Crops Analysis | June 29, 2023
Price action: Nearby July futures led the complex lower falling 9 cents to $5.81, while December futures fell 8 1/4 cents to close at $5.28 1/2
Fundamental analysis: As thunderstorms rolled across the Midwest, corn futures struggled to maintain early overnight strength and succumbed to heavy selling pressure in the afternoon. Temperatures have remained moderate in the northern portion of the Corn Belt, which has reduced evaporation and crop stress. The southern portion of the Corn Belt has not had such luck , with high crop stress and likely yield reductions occurring into Friday from eastern Kansas to southern Illinois and western Kentucky where soil moisture is short and temperatures will be reaching up to 100 degrees in parts of the region, says World Weather Inc. Additional moisture is expected most days in the next two weeks, supporting crop conditions as corn heads into pollination.
At this juncture, it is difficult to say what kind of yield potential has been lost, though timely rains and moderate temperatures have maintained the crop well enough into the upcoming wetter forecast. Futures prices have generally reflected this as weather premium was drastically taken out of the market over the last week, despite tomorrow’s highly volatile Quarterly Stocks and Acreage report yet to occur. Production cuts have come from several private analysts, most notably Dr. Michael Cordonnier who has the corn yield pegged at 175 bu. per acre with a lower bias going forward.
This morning the USDA released export sales numbers for the period ending June 22. Net sales were in the lower end of expectations at 140,400 MT for the 2022-23 marketing year, up noticeably from the previous week but 16% below the prior four-week average. Corn continues to fall behind the required pace to hit the current USDA export estimate, although this month’s exports have been far better than the numbers released in May.
Historically, tomorrow’s report day is the most volatile day of the year. This year is likely going to be no different. Corn stocks are expected to come in at 4,250.4 million bushels, with analysts’ estimates ranging from 3,791 to 4,410 million bushels, according to a Bloomberg survey. This is tighter than last year at 4,349 million bushels. Acres are expected to come in at 91.9 million acres compared to 91.97 million acres in the March report. Analysts ranged from 91 to 93 million acres in a Bloomberg survey. Historically, analysts undershoot the USDA number by over half a million acres.
Technical analysis: December corn futures continue to slide lower with bears holding the near-term technical advantage, although with prices falling over a dollar in the past six sessions, a bounce may be due if tomorrow’s report is not overtly bearish. December futures closed near session lows in a bearish close as price is approaching the June 8 low at $5.20 1/4, which will act as initial support. This will be backed by the late May support zone at $5.15, loss of which will have bears targeting the psychological $5.00 level, then the May 18 low at $4.90 3/4. Bulls are aiming to reclaim 40-day moving average support at $5.52 1/4 which coincides with the resistance zone that capped most gains until the explosion in mid-May. Additional buying will find resistance at $5.64 1/2, but a trip to $5.87 would be likely if bulls manage to turn recent selling pressure around.
What to do: Get current with advised sales/positions. Be prepared to make additional sales on signs the weather rally has run out of steam.
Hedgers: You should be 85% priced in the cash market on 2022-crop. You should be 50% forward priced for harvest delivery on expected 2023-crop with 25% reowned in December $7.00 calls short-dated to August (July 21 expiration). Our fill on the $7.00 calls was 12 cents.
Cash-only marketers: You should be 85% sold on 2022-crop. You should be 35% forward priced for harvest delivery on expected 2023-crop production.
Price action: November beans rose 3/4 cents to $12.656 3/4, finishing the near the session low. July meal gained $1.20 to $403.00, while July soyoil rose 121 points to 60.83 cents.
Fundamental analysis: Soybean futures paused recent downside efforts despite an increase in rains across the Midwest, tepid export sales and strength in the U.S. dollar, indicating enough premium has been removed ahead of the government’s Acreage and Quarterly Stocks Report, due out tomorrow at 11 a.m. CT. A Reuters survey indicates analysts expect soybean stocks as of June 1 at an average 812 million bu., with the estimates ranging from 750 to 920 million bu. This compares to March 1 stocks of 1.685 million bu. and 968 million bu. a year-ago. Meanwhile, a slight increase in soybean acreage is expected, with analysts anticipating an increase of around 200,000 acres from USDA’s end-of-March estimate to 87.505 million acres.
World Weather Inc. predicts increasing showers and thunderstorms will occur across the Midwest during the coming week, which will provide some much-needed relief to dryness, however, more rain will be needed. The forecaster does note that some locally intense thunderstorms will be possible and could lead to some crop damage in a few pockets, but overall, the moisture will stop crop deterioration after a very tough month of June.
USDA released its Weekly Export Sales Report ahead of this morning’s open, which showed net old-crop sales of 227,400 MT in week ended June 22. Sales for the week were down 50% from the previous week and 28% from the four-week average. New-crop sales of 17,000 MT were also reported for the week. Traders were expecting sales to range from 200,000 to 500,000 MT for 2022-23 and 0 to 200,000 MT for 2023-24.
