Crops Analysis | September 13, 2023
Price action: December corn rose 5 3/4 cents to $4.82 1/4, ending near the session high.
Fundamental analysis: Corn futures received spillover strength from SRW wheat futures, in addition to short-covering following a run at the Aug. 16 low in the wake of USDA’s release of September crop data on Tuesday.
USDA Secretary Tom Vilsack lent a bit of optimism to the corn market on Tuesday in a meeting with ethanol producers, in which he urged those in the industry to focus on reducing greenhouse gas emissions and seizing opportunities in the growing market for low-polluting jet fuel. Vilsack noted that this is a “make or break” moment as the future of ethanol is closely tied to sustainable Aviation Fuel (SAF), with a potential 36-billion-gallon industry on the horizon. The U.S. Treasury Department is working on guidance that will influence the industry and determine which fuels qualify for expanded tax incentives.
Meanwhile, headlines that Ukraine struck Russian naval targets and port infrastructure earlier today in the Crimean city of Sevastopol helped support the grain complex, as it was reportedly the biggest attack of the war on the home of the Russian navy’s Black Sea fleet.
Weekly ethanol production in week ended Sept. 8 averaged 1.039 million barrels per day (bpd), which rose 27,000 barrels per day from the previous week and were 7.9% above the same week last year. Ethanol stocks dropped 450,000 barrels to 21.171 million barrels, the lowest level since the week ended Dec. 24, 20221.
USDA will release its weekly export sales data prior to Thursday morning’s open. Traders are expecting sales to range from 500,000 MT to 1.10 MMT. For the week prior, net sales totaled 949,747 MT, which were near the top-end of the pre-report estimate for the week.
Technical analysis: December corn continues to be limited by the 10- and 20-day moving averages of $4.82 1/2 and $4.84 3/4. A push through the area will then see additional resistance at $4.92 1/4, again at $4.97 1/2, with bulls needing a close above the 40-day moving average of $5.00 3/4 to make a run toward the 100-day moving average of $5.19. Conversely, initial support continues to lie at the recent double bottom low of $$4.73 1/2. A turn below the level will likely see increased selling towards $4.50, with support layered in at $4.65 1/2 and $4.57 3/4.
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 rose 3 1/4 cents to $13.49 3/4 and near the session high. Prices hit a three-week low early on. December soybean meal fell $3.30 to $394.80 and hit a three-week low. December bean oil closed up 165 points at 61.72 cents.
Fundamental analysis: Some corrective buying slightly supported the soybean futures market today, after Tuesday’s losses. However, the weakening technical posture, looming soybean harvest and the resulting commercial hedge pressure have the soy complex bulls timid at present. The U.S. dollar index is near a six-month high, which is also a bearish “outside market” element for the soybean, meal and bean oil markets. Especially worrisome for the soybean bulls is the selling pressure seen in soybean meal futures lately.
World Weather Inc. today said Midwest weather “will continue mostly good” for late-season soybean development and maturation. Rainfall will be restricted, but not absent, which will be good for some of the late-season crops. “However, dryness in many areas in recent weeks and that which is still expected to continue through the weekend will pressure yields a little lower in late-season soybeans,” said the forecaster.
Weekly USDA export sales data is out Thursday morning, with U.S. soybean sales expected to come in at 600,000 to 1.45 million MT in the 2023-24 marketing year.
Technical analysis: The soybean futures bulls have the slight overall near-term technical advantage but are fading as prices are starting to trend lower. The next near-term upside technical objective for the soybean bulls is closing November prices above solid resistance at the August high of $14.09 1/2. The next downside price objective for the bears is closing prices below solid technical support at $13.00. First resistance is seen at this week’s high of $13.73 1/4 and then at $13.85. First support is seen at today’s low of $13.33 3/4 and then at $13.25.
The soybean meal bulls and bears are on a level overall near-term technical playing field, but the bears have momentum as prices are starting to trend down. The next upside price objective for the meal bulls is to produce a close in December futures above solid technical resistance at the August high of $421.00. The next downside price objective for the bears is closing prices below solid technical support at the August low of $379.00. First resistance comes in at today’s high of $398.20 and then at $400.00. First support is seen at today’s low of $391.20 and then at $387.00.
