Crops Analysis | September 5, 2023
Price action: December corn rose 4 1/2 cents to $4.86, ending the session above the 10-day moving average.
Fundamental analysis: Today’s trade found corn futures getting caught in the crossfire of strong crude oil gains and notable strength in the U.S. dollar. An extension of Saudi Arabia and Russia’s voluntary production cuts to the end of the year spurred a rally in crude, while forecasts of lingering U.S. inflation underpinned dollar strength.
Meanwhile, traders continue to anxiously await harvest reports as hot, dry weather across the Midwest pushes the crop to maturity. Following a heat wave over the long holiday weekend, World Weather Inc. notes the heart of the Midwest will not likely receive much rain through the weekend and the precip that occurs next week is expected to be brief and light, leaving most of the central Midwest in need of additional rain. However, the prolonged period of dry weather should see harvest efforts gain in earnest in areas across the Midwest.
A Bloomberg poll suggests analysts expect a three-percentage point drop in USDA’s “good” to “excellent” rating to 53%. If realized the rating would be one point behind last year’s rating for the same period.
USDA reported weekly export inspections of 481,309 MT (18.9 million bu.) which fell 118,601 MT from the previous week and were near the low-end of the pre-report range of 400,000 to 850,000 MT.
Technical analysis: December corn futures were able to secure a high range close above the 10-day moving average of $4.85 1/2 but fell short of the of the 20-day moving average of $4.86 3/4, which will continue to serve up resistance for bulls. However, a close above the area will find bulls then targeting resistance at $4.89 1/4, then $4.93, with psychological resistance serving at $5.00. A close above these areas will likely find bulls attempting to test the 40- and 100-day moving averages of $5.04 1/4 and $5.23 3/4, respectively. Conversely, initial support continues to serve at $4.77 1/2, then $4.73 1/2, where a close below would ignite selling efforts towards $4.50.
What to do: Get current with advised sales.
Hedgers: You should be 100% sold in the cash market on 2022-crop. You should be 50% forward priced for harvest delivery on expected 2023-crop.
Cash-only marketers: You should be 100% sold on 2022-crop. You should be 35% forward priced for harvest delivery on expected 2023-crop production.
Price action: November soybeans fell 4 1/4 cents to $13.65. December soybean meal fell $2.00 and settled at $397.60. December soyoil fell 48 points before closing at 62.81 cents.
Fundamental analysis: Soybean futures continue to fall under bearish seasonal pressure despite analysts’ view of a degrading crop. The USDA is set to release the weekly Crop Progress report after the close today. Traders expect soybean conditions to fall 2 points to 56% “good” to “excellent,” according to a Bloomberg poll. Last week’s crop progress report showed the crop handling the prior week’s heat well, falling only one point. Analysts were more conservative with estimates following last week’s miss.
Most of the Corn Belt remained hot and dry over the past week. Portions of the Midwest and northern Plains are expected to receive precip today, though much of the Midwest will not see rain through next week. World Weather Inc. notes this will leave most of the central Midwest in need of more rain and will likely continue to cause early crop maturation and potentially limit seed weights. Conditions did not warrant crop consultant Dr. Michael Cordonnier to lower his soybean expectations though, who expects soybeans to yield 50 bushels per acres and expects production at 4.13 billion bu. Cordonnier also anticipates acres to increase in South America, in which many countries have started to plant over the past week.
USDA reported export inspections of 378,595 MT (13.9 million bu.), which rose 52,529 MT from the previous week and were near the top-end of the pre-report range of 200,000 to 405,000 MT. Inspections ramped up after running far below average throughout May and June. Inspections data points to a beat of the current USDA estimate, tightening the old-crop balance sheet. New crop demand has picked up, evidenced by today’s daily sales report of 251,000 MT to unknown destinations, which marked the seventh straight market day in a row of a daily sales report, tough outstanding sales for new crop remain well below average.
Technical analysis: November soybeans continued last week’s weakness despite some midsession spillover strength. An uptrend remains on the daily bar chart, though recent weakness Price was largely supported by the 20-day moving average at $13.61 1/4, which will be key going into tomorrow’s session. Additional support comes in at $13.50, quickly backed by $13.48 1/2. Bulls are seeking a daily close above $13.70 before tackling $13.81 resistance.
