Crops Analysis | June 5, 2023
Price action: July corn fell 11 1/2 cents to $5.97 1/2, nearer the session low and below the 40-day moving average.
Fundamental analysis: Corn extended Friday’s gains to begin the overnight session, though momentum faded shortly following this morning’s open as profit-taking efforts ensued. Upcoming chances for cooler weather and rains in much of the Midwest weighed on futures as nearly widespread rain is expected Friday through Sunday along with follow-up showers June 13-15, according to World Weather. The forecaster notes that if these rain events occur as advertised, enough rain should fall to prevent significant crop stress during the next two weeks. However, widespread, soaking rains are not expected from either rain event and timely rain will be needed in the second half of the month to keep soil moist enough to ensure crops can withstand potential periods of hot and dry weather in the coming weeks.
USDA’s weekly export inspections data released midmorning proved weaker inspections for the week of June 1, with 1.18 MMT (46.5 million bu.), down 165,438 MT from the previous week but within the expected pre-report range of 800,000 MT to 1.4 MMT. Inspections continue to trail last year’s pace by nearly 32%.
Condition ratings will be released this afternoon, with a Reuters poll showing analysts on average expect a 2% decrease from last week’s 69% “good” to “excellent” rating as of June 4. Meanwhile, planting is expected to have advanced to 97% completed, up from 92% last week.
Technical analysis: While July corn ultimately failed to extend overnight gains and closed below the 40-day moving average of $5.98 1/4, an uptrend continues to prevail according to the daily chart. A push lower, however, will now face initial support at the 10-day moving average of $5.91 1/2, then the 20-day of $5.85 1/4 and from there, $5.71 and $5.60 3/4. Conversely, an advance to the upside, will face initial resistance at the 40-day moving average, then at $6.19 1/4 the 100-day moving average of $6.24 3/4 and $6.29 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 traded both sides of unchanged before ending the session 2 1/2 cents lower at $13.50. July soymeal closed $3.40 higher and nearer the session high. July soyoil closed 24 points lower at 49.26 cents.
Fundamental analysis: Soybean futures gave up overnight gains to post mild losses on the day in a struggle to break through technical resistance. Eyes will be on the initial crop condition report for soybeans released at 3 p.m. CT today, with analysts expecting the crop to be rated at 65% good to excellent, according to a Reuters survey. If proven true, 65% would be 3 points below the 10-year average and the lowest initial reading since 2019, which was rated at 54% good to excellent in the June 24 report. Meanwhile, USDA is expected to place seeding at 92% completed.
The eastern corn belt is expected to trend cooler this week, provided needed relief to crops that are suffering from dryness, World Weather Inc reports. The cooler weather will provide some time for crops to get rain and turn around development potential, following concerns over the past two weeks stemming from extensive heat and dryness. While the Midwest remains dry, some rain is forecast over the next week, but widespread, soaking rains are not expected. Today’s crop condition will provide some insight as to how soybeans have fared thus far.
This morning, the USDA reported soybean export inspections of 214,247 MT (7.9 million bu.), which were down 28,819 MT from last week and near the low-end of the expected pre-report range of 150,000 and 400,000 MT. Inspections remain below the seasonal pace needed to reach the USDA export forecast. Paired with lackluster nets sales recently, it sheds doubt that the current USDA number will be achieved.
Technical analysis: July soybeans saw consolidation throughout the session around the 20-day moving average at $13.53. Futures remain in a downtrend, currently capped by a trendline extending from the April and May highs, with today’s high rejecting off that key level at $13.61 1/4. A close above this resistance will open the door to retest prior support turned resistance at $13.88. Bears are looking to take out today’s low at $13.43 1/2 which is quickly backed by support at $13.40. Further selling will find support at $13.05, the last line of defense before the recent move-low at $12.70 3/4.
July soybean meal was the sole member of the bean complex to close green on the day. Bears remain in full control of the technical advantage. Bulls continue to struggle against the 10-day moving average at $402.50 which will stand as initial resistance, backed by the May 26 high at $407.00. Bears are looking to take out today’s low at $397.20 before tackling stronger support at $392.00, backed by the recent move-low at $386.30.
