Crops Analysis | June 7, 2023
Price action: July corn fell 3 3/4 cents to $6.04 1/4, near the session low.
Fundamental analysis: Nearby corn attempted another test of resistance at $6.12 1/2, though efforts were stifled once more as pressure in deferred contracts and the lower wheat complex weighed on futures. Production concerns likely eased a bit as cooler temps are expected throughout the Midwest during the coming week, which should help conserve soil moisture, even as anticipated rainfall will be restricted. Mildly supportive outside markets and the strongest ethanol production reported since the week ended Dec. 9 failed to spur upward momentum. Traders are also positioning ahead of USDA’s June Supply and Demand data, due out Friday at 11 a.m. CT.
While weather prospects have grown a bit more favorable, with most areas expected to receive “some” rain, according to World Weather, a general soaking rain is not forecasted for key production areas. However, cooler temps in tandem with some moisture will help keep crops viable, but in need of more rain.
Ethanol production in week ended June 2 rose 32,000 barrels per day from the previous week but was down 0.3% from the same week last year. Ethanol stocks increased 616,000 barrels to 22.948 million barrels, which was down 688,000 barrels (2.9%) from last year.
Traders will also be tuned into the government’s weekly export sales data for the week ended June 1 tomorrow morning. A range of net old-crop sales between net reductions of 100,000 to 600,000 MT is expected, with new-crop estimates ranging from 100,000 to 400,000 MT. Last week, net old-crop sales of 186,695 MT and new-crop sales of 312,648 MT were reported for the previous reporting period.
Technical analysis: July corn ended the session slightly weaker after making an early run at resistance of $6.12 1/2 for the second time this week, though the area was able to hold strong once again. However, a successful test of the area will find bulls then looking to work above $6.17 1/4, with the 100-day moving average of $6.24 within reaching distance. Success above the 100-day could spark notable buying efforts as bulls would then own the full technical advantage. Conversely, however, downside momentum will be supported first at $6.01 1/2, then at the near convergence of the 10- and 40-day moving averages of $5.98 1/4 and $5.97 1/4, respectively. A breach of this area will find additional support lying at the 20-day moving average of $5.86 3/4, then at the May 22 low of $5.53 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 7 1/2 cents to $13.60 3/4 and near mid-range. Prices hit a two-week high early on. July soybean meal gained $8.50 to $405.20 and near the session high. July bean oil fell 45 points at 50.47 cents, near the session low and hit a three-week high early on.
Fundamental analysis: The soybean and meal futures markets saw some short covering and perceived bargain buying today. Gains in the soy complex were limited by losses in corn and wheat futures today.
Weather leans slightly bullish as parts of the Corn Belt are dry. World Weather Inc. today reported two rounds of timely rain should improve conditions for crops across the Corn Belt “and prevent significant crop stress.” The first round of rain will occur Friday into Sunday and will favor eastern Nebraska and eastern Kansas to Michigan and Ohio, while confidence is low for the details of a second round of rain advertised for June 15-17. “The coming rain events will be highly beneficial, but a full restoration of soil moisture is not likely in many locations and timely rain will be needed later this month to keep crop conditions favorable and to ensure crops can withstand potential periods of hot and dry weather in July,” said the forecaster.
China imported a record 12.02 MMT of soybeans during May, up 68% from April and 24% above year-ago. June imports could prove even larger as active shipments of Brazilian supplies arrive at Chinese ports.
The weekly USDA export sales report on Thursday morning is expected to show U.S. soybean sales in the 2022-23 marketing year at -100,000 to 300,000 MT, and sales of 50,000 to 400,000 MT in the 2023-24 marketing year. Traders are also awaiting the USDA monthly supply and demand report on Friday morning.
Technical analysis: The soybean bears have the overall near-term technical advantage. However, a six-week-old downtrend on the daily bar chart has been negated to 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 the May low of $12.70 3/4. First resistance is seen at today’s high of $13.70 3/4 and then at $13.83 3/4. First support is seen at this week’s low of $13.40 1/4 and then at $13.25.
The meal bears 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 this week’s high of $405.90 and then at $410.00. First support is seen at today’s low of $396.10 and then at $392.80.
