Crops Analysis | June 9, 2023

Crops Analysis
Crops Analysis
(Pro Farmer)

Corn

Price action: July corn futures fell 6 cents on the session to $6.04 1/4, falling 4 3/4 cents on the week. December corn futures fell 2 1/2 cents today to $5.30 1/2, bringing this week’s loss to 10 3/4 cents.

5-day outlook: Friday’s WASDE failed to break July corn futures out of the recent range. This week saw volatility that traded entirely within Monday’s range, with bulls and bears both failing to garner the momentum needed to break the range one way or the other. Weather will likely be the determining market mover over the next week, with recent dryness challenged by potential rain through June 17 with follow-up showers June 18-23 through much of the corn belt, according to World Weather Inc. A full restoration of soil moisture is still unlikely and more rain will be needed this month to keep crop conditions favorable.

30-day outlook: After today’s report, eyes have turned to the Quarterly Grain Stocks and the June acreage report. Spring weather in the northern Plains concerned traders and producers alike of planting issues and the resurgence of large prevent plant numbers in North Dakota and Minnesota. Recently, many of those concerns have alleviated as flooding subsided and the soil dried. The report on June 30 will show just how many of those acres were planted, potentially more than the USDA was accounting for in today’s report. The continued dryness likely points to more than expected plantings, which would weigh heavily on corn prices, barring any overwhelming weather scare.

90-day outlook: As the U.S. nears harvest and there is more certainty on production, eyes will shift towards the demand side of the balance sheet. Recently exports have been poor, leading to the USDA lowering their export forecast in today’s report by 50 million bushels to 1.725 billion bushels. Brazil will begin exporting their record crop in the interim, flooding the global market with additional cheap corn. As it stands, there is a lot of concern over ongoing U.S. corn demand, and while that can change at moment’s notice, current forecasts lead us to believe weakness will prevail.

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.

 

 

Soybeans

Price action: July soybeans rose 23 1/4 cents to $13.86 1/2, marking the highest close since May 16 and a 34-cent gain on the week. November bean futures gained 15 1/4 cents to $12.04 1/4. July meal fell $6.80 to $397.20 and July soyoil rose 209 points to 54.59 cents.

5-day outlook: Soybeans worked gradually higher through the course of the week but continued to battle resistance around $13.72 1/2 ahead of the government’s monthly supply and demand updates, but bulls ultimately prevailed. Overall, traders expected an increase to old- and new-crop ending stocks as demand has waned in the wake of Brazil’s record crop, though a notable selloff since mid-April and questionable weather throughout the Midwest make soybeans ripe for a rebound. A daily old-crop export sale of 197,000 MT released earlier today confirmed the oilseed is a bargain. USDA’s June supply and demand data proved mostly bearish amid larger-than-expected increase to old- and new-crop ending stocks, along with global ending stocks. Though the data did little to curb enthusiasm in futures.

30-day outlook: USDA’s end-of-June Acreage and Quarterly Stocks Reports will be a major market driver, though weather could quickly become the focus following the government’s updated estimates.  The recent stretch of dry weather has not only led to a record planting pace, the effects on the growing soybean crop to this point have likely been minimal. However, as the growing season advances, consistent rains will become increasingly important as plants begin blooming, the initial phase of the plants reproductive sequence. With much of the crop planted at minimum a week earlier, the crucial period will prospectively begin a bit earlier-than-usual. Traders will continue to closely monitor weather forecasts as this fundamentally vital growing period inches closer.

90-day outlook: U.S. exports have fallen notably over the past few months as a record Brazilian harvest at cheaper prices attracted importing countries. As the end of the 2022-23 marketing-year grows near, exports will continue to be a market focus. The data will also provide trade insight into the health of the global economy. USDA’s most recent export sales report, released Thursday, reported net old-crop sales of 207,200 MT for the week ended June 1, a 68% increase from the previous week and notable increase from the four-week average. Top purchasers for the week were Japan, Germany and Egypt. Net new-crop sales of 264,600 MT were also reported, of which China, Mexico and Taiwan were the main buyers. Soymeal sales during the week dropped slightly to 177,600 MT, a 56% decrease from the previous week and 42% from the four-week average. Soymeal exports had recently encountered a solid increase in sales, likely due in part to Argentina’s subpar crop following severe drought.

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.

