Crops Analysis | July 13, 2023
Price action: December corn futures rallied 16 3/4 cents before settling at $5.00 1/2, near the session high.
Fundamental analysis: Corn futures piggybacked overnight gains during the day session with improved demand prospects spurring buying back into the support zone of the past two weeks. So far, buying seems little more than a corrective bounce, although a close above $5.10 would point to additional strength. Bulls shrugged off yesterday’s bearish report as traders turn their attention back to weather. As of July 11, the U.S. drought monitor showed 49% of the U.S. as covered by abnormal dryness/drought, down 3 percentage points from the prior week.
Weather forecasts remain largely the same for the coming week. The northern Plains are expected to experience less precip than historically, which could pressure conditions in North Dakota, which are some of the highest rated crop conditions at this juncture. Warming temperatures are expected to accompany the reduced precip, accelerating drying, says World Weather Inc. The forecaster says most of the Midwest is expected to see rainfall as well as mild temperatures over the next week, favoring crop development as pollination takes place.
This morning’s export sales for the week ended July 6 turned out better than expected, with the highest weekly sales number since the first week of April for the 22-23 marketing year. Export sales were 468,400 MT for 22-23, above analysts’ expectations and 86% above the prior week. Net sales of 470,800MT were announced for the 23-24 marketing year, above expectations and the highest weekly sale thus far for new crop.
Technical analysis: December corn futures rallied on the session but were unable to overcome meaningful resistance. Bulls need to overcome resistance at $5.10 for recent buying to be anything more than a corrective bounce. Friday’s session should provide some clarity on the next leg of the market, although price is likely to remain volatile as weather is the driving force. Bears are currently in control of the near-term technical advantage as price remains in a three-week-old downtrend. Bulls want a daily close above $5.10 coinciding with $5.09 1/2, which capped last week’s rally attempts. Further resistance can be found at the 20-day moving average at $5.22, then the 40-day moving average at $5.31 3/4. Bears want to break today’s low of $4.81, loss of which targets support at $4.63.
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 soybeans rose 42 cents to $13.69 3/4, near the session high and above the 200-day moving average, while August meal rose $11.40 to $422.30. August soyoil gained 135 points to 65.69 cents.
Fundamental analysis: Soybeans were able to regain Wednesday’s losses following USDA’s bearish supply and demand data. Traders are seemingly shaking off the data and turning their focus toward late-July and August weather. A daily new-crop export sale of 315,704 MT to Mexico, along with a reduction in Brazilian production and outside market strength, were additional variables contributing to the post-report rally. Conab trimmed its Brazilian soybean crop by 1.2 MMT to 154.5 MMT and left the country’s 2022-23 export forecast at 95.6 MMT. Crude oil futures took strength from easing inflationary concerns as the Consumer Price Index (CPI) marked its smallest year-on-year increase since March 2021, while the U.S. dollar continued its retreat following the report.
World Weather Inc. continues to forecast a transition to drier weather beginning July 21 through at least July 27, leaving much of the region in need of a boost of rain, with rains expected through next Thursday not likely to leave a large part of the region with an abundance of soil moisture.
USDA reported weekly export sales of 80,600 MT for the week ended July 6, which were down 57% form the previous week and 76% below the four-week average. Net sales of 209,200 MT were reported for 2023-24. Traders anticipated sales to range from 0 to 300,000 MT for 2022-23 and 100,000 to 600,0000 MT for 2023-24.
Technical analysis: Soybean bulls were back in full force today, with the new-crop November contract capturing a close above initial resistance of $13.62 1/4. The move positions the camp to make a solid run toward the next area of resistance around $13.96 1/2. From there, additional resistance stands at $14.15 1/4 as well as the Dec. 30 high of $14.27 3/4. A turn lower, however, will find notable support around 10-, 200- and 20-day moving averages of $13.37 3/4, $13.32 1/4 and $13.25 1/4, respectively. A breach of the area will find bears regaining control, though additional support lies at $13.09, at the 100-day moving average of $12.89 1/4 as well as the 40-day of $12.55 1/2.
August meal gained technical ground, with a close just above the technically significant 200-day moving average of $422.00. An extended push to the upside will encounter additional resistance at the 100-day moving average of $426.20, then at $431.30 and $437.00. Conversely, solid support lies around the 10-20- and 40-day moving averages of $409.90, $408.40 and $402.90, respectively. A turn below these levels will find bears grabbing technical traction to prepare for a battle at $$399.50 and again at $389.30.
