Crops Analysis | July 31, 2023

Crops Analysis
Crops Analysis
(Pro Farmer)

Corn

Advice: We advise hedgers and cash-only marketers to sell another 5% of 2022-crop to get to 90% sold in the cash market.   

Price action: December corn fell 17 1/4 cents to $5.13, closing below the 20-day moving average for the first time since July 17.

Fundamental analysis: Corn futures extended last week’s selling efforts in earnest, which were initiated by a notable gap lower to begin the overnight session. Heavy selling continued into this morning’s open as hot, dry weather has begun to abate across much of the Corn Belt and no new major Russian attacks occurred on Ukraine’s grain export infrastructure over the weekend.

World Weather Inc. notes the northwestern U.S. Corn Belt will receive some needed rain late this week into next week, though the forecaster indicates it will not be a “fix-all” event, but some relief from recent dryness is expected from the eastern Dakotas through Minnesota into Iowa, Wisconsin and northwestern Illinois eventually.

USDA reported weekly export inspections totaling 314,200 MT during week ended July 27, which were up 33% from the previous week and 15% above the four-week average. Inspections for the week were near the top-end of the pre-report range of 100,000 to 500,000 MT.

Weekly condition ratings will be reported following the close, with traders anticipating a one percentage point decline from last week to 56% “good” to “excellent,” according to a Reuters poll.

Technical analysis: December corn futures ended the first trading day with a diminished technical posture, as bears secured a close below the 20-day moving average of $5.21 1/4 and support at $5.12 1/4. An extension lower will find initial support at $4.99 1/4 and again at the July 13 low of $4.81, with bears then targeting the $4.50 area. However, a turn higher will find initial resistance at today’s failed support levels, then at Friday’s low of $5.25 1/2. From there, solid resistance stands around the 40- and 10-day moving averages of $5.40 1/4 and $5.43 1/2, respectively, and then at $5.56 1/4 and $5.65 1/4.

What to do: Get current with advised sales.

Hedgers: NEW ADVICE -- Sell another 5% of 2022-crop to get to 90% sold in the cash market. You should be 50% forward priced for harvest delivery on expected 2023-crop.

Cash-only marketers: NEW ADVICE -- Sell another 5% of 2022-crop to get to 90% sold. You should be 35% forward priced for harvest delivery on expected 2023-crop production.

 

 

Soybeans

Advice: We advise hedgers and cash-only marketers to sell the final 10% of 2022-crop to get to 100% sold in the cash market.   

Price action: Soybeans were the weakest link in the soy complex today, with the November contract falling 50 3/4 cents to $13.31 3/4. August soymeal fell $4.00 to $451.20, near the mid-point of today’s range. August soyoil fell 202 points to 65.58 cents.

Fundamental analysis: Soybean futures succumbed to heavy selling pressure as grain markets rolled over in general, quickly turning a healthy monthly gain on the month into monthly losses in the November contract. The worker’s strike in Argentina has come to an end already, ultimately having little effect on world supply.

Weather forecasts have turned decidedly favorable for soybean production with favorable conditions rolling in over the next two weeks. Relief from dryness is expected in the western Corn Belt as rain is expected in the eastern Dakotas through Minnesota and into Iowa, Wisconsin and northwestern Illinois towards the end of the week, World Weather Inc says. Temperatures will return closer to average, limiting crop stress. The question remains as to how much damage was done over the past week with hot and dry conditions over the majority of the Corn Belt. Some insight will be found in this afternoon’s condition ratings.

The USDA releases the weekly Crop Progress report this afternoon. Analysts see soybean conditions falling one point to 53% “good” to “excellent”, according to a Reuters poll. Eyes will be closely watching the “poor” to “very poor” rating as well, which came in at 14% last week.

USDA reported daily soybean sales of 132,000 MT to China and soymeal sales of 183,300 MT to the Philippines for 2023-24. This follows daily soybean sales of nearly 1.8 MMT to China, Mexico and “unknown destinations” last week. The demand situation has been improving but has not spurred any additional demand in the futures market as the forecast has turned favorable for the first couple weeks of August.

USDA reported soybean export inspections of 329,518 MT (12.1 million bu.), which were up 41,034 MT from the previous week and near the upper end of the pre-report range of 100,000 to 400,000 MT. Inspections remain poor historically, but the pace needed to hit the USDA export forecast is being met. Soybean exports are limping into the end of the crop year, but seeing an uptick in new crop demand is promising, although still below historical norms for this date.

The USDA is set to release the June Oilseed Crushings report tomorrow. Analysts expect monthly crush of 175.7 million bushels according to a Bloomberg poll, which would be down from 189.3 million bushels in May but up from 174.1 million bushels in June 2022. The poll also has analysts expecting soyoil stocks of 2.238 billion lbs., down from 2.386 billion lbs. at the end of May.

 

Technical analysis: November soybeans fell sharply, officially ending the first summer rally of the year that extended well beyond the average duration. Bears are taking hold of the technical advantage, though bulls showed some signs of life towards the end of the session with buyers stepping in around $13.30-33. This coincides with the July 12 low and will remain initial support heading into Tuesday. Additional support will come in around $13.15, then the psychological $13.00 level. Initial resistance lies at $13.50 and is backed by $13.64, bulls are ultimately targeting a daily close back above $14.00.