Technical analysis: November soybeans traded a narrowly inside Wednesday’s lower range, with the 20-day moving average of $12.56 1/4 serving as initial support. Success below the level will find additional support at $12.49 1/4, then at the 40-day moving average of $12.35 1/4 and $12.10 1/2. From there, the May 31 low of $11.30 1/2 will act as the next major level of support. Conversely, efforts to recapture this week’s losses will face resistance initially at $12.72 1/4, again at $12.88, then at the 100-day moving average of $12.91 3/4. A turn above the level will likely induce solid buying efforts towards resistance at $13.11 and the 10-day moving average of $13.15. From there resistance serves at $13.26 3/4, then the 200-day moving average of $13.34 1/4 and the June 21 high of $13.78.
What to do: Get current with advised sales/positions. Be prepared to advance sales on additional price strength.
Hedgers: You should be 80% priced in the cash market on 2022-crop. You should be 35% forward priced for harvest delivery on expected 2023-crop production with 25% reowned in November $14.00 call options short-dated to August (July 21 expiration). Our fill was 37 cents.
Cash-only marketers: You should be 80% sold on 2022-crop. You should be 25% forward sold for harvest delivery on expected 2023-crop production.
Price action: December SRW wheat fell 2 1/4 cents at $6.84 1/2, near the session low today and hit a two-week low. December HRW wheat dropped 6 3/4 cents to $8.01 1/2, near the session low. December HRS wheat rose 7 1/4 cents to $8.35.
Fundamental analysis: The winter wheat futures markets were again pulled down by another solid drop in corn futures prices. Weekly U.S. wheat sales were also disappointing, at 155,200 MT reported for 2023-24, were near the low-end of market expectations. Seasonal harvest hedge pressure is also a bearish element for the winter wheat futures markets.
World Weather Inc. today reported “concern continues over crops in Canada’s Prairies due to dryness. Portions of North Dakota and northeastern Montana also need rain. The remainder of the northern U.S. Plains have seen timely rainfall that is benefitting spring wheat, barley and oat development.” Wheat maturation and harvest conditions have been fair to good recently in the central United States; including hard red winter wheat areas and soft wheat in the Midwest. Wet weather coming to the Midwest this weekend into next week could slow crop maturation and harvesting and may raise some crop quality concerns, said the forecaster.
Traders are awaiting Friday morning’s USDA quarterly grain stocks report and planted acreage updates. These reports have a history of producing surprises and higher price volatility in the immediate aftermath of their releases.
Technical analysis: This week’s price action produced bearish V-Top reversal patterns in SRW and HRW. Bears have the overall near-term technical advantage. SRW bulls' next upside price objective is closing December prices above solid chart resistance at $7.50. The bears' next downside objective is closing prices below solid technical support at $6.50. First resistance is seen at $7.00 and then at Wednesday’s high of $7.22 1/2. First support is seen at $6.75 and then at $6.60. The HRW bulls' next upside price objective is closing December prices above solid technical resistance at the January high of $8.93. The bears' next downside objective is closing prices below solid technical support at $7.75. First resistance is seen at today’s high of $8.17 1/4 and then at $8.25. First support is seen at $7.90 and then at $7.80.
What to do: Get current with advised sales.
Hedgers: You should be 50% sold in the cash market on 2023-crop production.
Cash-only marketers: You should be 50% sold on 2023-crop production.
Price action: December cotton rose 167 points to 79.03 cents, finishing near the session high and at the highest level since June 22.
Fundamental analysis: December cotton was able to capture solid gains, turning higher for a second straight day on continued technical buying amid strength in equities. Traders largely anticipate USDA will produce a lower acreage figure from its initial end-of-March estimate of 11.256 million acres. Pre-report estimates indicate traders project planted acreage of 11.119 million acres, down from 2022 plantings of 13.763 million acres.
Tough weather conditions in Texas could also be adding to the natural fiber’s upward movement, as World Weather Inc. states most Texas crop areas continue to get beat up by excessive heat and dryness. The forecaster indicates the pattern will linger for another day or two, with cooling expected in addition to some showers and thunderstorms. While the rain will be poorly distributed, leaving many areas in need of moisture, it will be welcome and provide a short-term period of crop improvement. West Texas will be included in some of the rain with Friday and Saturday the wettest.
USDA reported weekly cotton sales of 125,600 RB for the week ended June 22, which were up noticeably from the previous week, but down 44% from the four-week average. Top purchasers for the week were China, Vietnam and Taiwan. Meanwhile, exports for the week totaled 225,200 RB, a 5% reduction from the previous week and 17% from the four-week average.
Technical analysis: December cotton edged above resistance at 78.15 and 78.93 cents, along with the 10-day moving average of 79.12 cents, handing bulls a bit more technical traction. Persisting upward momentum will now face initial resistance at the 10-day moving average, then at 79.55 cents, and again at the 20-, 40- and 100-day moving averages of 80.25, 80.85 and 81.78 cents, respectively. From there, the April 19 high of 84.50 cents will serve as the next major area of resistance. A move the downside, however, will face support at today’s failed resistance levels, along with 76.75, 76.13 and 75.35 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.