Soybean oil bears have the overall near-term technical advantage. However, a five-month-old downtrend on the daily bar chart has been negated to suggest a market bottom is in place. The next upside price objective for the bean oil bulls is closing July prices above solid technical resistance at 54.00 cents. Bean oil bears' next downside technical price objective is closing prices below solid technical support at the May low of 44.53 cents. First resistance is seen at today’s high of 51.57 cents and then at 52.50 cents. First support is seen at 50.00 cents and then at this week’s low of 48.63 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 11 cents to $6.16 3/4, ending the day near the session low. July HRW futures lead the complex lower, falling 32 1/4 cents to $7.88, near the session low., while July spring wheat fell 22 1/2 cents to $7.94.
Fundamental analysis: Wheat futures fell sharply on technical selling and harvest pressure. USDA is releasing production estimates Friday, with the trade expecting winter wheat production to rise compared to a month ago. Wheat conditions have improved remarkably since the initial report a few months ago. The better conditions have pointed to USDA raising production estimates in the past and this year we feel that will continue. The expectation of strengthening production paired with reduced demand, mentioned below, is also likely pressuring wheat prices at this juncture.
Soil moisture has greatly improved for HRW acres although some areas have recently become too wet, according to World Weather Inc. Production areas are expected to receive rain starting Friday and into next week, beneficial for some but bringing wheat quality concerns into a few areas where the rain is greatest. Rain is expected to tail off into the second week of the outlook, the forecaster says.
USDA releases export sales tomorrow morning, with analysts expecting a net reduction of 150,000 MT to net sales of 50,000 MT for the 2022-23 marketing year and net sales between 200,000 and 550,000 MT for the 2023-24 marketing year. The current data leads us to believe that USDA will adjust expected exports lower in Friday’s WASDE as exports have not met the required pace to meet their current estimate of 775,000 bushels.
Technical analysis: July SRW futures fell under pressure, although HRW futures led the complex lower today. SRW futures remain incapable of getting a bid above the 40-day moving average, currently at $6.39 1/2, which has capped all the upside since mid-February. Price remains in a downtrend stemming from the February, March, April, May, and now June highs. A break of this trendline will give bulls confidence that a low could be in place, but until then bears remain in firm control of the technical advantage. Resistance stands at the 20-day moving average at $6.21 3/4, backed by today’s high of $6.35 1/2, quickly reinforced by $6.39 1/2. Price settled near the 10-day moving average at $6.16 1/4, which will remain an important pivot into the latter half of the week. Bears want to extend today’s weakness into stiff $6.00 support, backed by the recent move-low at $5.73 1/4.
July HRW futures succumbed to stiff selling pressure today, breaking below moving average support and closing in on last week’s low. Bears are targeting the May 31 low at $7.63 3/4 with additional support at $7.83 on the way. Price is nearing the lower end of the range that has controlled price action for the past 11 months. Bulls are targeting resistance at $8.13, backed by yesterday’s high at $8.47 1/4. Price remains volatile, evidenced by the 60-cent range in the last two days.
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 33 points at 85.01 cents today, ending near the session high, while December cotton fell 55 points to 81.23 cents.
Fundamental analysis: The cotton futures market saw some mild price pressure today, but trading overall remains choppy in a well-defined trading range on the daily charts. Traders are awaiting USDA weekly export sales data Thursday morning. China has been a decent U.S. cotton buyer recently, but a report out of China today showed a weakening economy as both imports and export declined in May.
Traders are also looking ahead to the monthly USDA supply and demand report on Friday morning. Traders are looking for the agency to peg U.S. cotton production at 16.35 million bales, with exports at 13.86 million bales, according to a Bloomberg survey.
World Weather Inc. today reported less rain is expected in Texas cotton areas during the next 10 days to two weeks, “although it will continue plenty moist in some areas.” Crop conditions in the Delta and southeastern states will remain favorable, said the forecaster.
Technical analysis: Cotton futures bulls have the slight 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 this week’s high of 86.45 cents and then at last week’s high of 87.16 cents. First support is seen at 83.55 cents and then at 83.00 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.