July soyoil was unable to test the psychological 50 cent level before rejecting lower and retesting the 20-day moving average at 49.07 cents. Both levels will remain key going into the rest of this week. Bulls want to close prices above 50.00 cents before tackling the 40-day moving average at 50.87 cents which has capped all upside since February. Bulls want to defend today’s low at 48.63 cents which is quickly backed by the 10-day moving average at 48.36 cents. Bears ultimate target is the May 31 low at 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 wheat firmed 5 cents to $6.24, closing near mid-range. July HRW wheat rose 10 cents to $8.22 1/4., while July spring wheat futures closed 12 1/2 cents higher to $8.20 1/4, ending the session near the intraday high.
Fundamental analysis: The winter wheat futures markets saw short covering today, along with some perceived bargain hunting, following the late-May selling pressure.
USDA this morning reported disappointing U.S. wheat export inspections of 291,599 MT to begin the 2023-24 marketing-year--down 99,693 MT from the previous week and near the low-end of trade expectations.
TASS news agency said Russia is continuing consultations with the United Nations over the Black Sea grain-shipping deal, and that ship inspections had resumed. More talks are scheduled for Friday in Geneva. However, Russia said it sees no prospects for extending the deal, which currently runs through mid-July.
World Weather Inc. today reported weather in U.S. wheat country in the coming 10 days to two weeks will maintain the status quo for most crops. Rain is needed in eastern Alberta and parts of southern Manitoba, Canada. Rain has been falling favorably for spring crops in the northern U.S. Plains, although it is becoming too dry in a part of the eastern Dakotas and western Minnesota. Wheat in the U.S. Midwest remains favorably rated, despite recent warm and dry weather. U.S. hard red winter wheat needs drier weather to protect grain quality, said the forecaster.
Traders are awaiting this afternoon’s weekly USDA crop progress reports. According to a Reuters survey, the U.S. spring wheat crop condition is expected to be 66% good to excellent. The winter wheat crop is seen at 35% good to excellent, compared to 34% last week. Spring wheat planted is expected at 94% compared to 85% last week. Winter wheat harvested is expected at 4% as of Sunday.
Technical analysis: SRW and HRW wheat bears still have the 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 the May low of $5.73 1/4. First resistance is seen at today’s high of $6.31 1/2 and then at $6.40. First support is seen at today’s low of $6.15 1/2 and then at $6.00. The HRW bulls' next upside price objective is closing July prices above solid technical resistance at $9.00. The bears' next downside objective is closing prices below solid technical support at last week’s low of $7.63 3/4. First resistance is seen at today’s high of $8.30 3/4 and then at $8.40. First support is seen at today’s low of $8.10 1/2 and then at $8.00.
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 fell 126 points to 84.79 cents, nearer the session low.
Fundamental analysis: Cotton futures extended Friday’s weakness despite crude strength after top crude exporter Saudi Arabia pledged to cut production by an additional 1 million barrels per day from July. The U.S. dollar extended last week’s gains overnight but turned lower following a weaker-than-expected reading of the May ISM services index, which fell from 51.9 in April to 50.3 last month, reflecting the second lowest reading of the expansion after last December’s decline to 49.2. This comes after last Friday’s jobs report which indicated healthy service employment. The next Consumer Price Index (CPI) reading may influence the Fed’s decision on whether to increase rates at this month’s meeting.
Frequent rains continue in key cotton-growing areas, with some flooding occurring in West Texas, southwestern Oklahoma and the Texas Panhandle during the weekend, according to World Weather, which will cause further delays to planting while inducing additional increases in soil moisture. The forecaster indicates these areas will receive additional rain through Wednesday, with some additional flooding possible in the Panhandle where rain will be greatest.
Technical analysis: July cotton futures lost technical ground today with bears grasping a close below initial support of 85.31 cents. Initial support will now lie at 84.58 cents, then at the 10-, 20-, 100- and 40-day moving averages at 83.95, 83.54, 83.23 and 82.55 cents, respectively. Upward momentum, however, will be stifled initially at today’s failed support of 85.31 cents, then at 86.24, 86.97 and 87.90 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.