December soybean meal has turned lower after late August strength, negating the bull’s technical advantage. Meal saw its sixth straight day of losses, though price was supported today by 200-day moving average support at $396.1. Further selling would encounter support at $389. Meal has traded in a largely sideways pattern since mid-June, though price has remained volatile. Bulls are looking to overcome initial resistance at $400 before targeting $407.7.
December soyoil saw losses today despite a surging crude oil market. Price has been pinned between 20-day moving average support and the downward trendline from July and August highs as price continues to tighten. Price can remain in this tight range for another two weeks before the pattern collapses, though a move either way is likely before that point. A daily close above 64-cent resistance or below 62-cent support will likely determine the forthcoming move.
What to do: Get current with advised sales.
Hedgers: You should be 100% 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 100% sold on 2022-crop. You should be 40% forward sold for harvest delivery on expected 2023-crop production.
Price action: December SRW wheat rose 3 3/4 cents at $5.99 1/4, near mid-range after notching a contract low. December HRW wheat gained 1 3/4 cents to $7.24 1/2. Prices closed near mid-range and hit a two-year low. December spring wheat futures rose 2 1/2 cents to $7.62 1/4.
Fundamental analysis: Winter wheat futures saw some tepid short covering as prices languished at lower levels. A higher U.S. dollar index that scored a six-month high today was a bearish outside market element for the wheat markets today, but strong gains in crude oil prices to a 10-month high offset the stronger greenback.
Wheat traders seemingly ignored reports Russian President Vladimir Putin said the Black Sea grain deal will not be reinstated until the West fulfills its commitments to facilitate Russian agricultural exports. However, Turkish President Recep Tayyip Erdogan said he thinks the deal could be revived “in short time.” However, Erdogan said Ukraine needs to “especially soften its approaches” the shipping deal to resume.
USDA this morning reported U.S. wheat export inspections of 299,862 MT, which were down 90,772 MT from the previous week, but within market expectations.
World Weather Inc. today said that in the northern Plains a weather disturbance promoting rain today in the central Dakotas “will be beneficial for increasing soil moisture. Another disturbance is expected to move by Friday through Saturday with additional shower activity. This additional rain is unlikely to cause any notable harvesting delays.”
This afternoon’s weekly USDA crop progress reports are expected to show U.S. spring wheat harvested at 70% complete versus 54% last week and 71% a year ago at this time. U.S. winter wheat planted is seen at 4% compared to 3% last year at this time.
Technical analysis: Winter wheat futures bears have the solid overall near-term technical advantage. Prices are in steep five-week-old downtrends on the daily bar charts. SRW bulls' next upside price objective is closing December prices above solid chart resistance at $6.60. The bears' next downside objective is closing prices below solid technical support at $5.50. First resistance is seen at $6.15 3/4 and then at last week’s high of $6.28 1/2. First support is seen at today’s contract low of $5.92 1/4 and then at $5.80. The HRW bulls' next upside price objective is closing December prices above solid technical resistance at $7.80. The bears' next downside objective is closing prices below solid technical support at $7.00. First resistance is seen at Friday’s high of $7.46 3/4 and then at $7.60. First support is seen at today’s low of $7.13 3/4 and then at $7.00.
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 fell 119 points to 88.76 cents after marking an intraday low of 87.17 cents.
Fundamental analysis: December cotton futures retreated lower on profit-taking following last week’s strong close to a 13-month high. The downside move came despite strong gains in crude oil futures, while a strength in the U.S. dollar pressured the natural fiber. Weakness across equities also pressured prices following weak service data from China and Europe.
World Weather Inc. notes Texas weather will be hot and dry again this week which may place another nail in the coffin of dryland production this year. The forecaster states irrigated crops are not performing as well as they should due to warm to hot temps, but the crop may “eek” out a fair yield in some areas. Production in the Blacklands and Coastal Bend is notably below average as well. Dry weather will persist through much of the next two weeks and mostly light showers that occur on occasion should not have much of an impact on the crop or soil conditions, though where cotton is mature, harvesting should advance well.
Technical analysis: December cotton futures were able to turn from an early test of support at 88.33 cents and the 10-day moving average of 87.19 cents. However, an additional test of the levels will find bears working towards the 20-day moving average of 86.18 cents and the 40-day moving average of 85.15 cents. Conversely, an extension of last week’s gains will find initial resistance at Friday’s high of 90.00 cents, again at 90.78 cents, then 91.62 and 93.23 cents.
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.
