Crops Analysis | July 19, 2023
Price action: December corn rose 18 1/2 cents to $5.53, closing above the 100-day moving average and at the highest level since June 27.
Fundamental analysis: A second air attack on Ukraine’s port city of Odesa for a second night in a row sent corn futures higher as the attack reportedly caused a “considerable” amount of damage to the Chornomorsk port. The Ukrainian Ag Minister also noted the attack destroyed 60,000 MT of grain that should have been shipped via the Black Sea grain initiative. Adding late-morning fuel to the proverbial fire was an announcement from Russia’s Defense Ministry which stated it will consider ships travelling to Ukrainian ports on the Black Sea as potential carriers of military cargoes beginning July 20.
Forecasts for mostly favorable weather throughout the Midwest dampened gains, as World Weather Inc. notes mostly mild temps are expected to persist through Sunday, with showers and thunderstorms in parts of the lower and eastern Midwest into Thursday will maintain or improve conditions for corn pollination and crop development into the weekend. However, the forecaster notes concerns hover over net drying in areas form Iowa and parts of Illinois into the Dakotas due to drying and warmer weather expected Friday into early August.
Ethanol production rose 38,000 barrels in week ended July 14 to 1.070 barrels per day (bpd), which was up 3.5% from the same week last year. Ethanol stocks increased 508,000 barrels during the week to 23.166 million barrels.
USDA will release its weekly export data for the week ended July 13 early tomorrow. Traders are expecting net sales between 200,000 and 500,000 MT for 2022-23 and 50,000 to 500,000 MT for 2023-24. Last week, USDA reported 468,400 MT for the week prior, which was up 86% from the previous week and a notable increase from the four-week average.
Technical analysis: December corn bulls were able to expand their technical posture by securing a close above the technically significant 100-day moving average of $5.43 3/4 as well as resistance at $5.49 1/2. Upside efforts will now face initial resistance at $5.64 1/2, then at the 200-day moving average of $5.85 1/4. A breach of these areas will build momentum towards psychological resistance at $6.00, with the July 21 high of $6.29 3/4, serving as the next major bull target. Profit-taking, however, will find support at today’s failed resistance levels, then at the 40- and 20-day moving averages of $5.35 3/4 and $5.31 1/4. From there support lies at the 10-day moving average of $5.09 1/4, then at $4.87 and $4.72.
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 13 1/2 cents to $14.08 3/4 and near mid-range. Prices hit a 13-month high early on today. August soybean meal rose $1.10 to $443.80 and near mid-range after hitting a three-month high early on. August bean oil gained 200 points to 66.05 cents, nearer the session high and hit a seven-month high.
Fundamental analysis: The soybean futures market followed the lead of wheat futures markets today, as prices spiked higher in a knee-jerk reaction to news reports that Russia said it will consider all ships traveling to Ukrainian ports on the Black Sea as potential carriers of military cargo, effective Thursday. This follows Russian attacks on a major Ukrainian grain-loading facility earlier this week.
A bit worrisome for the soybean market bulls is meal’s lackluster performance on a day when soybeans and soybean meal performed well. Spreaders were likely buying soybean oil and selling meal today.
Weather in the Midwest leans slightly bullish for soybean prices. World Weather Inc. today said mostly mild temperatures in the region through Sunday, along with soil moisture in place, and showers and thunderstorms in parts of the lower and eastern Midwest into Thursday will maintain or improve conditions for crop development in much of the region into this weekend. However, a transition to drier weather Friday through August 2, along with a return of hot temperatures next week, “will cause rapid drying of the soil across the Midwest and stress to crops will steadily increase with some declines in yield potentials likely,” said the forecaster.
Thursday morning’s weekly USDA export sales report is expected to show total U.S. soybean sales of 0 to 300,000 MT in the 2022-23 marketing year and 150,000 to 700,000 MT in the 2023-24 marketing year, according to a Reuter’s survey. Last week’s U.S. soybean export sales totaled 80,587 MT and 209,162, respectively.
Technical analysis: The soybean bulls have the solid overall near-term technical advantage. Prices are in a steep six-week-old uptrend on the daily bar chart. The next near-term upside technical objective for the soybean bulls is closing November prices above solid resistance at the contract high of $14.48 1/4. The next downside price objective for the bears is closing prices below solid technical support at $13.50. First resistance is seen at today’s high of $14.28 3/4 and then at $14.48 1/4. First support is seen at today’s low of $13.90 and then at $13.75.
The meal bulls have the overall near-term technical advantage. Prices are in a three-week-old uptrend on the daily bar chart. The next upside price objective for the meal bulls is to produce a close in August futures above solid technical resistance at the April high of $456.00. The next downside price objective for the bears is closing prices below solid technical support at this week’s low of $424.90. First resistance comes in at $450.00 and then at $456.00. First support is seen at today’s low of $439.00 and then at $435.00.