August soyoil continues to find solid resistance at 65.76 cents, though bulls are seemingly pausing before making a run above the area towards 67.18 cents and 68.46 cents. Conversely, a push lower will find initial support at the 10-day moving average of 63.36 cents, then at 61.78 cents and the 20-day moving average of 60.21 cents. From there lies the 200-day moving average of 58.61 cents and the 100- and 40-day moving averages of 55.02 and 54.69 cents.
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 rose 7 1/4 cents to $6.59 1/2, nearer the session high and hit a five-week low early on today. December HRW wheat rose 3 3/4 cents to $8.10 3/4 and nearer the session high. December spring wheat rose 7 3/4 cents to $8.67 1/4.
Fundamental analysis: The winter wheat futures markets today saw short covering following recent selling pressure. Solid gains in corn and soybean futures prices also supported the wheat markets today. The big drop in the U.S. dollar index this week to a 15-month low is also an underlying bullish element for the grain markets.
This morning USDA reported U.S. wheat sales of 395,700 MT for 2023-24, down slightly from the previous week and within market expectations.
World Weather Inc. today said some periodic rain in the U.S. Midwest and central Plains “may keep a little interest in the quality of winter wheat left to be harvested, but most of the crop should not be seriously harmed by periodic rain.” Canada Prairies weather is expected to deteriorate in the central and east, especially next week and into the last 10 days of this month, when hot and dry weather is most likely. “Crop stress will cut into yields, especially in Saskatchewan,” said the forecaster. Europe spring cereals may experience some greater stress because of limited rain and warm to hot temperatures.
Technical analysis: SRW wheat futures bears have the firm overall near-term technical advantage. Prices are in a fledgling downtrend on the daily bar chart. SRW bulls' next upside price objective is closing December prices above solid chart resistance at $7.00. The bears' next downside objective is closing prices below solid technical support at the May low of $6.08 1/4. First resistance is seen at today’s high of $6.64 1/4 and then at this week’s high of $6.82 1/4. First support is seen at today’s low of $6.41 1/2 and then at $6.30.
HRW bulls and bears are on a level overall near-term technical playing field amid choppy trading. 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 $8.00. First resistance is seen at today’s high of $8.14 and then at $8.25. First support is seen at this week’s low of $7.96 1/4 and then at the July low of $7.89 1/2.
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 3 points to 81.68 cents, nearer the session high.
Fundamental analysis: Cotton futures fell under pressure early in the session following a decline in export sales, though outside market strength erased losses. Lingering bearish sentiment in the wake of Wednesday’s supply and demand data continued to cast a shadow over the natural fiber. However, the marketplace in general is more positive for commodities as the June Consumer Price Index report came in lower-than-expected both on the headline and core reading, indicating the Fed’s inflation battle is indeed effective.
Weather in key cotton growing regions of the U.S. continues to prove variable. World Weather Inc. notes Texas crops will continue stressed for another ten days except in the Panhandle and Red River Valley where timely rain is expected. Rain will fall favorably in southwestern Oklahoma, the Delta and southeastern states, while far western U.S. crops will be very dependent upon irrigation water due to moisture shortages and excessive heat.
USDA reported weekly export sales of 23,100 RB for 2022-23, which were down 79% from the previous week and 76% from the four-week average. Net sales of 51,000 RB were reported for 2023-24. Primary purchasers for the week were China (36,000 RB), Honduras (9,800 RB) and Pakistan (2,500 RB). Meanwhile, shipments totaled 208,300 RB during the week, which were down 20% from the previous week and 14% from the four-week average.
Technical analysis: December cotton experienced an early test to the 100-day moving average of 81.45 cents, which was ultimately thwarted. An additional test of the area, however, will see bears gathering momentum towards next support tat 80.96 cents and the 40- and 10-day moving averages of 80.78 and 80.68 cents, respectively. From there additional support will serve at 80.27 cents then at the 20-day moving average of 79.95 cents and again at 79.20 cents. Conversely, a turn higher will continue to face resistance at 82.03 cents, then 82.70, 83.79 and 84.48 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.