 

 

Wheat

Price action: July SRW wheat rose 4 cents to $6.30 1/4, near the session high and for the week up 11 1/4 cents. July HRW wheat fell 7 cents to $7.97 3/4, near mid-range and for the week down 14 1/2 cents. July spring wheat futures fell 4 cents to $8.11 3/4 but rose 4 cents on the week.

5-day outlook: Today’s monthly USDA supply and demand report produced no big price movements for the wheat markets. The agency raised its winter wheat crop estimate 6 million bu. from last month but it was a bit less than traders expected. The national average yield increased 0.2 bu. to 44.9 bu. per acre. USDA left harvested area at 25.286 million acres, which is the largest abandonment rate ever recorded. Wheat carryover for 2022-23 was unchanged from last month and 8 million bu. below market expectations. USDA put the national average on-farm cash wheat price for 2022-23 at $8.85, unchanged from last month. USDA made no changes to 2023-24 demand estimates from last month. USDA put the national average on-farm cash wheat price for 2023-24 at $7.70, down 30 cents from last month.

Traders will continue to monitor weather in U.S. wheat regions. World Weather Inc. today reported in HRW country conditions will likely be drier-biased in far southwestern areas in the next seven days, “which is needed after recent heavy rain in the last few weeks. Rain will be greater elsewhere and could be too much again in some spots, leading to wheat quality concerns”, said the forecaster. In the northern Plains, conditions in the next seven days will be mixed. Recent rain in eastern areas has locally been beneficial and helpful. “However, a more generalized heavy rain event is needed in the Dakotas and Minnesota due to how dry the topsoil has become.”

30-day outlook: The already flimsy Russia-Ukraine grain-shipping deal appears headed for its demise in the coming weeks. Reports said Russian Deputy Foreign Minister Mikhail Galuzin said a blast that damaged an ammonia pipeline between Russia and Ukraine would be considered during talks on the Black Sea grain deal. The apparent Russian sabotage of a major dam in Ukraine, which produced major flooding damage, also appears to have dealt a major blow to the agreement being extended.

The updated U.S. planted acreage and quarterly grain stocks reports in late June will be closely scrutinized by wheat traders. Also, the late-June/early-July timeframe can be a pivotal period for corn and soybean futures prices, which in turn could impact wheat futures prices. Many times in summer months the wheat markets tend to more closely follow price action in the corn and soybean markets.

90-day outlook: Summer U.S. wheat harvest will likely limit rally potential in the futures markets in the coming weeks. Harvested wheat filling up local elevators will weigh on futures prices. However, the balance between harvested low-yield land and abandoned acres could limit the downside.

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 futures fell 27 points on the session to 84.04 cents, bringing the weekly loss to 201 points.

5-day outlook: Cotton futures saw weakness throughout this week as prices rejected off the upper end of the recent range. Cotton prices have continued to trade in the same range for the past seven months and the coming week is unlikely to provide any catalyst to exit that range. Cotton planting remains behind the ten-year average, although most of this delay is largely due to key production areas receiving much-needed rain. A drier weather pattern is expected to occur in the next two weeks in west Texas, southwestern Oklahoma and the Texas Panhandle, according to World Weather Inc. This will help planting accelerate, although the drying will come too late for some fields to be planted. Despite recent wetness, USDA increased new-crop harvested area by 700,000 acres today thanks to the reduction in drought-stricken areas reducing expected abandonment.

30-day outlook: The acreage report coming at the end of the month will provide insight into the overall crop potential. Planting has increased to just five percent behind the ten-year average and conditions are four points above the ten-year average. This spring/early summer has provided opportunity for many acres that have seen high abandonment rates the past few years to be planted. USDA is expanding new-crop production as well as exports, and if the current trend of an improving cotton production outlook continues, new-crop prices are likely to face steady pressure as confidence in higher production estimates rises.

90-day outlook: Cotton export sales have rocketed past the five-year average, making a marketing year high this week with net sales of 480,400 RB. China accounted for the bulk of that, buying 384,700 RB of the natural fiber. Chinese cotton prices have been trending higher for the bulk of this year; if they decide to continue to purchase cotton from the U.S. it could provide needed demand for increased U.S. production. While exports are likely to increase, it is unlikely the U.S. will be able to export every bushel of increased production, evidenced by the USDA increasing both production and exports, but new-crop ending stocks also rose. The increased 2023-24 carryout will likely continue to weigh on prices over the course of the summer unless significant demand steps up purchasing both old-crop and new-crop cotton.

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.

 

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