Soybean oil futures bulls have the overall near-term technical advantage but have faded recently. A 2.5-month-old uptrend on the daily bar chart has been negated. Prices are starting to trend down. Also, a bearish double-top reversal pattern has formed on the daily chart. The next upside price objective for the bean oil bulls is closing September prices above solid technical resistance at 64.00 cents. Bean oil bears' next downside technical price objective is closing prices below solid technical support at the August low of 57.86 cents. First resistance is seen at today’s high of 61.82 cents and then at 62.52 cents. First support is seen at 60.00 cents and then at this week’s low of 59.06 cents.
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 futures rose 9 3/4 cents before settling at $5.97 1/4, nearer the session high. December HRW futures rose 14 cents before closing at $7.44 3/4, near the session high. December HRS rose 8 1/2 cents to $7.87 1/2.
Fundamental analysis: Wheat futures saw corrective buying again today following Tuesday’s contract low, though lack of follow-through buying points to likely sustained weakness. News surrounding the Black Sea continues to lead to supply chain concerns as Ukraine’s grain shipments through the first half of September are nearly half of year-ago. Russia’s attacks on over 100 port infrastructure facilities have certainly led to some of the decline. This bullish news is counteracted with Hungary, Poland, Romania, Slovakia and Bulgaria vowing to ban Ukrainian grain imports if the E.U. does not extend the current ban, expiring Sept. 15. The nations are seeking to protect producers’ margins in their own respective countries, which have been lowered by cheap Ukrainian grain. While supplies have been seemingly ample so far this year, stocks are expected to tighten over the course of the marketing year as production concerns arise due to the lack of rainfall caused by El Niño.
Badly needed and welcomed rainfall has fell across U.S. HRW acres over the past few days, improving planting moisture, World Weather Inc says. Additional rain is expected over the coming week, further improving conditions for emergence and establishment. Price action has recently been unsupportive for winter wheat plantings, but as weather has been largely favorable the past few weeks, it draws into question if acres will fall as much anticipated.
The USDA is set to release the weekly export sales report Thursday morning, where traders expect net sales between 250,000 and 600,000 MT. Last week’s report showed sales of 370,341 MT. Export sales continue to pace well below the ten-year average and outstanding sales are at the lowest level since 2006/07 for this date.
Technical analysis: December SRW futures continue to struggle garnering momentum above 10-day moving average resistance, which currently stands at $5.99 1/4. Price has not closed above the 10-day moving average since July. Additional resistance comes in at $6.09, then $6.15. Support comes in at $5.84, backed by Tuesday’s contract low at $5.70.
December HRW futures have formed a solid base over the last couple weeks, but still struggle to break above 20-day moving average resistance at $7.46 1/4. A daily close above this level would target $7.65 and indicate a potential interim low. Additional selling pressure would find support at $7.25, backed by Tuesday’s contract low of $7.09.
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 141 points to 86.89 cents and nearer the session low.
Fundamental analysis: The cotton futures market today saw a routine corrective and profit-taking pullback from this week’s solid gains. The bulls are still strong and don’t be surprised to see more upside price action this week, following the bullish monthly USDA report on Tuesday. The agency cut the U.S. cotton crop estimate by 860,000 bales from last month’s number, which was more than double the decline from market expectations.
World Weather Inc. today reported Texas rainfall over the next few days will be welcome in easing long-term dryness, “but it comes too late for a serious change in production for 2023.” U.S. Delta crop conditions remain mostly good as are those in the southeastern states and far western states, said the forecaster.
Weekly USDA export sales data is out Thursday morning and will be closely scrutinized by cotton traders.
Technical analysis: The cotton futures bulls still have the solid near-term technical advantage. An uptrend is still firmly in place on the daily bar chart. The next upside price objective for the cotton bulls is to produce a close in December futures above technical resistance at the September high of 90.00 cents. The next downside price objective for the cotton bears is to close prices below solid technical support at the August low of 83.25 cents. First resistance is seen at this week’s high of 88.61 cents and then at 90.00 cents. First support is seen at 86.00 cents and then at 85.00 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.
