.00 cents and then at today’s low of 83.55 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 100% priced on 2022-crop in the cash market. You should be 50% forward-priced on 2023-crop for harvest delivery.
Cash-only marketers: You should be 100% priced on 2022-crop. You should be 50% forward-priced on 2023-crop for harvest delivery.
