Grain Market Insider: August 1, 2023
All prices as of 1:45 pm Central Time
| Corn | ||
| SEP ’23 | 497 | -7 |
| DEC ’23 | 507.25 | -5.75 |
| DEC ’24 | 515.25 | -2 |
| Soybeans | ||
| NOV ’23 | 1341.25 | 9.5 |
| JAN ’24 | 1349.75 | 9.25 |
| NOV ’24 | 1258 | 6.25 |
| Chicago Wheat | ||
| SEP ’23 | 652.25 | -13.5 |
| DEC ’23 | 678.25 | -13.5 |
| JUL ’24 | 718.5 | -8.75 |
| K.C. Wheat | ||
| SEP ’23 | 804.5 | -8.25 |
| DEC ’23 | 817.75 | -11.75 |
| JUL ’24 | 799 | -5.5 |
| Mpls Wheat | ||
| SEP ’23 | 854.75 | -1 |
| DEC ’23 | 869.5 | 0 |
| SEP ’24 | 822.75 | -1.25 |
| S&P 500 | ||
| SEP ’23 | 4602.75 | -11.75 |
| Crude Oil | ||
| OCT ’23 | 80.87 | -0.45 |
| Gold | ||
| OCT ’23 | 1962.6 | -26.7 |
Grain Market Highlights
- Carryover weakness from the wheat market and a cooler, wetter forecast kept the pressure on the corn market with follow through selling as traders extract more weather premium.
- Lower good/excellent crop ratings helped to incentivize the soybean market to consolidate from Monday’s sharply lower close in classic turnaround Tuesday fashion.
- Record soybean oil use for biofuel production reported for the month of May in Monday’s EIA report gave support to the oil leg of the soybean complex, while soybean meal also consolidated from Monday’s losses.
- Reports that Ukraine is discussing using Croatian ports to export grain likely pressured the wheat complex lower, while a 7% drop in spring wheat’s good/excellent crop condition ratings limited the losses for the Minneapolis contracts.
- The U.S. dollar continued its rally today as it tested the 50-day and 100-day moving averages for the first time since early July, likely adding some downward pressure to commodities.
- To see the current Monthly temperature and precipitation outlooks courtesy of the Climate Prediction Center, scroll down to the other Charts/Weather Section.
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Corn
Action Plan: Corn
Calls
2023
No Action
2024
No Action
2025
No Action
Cash
2023
No Action
2024
No Action
2025
No Action
Puts
2023
No Action
2024
No Action
2025
No Action
Corn Action Plan Summary
- No new action is recommended for Old Crop. The market had a nearly 140-cent swing from the May low to the June high and back on weather. Use any remaining bounces in the market to price what Old Crop bushels you may have, if any. We won’t have any “New Alerts” for 2022 Corn (Cash, Calls, or Puts) as we have moved focus onto 2023 and 2024 Crop Year Opportunities.
- No action is recommended for New Crop 2023 corn. The future price potential for Dec 23 corn continues to be at the mercy of each new weather forecast. Dryness and dry weather forecasts pushed Dec corn from the May low to the June high with a gain of 137 cents, which was promptly erased and then some by mid-July, leaving the market 149 cents off that June high, with a surprise jump in acres and more favorable forecasts. During the runup in early June, we warned that any change in the forecast to wetter weather could erase all the gains as corn didn’t have much of a bullish fundamental story without a supply side shock fueled by lower yields. Overall, our thought process has not changed from a month ago and with the tremendous uncertainty, and subsequent volatility still in front of us, we continue to recommend holding the Strangle options position, comprised of the previously bought Dec 610 calls and Dec 580 puts. A turn back to wetter weather and we wouldn’t be surprised to see sub-500 corn again, and if dry weather persists, we wouldn’t be surprised to see corn prices north of 700. Under either of these scenarios the Strangle will benefit and doesn’t require trying to outguess the weather.
- No Action is currently recommended for 2025 corn. 2025 markets are very illiquid right now, and it may be some time before conditions are conducive to consider making any recommendations. Be patient as we monitor the markets for signs of improvement.
Market Notes: Corn
- December corn futures closed the day lower, posting a new low for this most recent move as selling pressure in the wheat market and the prospects of improving August weather kept sellers active.
- Short term weather models are keeping temperature cool with mixed rain forecasts, which should help fill out the recently pollinated corn crop.
- USDA weekly crop rating saw a drop of 2% good/excellent to 55% good/excellent. Northern and western states saw the biggest impacts of the heat on crop conditions, while late in the week rainfall helped support central and eastern crops. Illinois has improved its crop ratings for five consecutive weeks.
- Crude oil is trading over $80.00 a barrel, and with lower corn prices, ethanol margins should be improved, which should help support the corn market.
- The corn market is weak technically, with psychological support likely at the $5.00 level, but if weather forecasts are realized, and the market lacks bullish news, a test of the July $4.81 low for December futures could be a possible target.
