Grain Market Insider: August 2, 2023
All prices as of 1:45 pm Central Time
| Corn | ||
| SEP ’23 | 488.25 | -8.75 |
| DEC ’23 | 500.5 | -6.75 |
| DEC ’24 | 513.25 | -2 |
| Soybeans | ||
| NOV ’23 | 1321.25 | -20 |
| JAN ’24 | 1330 | -19.75 |
| NOV ’24 | 1249.25 | -8.75 |
| Chicago Wheat | ||
| SEP ’23 | 640 | -12.25 |
| DEC ’23 | 667.25 | -11 |
| JUL ’24 | 709.25 | -9.25 |
| K.C. Wheat | ||
| SEP ’23 | 787 | -17.5 |
| DEC ’23 | 801 | -16.75 |
| JUL ’24 | 786.75 | -12.25 |
| Mpls Wheat | ||
| SEP ’23 | 849 | -5.75 |
| DEC ’23 | 862.25 | -7.25 |
| SEP ’24 | 816.75 | -6 |
| S&P 500 | ||
| SEP ’23 | 4539 | -62.25 |
| Crude Oil | ||
| OCT ’23 | 79.23 | -1.69 |
| Gold | ||
| OCT ’23 | 1952.6 | -6.6 |
Grain Market Highlights
- Reports of additional Russian drone attacks on Ukrainian Danube River grain terminals spiked the markets higher in the overnight session, but the news was shrugged off since the terminals remain functional.
- After trading higher in the overnight session, favorable weather forecasts and continued demand concerns dominated the trade to reverse the corn market and close in negative territory for the 7th consecutive day.
- A friendly weather forecast for the next 10 days weighed on prices and led soybeans to post losses in excess of 100 cents over the last week.
- Despite the closure of the Black Sea corridor and Russian attacks on Danube River terminals, the fact that other nations are working with Ukraine to increase their export capacity via land routes continues to weigh on the three wheat markets.
- The Fitch credit rating agency lowered the U.S.’ credit rating to AA+ from AAA due to growing debt and the possibility of a slowing economy. The surprise move led to a “risk-off” mood possibly adding downward pressure to the grain markets.
- To see the current Monthly Drought Outlook and the 6 – 10-day Precipitation and Temperature 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
- Even with a surge in overnight prices after the most recent attack by Russia on Ukraine export infrastructure, corn futures failed to hold gains, reversing to close lower on the session as weather forecasts and demand concerns drive the market sentiment.
- December corn futures had a 26 cent trading range on the session, closing just above the psychological $5.00 level, but at the bottom of the trading range. The weak technical picture will likely keep selling pressure in the market in the near term.
- The weather forecasts are non-threatening as August weather is expected to stay cooler than normal with average to above average rainfall. This forecast will help fill the recently pollinated corn crop.
- Demand will be the focus on Thursday morning with the release of USDA’s weekly export sales report. Expectations are for corn sales to range from 150,000MT-500,000 MT for old crop, and 200,000-700,000 MT for new crop for last week.no Export demand is still well behind last year’s levels at this time.
- Outside markets added to selling pressure as the credit rating agency, Fitch, lowered the U.S. credit rating from AAA to AA+, sending a “risk-off” trade across equity and commodity markets on Wednesday.
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.
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 ended the day lower after trading slightly higher overnight, while soybean meal ended lower and soybean oil was bull spread, with front months higher and deferred contracts lower despite a sharp decline in crude oil.
- Soybeans have lost over $1.10 in the past 7 days as weather shifted from hot and dry to a forecast of cool and wet, with temperatures expected to be in the low 80’s and above normal rains for the entire Corn Belt and northwestern Plains.
- Due to the upcoming El Nino pattern, northern Brazil may experience drier than normal conditions next year, which could impact their total production and support prices, but the same pattern may show Argentina receiving more rains.
- The current USDA yield estimate for the soy crop is 52.0 bpa, and while that number seemed far away a few weeks ago, it may be achievable if these August forecasts hold up. Illinois, Minnesota, North Dakota, and Michigan all had some of the worst good to excellent ratings last week, but all four states are forecast to get higher than normal rains over the next two weeks.
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.
Wheat
Market Notes: Wheat
- Wheat was higher overnight after a new round of Russian attacks hit Danube River terminals in Ukraine. However, this was not enough to sustain a rally; all three US wheat futures classes closed lower in tandem with Paris milling wheat.
- Slovakia is planning to increase the capacity of railway transport for Ukrainian grain. Funding was reportedly approved for two projects to increase the amount that can be transported through these lanes.
- The US credit rating was lowered from AAA to AA+ due to large amounts of debt and the possibility of a slowing economy. This put pressure on the financial markets today, some of which may have spilled over into commodities. Additionally, the US Dollar Index continues to trend higher, likely limiting the upside in wheat.
- Egypt’s wheat tender resulted in a purchase of 300,000 mt from Russia and 60,000 mt from Romania. Russia continues to dominate exports – another negative factor affecting the market. In addition to Egypt, recent tenders by Algeria and Tunisia have also been fulfilled by Russia.
- Kazakhstan’s grain union is estimating their wheat crop at 14.5 mmt, which would allow for exports of about 8.5-9.0 mmt in 23/24.
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. Below the 600 psychological support level, key support may be found 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. Since then prices have retreated, with support below the market near 763 – 778. Should prices reverse higher, heavy resistance remains in the 920 – 930 area.
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.
Other Charts / Weather