August soymeal held up relatively well compared to the soybean market, bolstered by recent surging crush values. Price was supported by the 10-day moving average at $448.70, which will remain key support into Tuesday. Further support lies at $444.00 then $437.50. Bulls are targeting the recent high close at $464.70, backed by the July 27 intraday high at $472.50.

August soyoil closed lower for the fourth day in a row, though an uptrend remains in place stemming from the May low. Price close right on the uptrend line, any further weakness below 65.50 cents on a closing basis would indicate a technical breakdown, targeting support at 62.50 cents then 59.00 cents. Bulls are targeting the psychological 70.00 cent level then 72.50 cents.

What to do: Get current with advised sales.

Hedgers: NEW ADVICE -- Sell the final 10% of 2022-crop to get to 100% sold in the cash market. You should be 45% forward sold for harvest delivery on expected 2023-crop production.

Cash-only marketers: NEW ADVICE -- Sell the final 10% of 2022-crop to get to 100% sold. You should be 40% forward sold for harvest delivery on expected 2023-crop production.

 

 

Wheat

Price action: December SRW wheat dropped 36 1/4 cents to $6.91 3/4 and nearer the session low. December HRW wheat closed down 39 3/4 cents at $8.29 1/2. Prices closed nearer their session lows and hit two-week lows today. September spring wheat futures fell 40 1/4 cents to $8.55 3/4 and closed near the session low.

Fundamental analysis: Big losses in corn and soybean futures spilled over into the wheat markets today. Weak long liquidation to end the month of July was featured in the grain markets. Traders continued to remove risk premium from futures prices amid a pause in attacks in the Black Sea over the weekend and notions Ukrainian grain can flow out of the country via land routes. Seasonal winter wheat harvest pressure and commercial hedge selling remain seasonally bearish elements.

USDA this morning reported U.S. wheat export inspections of 581,278 MT during the week ended July 27, which were up 220,143 MT from the previous week and well above trade expectations. The inspections pace is still slightly behind last year’s but did catch up significantly after today’s numbers.

World Weather Inc. today reported northern Plains temperatures will be close to normal the next two weeks, although there will be some warm and cool days. Scattered showers and thunderstorms are expected in the region, “but they will not be frequent or significant enough to seriously bolster soil moisture. They will be timely in some fields. proving beneficial to some crops. A more generalized rain will be needed especially in the east,” said the forecaster.

This afternoon’s USDA crop progress reports are expected to show the U.S. spring wheat crop in 48% good to excellent condition as of Sunday, versus 49% last week. The winter wheat harvest is expected to be 79% completed as of Sunday, compared to 68% last week.

Technical analysis: Winter wheat futures bulls have lost their overall near-term technical advantage and the bears have momentum. 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 the July low of $6.41 1/2. First resistance is seen at $7.00 and then at today’s high of $7.26 3/4. First support is seen at $6.80 and then at $6.70. The HRW bulls' next upside price objective is closing December prices above solid technical resistance at $8.90. The bears' next downside objective is closing prices below solid technical support at $8.00. First resistance is seen at $8.50 and then at $8.70. First support is seen at $8.20 and then at $8.10.

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.

 

 

Cotton 

Price action: December cotton rose 46 points to 84.72 cents, nearer the session low after posting an intraday high of 86.31 cents.

Fundamental analysis: December cotton rebounded from last week’s heavy selling and is still set to notch the biggest monthly gain since January amid scorching temperatures in Texas which have elevated supply concerns. However, mixed outside markets, weakness in grain and soy complexes and headlines that China will sell over 10,000 MT of cotton reserves capped the natural fiber’s upside.

World Weather Inc. notes dry weather in Texas remains a concern for West Texas and the Blacklands where crop development is still well underway, while drying in southern Texas is good for defoliation and early harvesting. Meanwhile, recent hot and warm to hot weather in the U.S. Delta has likely been positive for the crop in the region and the southeastern U.S. continues to experience a good mix of rain and sunshine along with warm temps, supporting normal crop development. The forecaster states water supply in the far western U.S. continues to prove adequate to support cotton development, but excessive heat in recent weeks has been stressful for crops in the southwestern desert region.

USDA will release its weekly crop ratings following the close. Last week, the portion of the crop rated “good” to “excellent” stood at 46%, while the “poor” to “very poor” rating was 24%, which was a 4% increase on the week.

Technical analysis: December cotton futures reclaimed a portion of last week’s end-of-week losses but failed to hold a close above the 10-day moving average of 84.83 cents, which will serve as initial resistance. From there, bulls will need to gather momentum to turn above resistance at 85.25 cents, then 86.23 cents and 86.79 cents. Conversely, initial support will remain at 83.71 cents, then at the 20-day moving average of 82.95 cents, 82.17 cents, with solid support serving at the near convergence of the 100- and 40-day moving averages of 81.53 and 81.49 cents, respectively.  

What to do: Get current with advised sales.

Hedgers: You should be 100% priced on 2022-crop in the cash market. You should have 60% of expected 2023-crop production forward sold for harvest delivery.

Cash-only marketers: You should be 100% priced on 2022-crop. You should have 60% of expected 2023-crop production forward sold for harvest delivery.

 

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