Above: Since mid-July, the market retraced about 62% of the prior down move, hit resistance around the 50-day moving average and turned lower. The market appears to be correcting from being overbought and broke through the 520 support level. Key support lies near the 474 low, and should the market turn back higher, heavy resistance lies near 555 – 565.
2023/24 Corn condition percent good-excellent (red) versus the 5-year average (green) and last year (pink).
Soybeans
Action Plan: Soybeans
Calls
2023
No Action
2024
No Action
2025
No Action
Cash
2023
No Action
2024
No Action
2025
No Action
Puts
2023
No Action
2024
No Action
2025
No Action
Soybeans Action Plan Summary
- No new action is being recommended for Old Crop. Any remaining old crop bushels should be getting priced into this rally. We won’t have any “New Alerts” for 2022 Soybeans (Cash, Calls, or Puts) as we have moved focus onto 2023 and 2024 Crop Year Opportunities.
- No action is recommended for 2023 soybeans. The USDA injected a lot of volatility into this market beginning with a much lower-than-expected planted acreage estimate, followed by a much larger-than-expected 300mb carryout estimate in its July WASDE. While demand has been weak, we have a bona fide weather market during a crucial period for soybeans and there is little wiggle room for lost yield in this year’s crop. While a drier forecast can still maintain upside potential, plenty of time remains for rain to come and push prices lower, much like in 2012, when July was dry. Then the pattern changed in August, and decent rain fell in parts of the western Corn Belt and IL, sending Nov ’12 soybeans down 20%. For now, Insider may not consider suggesting any additional sales until after harvest. Although, we will continue to monitor the market for any upside opportunities in the coming weeks.
- No Action is currently recommended for 2025 Soybeans. 2025 markets are very illiquid right now, and it may be some time before conditions are conducive to consider making any recommendations. Be patient as we monitor the markets for signs of improvement.
Market Notes: Soybeans
- Soybeans began the day lower on August forecasts showing wetter and cooler weather, but ultimately ended the day higher, thanks to gains made in both soybean meal and oil. Yesterday’s crop progress report may have added support.
- The Crop Progress reports showed soybean ratings declining more than the average guess with good to excellent ratings falling 2 points to 52%. 83% of the crop is blooming and 50% is setting pods. If forecasts hold up for August, soybean ratings could easily improve.
- Monday’s EIA report showed soybean oil use for biofuel production was a record 1.141 bil. lbs. in May, which was up 23% from April’s numbers and a 33% increase from May 2022. Year to date usage also increased 13% from year ago levels to 7.6 bil. lbs.
- There has been some export activity in soybeans, which has been supportive over the past few days, and another new crop sale was announced as sold to China on Monday of 4.9 mb. The one-week total of new soybean sales to China and unknown destinations is now 70.5 mb.
- Census crush will be released today, and the average trade guess is 175.5 mb for June, which would compare to 189.3 mb in May. Despite the slip, domestic demand has been stout, thanks to profitable crush margins.
Above: On 7/27 the market posted a bearish reversal, turning the market lower. Initial support below the market may come in around the 1350 – 1318 level and again near the May low of 1270-3/4. Above the market heavy resistance remains around 1490 – 1505.
2023/24 Soybeans percent planted (red) versus the 5-year average (green).
Wheat
Market Notes: Wheat
- While there have not been any major new headlines regarding the Black Sea conflict, Ukraine is said to be talking about using Croatian ports for exports of grain. There is still much uncertainty though, given last week’s Russian attacks on the river terminals.
- The Crop Progress report said winter wheat harvest is 80% complete. It also showed a 7% drop in spring wheat condition to 42% good to excellent, versus 70% at this time last year. This is likely why MPLS futures had more support today compared with Chi and KC.
- According to CONAB, as of July 22, 97.9% of Brazil’s wheat crop has been planted. Argentina is said to have 96.4% of their wheat crop planted as of July 26, according to Bolsa de Cereales.
- The weather bureau in Australia said that the El Nino weather pattern remains likely to bring hotter and drier weather. This could reduce rain in the eastern part of the country, threatening the wheat crop.
- Algeria finalized a tender for 700-800 metric tons of milling wheat for fall shipment. However, this is likely to be sourced from Russia as they continue to dominate the export market with cheap offers.
Action Plan: Chicago Wheat
Calls
2023
No Action
2024
No Action
2025
No Action
Cash
2023
No Action
2024
No Action
2025
No Action
Puts
2023
No Action
2024
No Action
2025
No Action
Chicago Wheat Action Plan Summary
- No new action is recommended for 2023 New Crop. The wheat market has seen a great amount of volatility in recent weeks and has primarily been a follower of corn, which has been driven by weather. Although demand remains weak, the closure of the Black Sea corridor, and the continued supply uncertainty, which that brings to the market, still leaves many supply questions unanswered. While Grain Market Insider will continue to monitor the downside for any violation of major support following the recent sales recommendation, it may be after harvest or near the end of summer before we consider recommending any additional sales for the 2023 crop.No action is currently recommended for 2024 Chicago wheat. Since the middle of June, price volatility has risen with updated USDA reports, changing weather forecasts, and current events in the Black Sea. While prices continue to be volatile, plenty of time remains to market the 2024 crop. War continues in the Black Sea region, major exporting countries’ stocks are at 11-year lows, and no one knows what the weather will bring, leaving the market vulnerable to many uncertainties. For now, after recommending making a sale for the 2024 crop, and while keeping an eye on the market to see if any major support is broken, Grain Market Insider would need to see prices north of 800 before considering recommending any additional sales.