Soybean oil futures bulls have the solid overall near-term technical advantage. Prices are in a five-week-old uptrend on the daily bar chart. The next upside price objective for the bean oil bulls is closing August prices above solid technical resistance at the November 2022 high of 68.52 cents. Bean oil bears' next downside technical price objective is closing prices below solid technical support at 60.00 cents. First resistance is seen at today’s high of 67.17 cents and then at 68.52 cents. First support is seen at this week’s low of 63.55 cents and then at the July low of 61.56 cents.
What to do: Get current with advised sales/positions. Be prepared to advance sales on additional price strength.
Hedgers: You should be 90% sold in the cash market on 2022-crop. You should be 45% forward sold for harvest delivery on expected 2023-crop production.
Cash-only marketers: You should be 90% sold on 2022-crop. You should be 45% forward sold for harvest delivery on expected 2023-crop production.
Price action: September SRW futures rallied 57 cents to close near limit up at $7.27 3/4 as geopolitical tensions shocked the market. September HRW futures rose 39 1/2 cents before settling at $8.66 3/4, over 20 cents off the intraday high. September spring wheat futures rose 19 3/4 cents to $8.97 1/4.
Fundamental analysis: Wheat prices shot higher following increasing tension in the Black Sea, with September SRW futures testing limit up intraday. Wheat futures were higher in early trading, but the Russian Defense Ministry said, “It will consider all ships travelling to Ukrainian ports on Black Sea as potential carriers of military cargoes” starting at midnight. This sent prices soaring to the highest level since June 26. Later in the day, Putin came out to say Russia “will consider returning (to the grain deal) if all principles of Russian participation are implemented.” It appears Russia is currently bluffing and trying to get solid commitments for Russian agricultural exports, but any attack on civilian ships in the Black Sea is sure to send grain prices soaring, similar to when the invasion started last February. The last two days there have been overnight drone strikes on the Ukrainian port of Odesa and continued attacks on Ukrainian infrastructure are likely.
The frequency and intensity of rain throughout winter wheat production areas has weakened crop quality concerns and helped harvest accelerate. Temperatures are expected to ease into the weekend before turning hot next week with highs in the 90’s Monday and Tuesday next week throughout the Plains, World Weather Inc. says. Meanwhile, dryness in the western half of the northern Plains continues to pressure spring crops and is expected to continue over the next two weeks. Temperatures will warm to above average starting this weekend, the forecaster says. The USDA opted to leave a relatively high yield estimate for spring wheat. Precedence says that a lower yield is likely, tightening the balance sheet and providing fundamental support for price in the medium term. Geopolitical concerns and corn/soybean prices will still continue to dictate much of the near-term price action.
The USDA is set to release export sales tomorrow morning, with analysts expecting between 200,000 and 500,000 MT of sales for the 2023-24 marketing year. Last week saw net sales of 395,713 MT.
Technical analysis: September SRW futures surged higher though buying was stifled by the 200-day moving average and daily bar chart resistance. How the market reacts during tomorrow’s session will be key from a technical perspective, as a close above $7.30 resistance would likely lead to a rapid test of the June high at $7.70 1/4, with $7.50 resistance on the way. Bulls are looking to defend support at the 100-day moving average, currently at $6.88, backed by $6.67. Today’s surge higher and close near the highs indicates continued strength is likely, though any news regarding the Black Sea can send prices explosively either way.
September HRW futures surged on the day as well, though technical resistance at June highs capped buying Wednesday. Prices remain in volatile sideways trade, with bulls aiming for a close above the $9.00 level with stiff resistance at $8.85 and $8.72 on the way. Price remains in an uptrend on the daily bar chart, though currently in the upper end of the recent range and 60 cents above the “line in the sand” for bulls at $8.00. Additional support lies at the 200-day moving average at $8.40, then the 20-day moving average at $8.24.
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 150 points to 83.75 cents, closing nearer the session high. Prices hit a two-month high today.
Fundamental analysis: The cotton futures market today was pulled higher by solid gains in the grain futures markets. Also bullish for cotton, the U.S. stock indexes have hit new highs for the year this week, while crude oil prices have rallied to 2.5-month highs recently.
Weather leans bullish for cotton futures prices, amid a major heat wave in the southern U.S. World Weather Inc. today said Texas heat and dryness is continuing to stress the cotton crop. “Some production cut is expected from south Texas and the Texas Coastal Bend and may soon evolve in the Blacklands and West Texas,” said the forecaster. Cotton in the Delta and southeastern states will develop relatively well as will be the case in the far western U.S.
Cotton traders on Thursday morning will closely examine the weekly USDA export sales report.
Technical analysis: Cotton futures bulls have the overall near-term technical advantage as prices are in a fledgling uptrend on the daily bar chart. However, there are stiff overhead resistance layers just above the market. The next upside price objective for the cotton bulls is to produce a close in December futures above technical resistance at the April high of 84.50 cents. The next downside price objective for the cotton bears is to close prices below solid technical support at the June low of 76.81 cents. First resistance is seen at 84.50 cents and then at 85.00 cents. First support is seen at 83.00 cents and then at today’s low of 81.95 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.
