Crops Analysis | July 21, 2023
Price action: December corn futures fell 10 cents to $5.36 1/4, though prices still gained 22 1/2 cents on the week.
5-day outlook: December corn futures fell under pressure once again as price retraces Wednesday gains despite ongoing tension in Ukraine. Despite a near 30-cent retreat from Wednesday’s high, almost all price action has remained within Wednesday’s session. An uptrend remains on the daily bar chart and the recent uptrend is likely going to continue over the next week. Geopolitical tensions remain high, and any catalyst could send corn prices soaring. Until there is more clarity on a potential new grain deal or worries cease over shipping grains out of the Black Sea, some risk premium is likely to remain in corn prices.
30-day outlook: Weather is expected to turn hot and dry into the first week of August. Declines in soil moisture are expected and some crop stress will return, not helped by increasing temperatures that will lead to additional evaporation. It is still unclear how much the extensive dryness throughout early summer will have an effect on crops, but the current recovery in crop conditions likely points to the USDA leaving their forecast for yield unchanged in next month’s WASDE, barring any significant stress in the next couple of weeks.
90-day outlook: Once geopolitical tensions ease and production prospects are better realized, attention will turn back to the balance sheet. The 2022-23 marketing year is expected to have ending stocks at 1.43 billion bushels, the highest level since 2019-20. Exports are the lowest since 2012-13 and weekly sales have not been promising. The new crop balance sheet is not much better, with our ending stocks forecast at 2.22 billion bushels, the highest since 2018-19. The continued impact of Brazilian corn taking market share and reduced Chinese demand will likely weigh on prices in the medium term, barring any significant changes in the meantime.
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 fell 2 1/4 cents to $14.08 1/4, nearer the session high and gained 37 1/2 cents on the week. August meal rose $2.30 to $442.80, a $19.00 increase week-over-week, while August soyoil rose 176 points to 69.40 cents, gaining 435 points on the week.
5-day outlook: Soybean futures ended the week in choppy fashion as profit taking in grains along with strength in the U.S. dollar pressured prices, while extended gains in soyoil ultimately curbed losses. Traders are likely taking risk off ahead of the weekend after a volatile week of heightened tensions between Russia and Ukraine, as well as forecasts which indicate a return of hot, dry weather next week and into at least the first week of August. Next week’s trade may evolve from a potential escalation or easing of the Black Sea conflict over the weekend along with any weather forecast changes.
30-day outlook: As the end of the month nears and August approaches, traders will become increasingly focused on weather as the soybean crop enters its crucial growth phase. World Weather Inc. predicts hotter weather and restricted rainfall in the western Corn Belt next week, making timely rains in the last days of July and early August very important. The forecaster notes that the GFS and European Ensembles both keep a ridge of high pressure over the Rocky Mountains and Great Plains during August, which is an orientation that will bring cooler air into the Midwest periodically, although the ridge axis will be close enough to the western Corn Belt periodically to keep temps a little warmer than usual. Both models suggest warmer than usual weather will occur more often than not especially in the western Midwest. Further, each frontal system that comes in the northwesterly flow will have potential to generate some brief cooling and a chance of rain, but the eastern Midwest should be coolest relative to normal, and the lower Midwest will likely be the wettest along with the northern Delta and interior parts of the southeastern states.
90-day outlook: U.S. export sales will continue to be closely monitored as the 2022-23 marketing year winds down. Importing countries have consistently looked to Brazil following a record crop to fulfill needs, though a subpar Argentine crop has spurred a notable increase in meal exports. Thursday, USDA reported export sales of 127,000 MT for the week ended July 13, which were up 58% from the previous week, but down 43% from the four-week average. Meanwhile, 760,300 MT were reported for 2023-24, topping the pre-report range of 150,000 MT to 700,000 MT. Top purchasers included Mexico (339,100 MT), unknown destinations (229,000 MT) and China 143,000 MT. Export commitments for the current marketing year are running 11.6% behind year-ago. Soymeal exports, however, were 6.0% ahead of the previous marketing year.