- No Action is currently recommended for 2025 Chicago Wheat. 2025 markets are very illiquid right now, and it may be some time before conditions are conducive to consider making any recommendations. Be patient as we monitor the markets for signs of improvement.
Above: Since testing the June high on 7/25, the market has retreated and is poised to test support near the 620 – 610 area between the July and June lows respectively. Key support may be found below the 600 psychological support level near 573. Heavy resistance remains above the market around 777 – 808.
Action Plan: KC Wheat
Calls
2023
No Action
2024
No Action
2025
No Action
Cash
2023
No Action
2024
Active
Sell JUL ’24 Cash
2025
No Action
Puts
2023
No Action
2024
No Action
2025
No Action
KC Wheat Action Plan Summary
- We continue to look for better prices before making any 2023 sales. As harvest winds down and more becomes known about this year’s crop with some reports of better than expected yields, questions remain about the world wheat supply. War continues in the Black Sea region, Ukraine’s export capabilities remain uncertain, and dryness continues in key production areas of the world. With world supplies currently seen at 11 year lows, we continue to target 950 – 1000 in the July futures as a potential level to suggest the next round of New Crop sales.
- Grain Market Insider sees an active opportunity to sell a portion of your 2024 K.C. Wheat crop. Weather and supply concerns from the Black Sea have dominated the market, and recent news of rising tensions in the Black Sea region pushed the market higher. With little follow-through to the upside on talk that Ukrainian supplies should still be able to enter the world market, prices have retreated below the 817 support level. Closing below that 817 support signals that the uptrend from the recent July low may have ended, which poses the risk that a change in trend could erode prices further. First, prices could drop to the July low of 758-1/2. If support there doesn’t hold, there is a risk that prices could further erode to the 740 – 724 level near the April low. Although making a sale in a down market may be uncomfortable, it’s important at times to have a Plan B with the objective of trying to avoid having to sell bushels at even lower prices in the future if a downtrend takes hold. Insider recommends making a sale on a portion of your 2024 K.C. wheat production by using either JUL ’24 K.C. Wheat futures or a JUL ’24 HTA contract, so basis can be set at a later, more advantageous time.
- No Action is currently recommended for 2025 KC Wheat. 2025 markets are very illiquid right now, and it may be some time before conditions are conducive to consider making any recommendations. Be patient as we monitor the markets for signs of improvement.
Above: The September K.C. wheat contract posted a bearish reversal on 7/25 after testing heavy resistance near 920. Prices have become over bought and retreated. Support below the market is near 763 – 778. Should prices reverse higher, heavy resistance remains in the 920 – 930 area.
2023/24 Winter wheat percent harvested (red) versus the 5-year average (green) and last year (purple).
Action Plan: Mpls Wheat
Calls
2023
No Action
2024
No Action
2025
No Action
Cash
2023
No Action
2024
No Action
2025
No Action
Puts
2023
No Action
2024
No Action
2025
No Action
Mpls Wheat Action Plan Summary
- No action is currently recommended for the 2023 New Crop. Weather has been a dominant feature to price volatility this growing season with continued dryness concerns in not only the U.S., but also Canada and Australia. As we enter harvest season, there isn’t a strong likelihood of higher prices until after harvest, although both weather and geopolitical events can change suddenly to move prices higher. Insider will consider making sales suggestions if prices improve, while also continuing to watch the downside for any further violations of support.
- No action is currently recommended for the 2023 New Crop. Weather dominates the market right now, and though much of the growing season remains, Grain Market Insider suggested making a sale as prices closed below 822 to protect from further downside erosion due to a potential trend change. Seasonally, there isn’t a strong likelihood of higher prices until after harvest, although both weather and geopolitical events can change suddenly to shock the market higher. Insider will consider making sales suggestions if prices improve through this growing season, while also continuing to watch the downside for any further violations of support.
- No Action is currently recommended for the 2025 Minneapolis wheat crop. 2025 markets are very illiquid right now, and it may be some time before conditions are conducive to consider making any recommendations. Be patient as we monitor the markets for signs of improvement.
Above: September Mpls wheat’s rally of nearly 180 cents to test last winter’s highs culminated in a bearish reversal on 7/25 after the contract became mildly overbought. Prices have since retreated and are testing the 865 – 845 initial support area where both the 50-day and 100-day moving averages converge. Further support below the market may be near 800. If more bullish input is received, the market could turn higher again to retest the heavy resistance area near 950.
2023/24 Spring wheat condition percent good-excellent (red) versus the 5-year average (green) and last year (pink).
Other Charts / Weather