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: December SRW wheat fell 28 1/2 cents to $7.17 3/4 and near the session low. For the week, December SRW gained 37 cents. December HRW wheat dropped 14 cents to $8.66 3/4, near mid-range and for the week up 33 1/4 cents. December spring wheat fell 15 1/4 cents to $8.96 1/2 and gained 7 cents on the week.
5-day outlook: The winter wheat futures markets today saw profit-taking pressure from this week’s solid gains. Key for the bulls early next week will be to at least stabilizes prices as the bulls now appear tired, especially in SRW futures. Stiff chart resistance levels reside just above the winter wheat markets that may give the bulls pause next week.
The HRW harvest is still lagging, extending its vulnerability to weather damage. World Weather Inc. today said harvest conditions in the U.S. central Plains and Midwest will improve with less frequent and less significant rain for a while. The forecaster reported concern about the southern Canada Prairies and northern U.S. Plains wheat and barley will continue. “Rain is needed throughout the Prairies, but very warm to hot weather and little to no rain is expected for a while.”
30-day outlook: Traders in the coming weeks will continue to monitor Russian aggression against Ukraine. Russia this week attacked Ukrainian grain export facilities and said any ships in the Black Sea region will be considered hostile. Many believe Russia is posturing for higher grain prices in shipping its own grain and that at some point will again allow Black Sea grain shipments to appease the few allies it has.
90-day outlook: USDA Thursday reported U.S. wheat sales of 170,700 MT for week ended July 13, which were notably lower from the previous week and below market expectations. The U.S. dollar index this week dropped to a 15-month low, which will make U.S. wheat prices more competitive on world trade markets (in non-U.S. currency) in the coming weeks. U.S. wheat sales abroad need to improve in the coming months in order for wheat prices to sustain their present price levels that are still lofty by historical standards.
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 17 points to 84.48 cents, ending mid-range after posting the highest intraday level since early Feb. The contract gained a solid 326 points on the week.
5-day outlook: Cotton futures pushed higher for the fifth straight session as hot, dry weather continues in key U.S. growing regions, heightening supply concerns. Crude oil strength lent added support, though U.S. dollar strength likely curbed upside momentum. News from China which indicated the country will issue 750,000 metric tons in sliding tariff rate cotton import quotas to non-sate-run-firms, was viewed as extremely bullish. The move suggests Chinese demand may be picking up and/or the country’s crop is in trouble. Traders will continue to monitor the situation over the next several days, along with outside market movement.
30-day outlook: At this juncture, weather will be the key market driver over the next month. World Weather Inc. notes short soil moisture, hot temps and a lack of significant rain during the next two weeks in much of West Texas will lead to rising levels of stress and declines in yield potentials in dryland areas. Some soil moisture is in place and showers in parts of the region into Saturday in the Panhandle and southwestern Oklahoma should keep soil moisture supportive of cotton development for a while longer, though crop stress will steadily increase next week. Crop stress is also expected to increase during the next two weeks in the Blacklands, Coastal Bend and south Texas where mostly hot and dry conditions will erode remaining soil moisture.
90-day outlook: Traders will continue to keep a close eye on U.S. export business in order to gauge the global economic landscape. Cotton exports have proven notable in recent weeks, they have faded slightly. Thursday, USDA reported net sales of 67,100 RB for the week ended July 13, which were up noticeably from the previous week but down 11% from the four-week average. Net sales of 86,100 RB were also reported for 2023-24, with China (49,200 RB), Pakistan (17,900 RB) and Vietnam (8,400 RB) reported as top new-crop purchasers during the week. Meanwhile shipments for the week totaled 233,100 RB, which rose 12% from the previous week, but were unchanged from the four-week average. Top destinations were China, Pakistan and Turkey.
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.
