Grain Market Insider: August 22, 2023
All prices as of 1:45 pm Central Time
| Corn | ||
| SEP ’23 | 466.5 | -2.75 |
| DEC ’23 | 479.5 | -3 |
| DEC ’24 | 502 | -5 |
| Soybeans | ||
| NOV ’23 | 1346 | -15.75 |
| JAN ’24 | 1356 | -15.5 |
| NOV ’24 | 1283.75 | -13 |
| Chicago Wheat | ||
| SEP ’23 | 601.75 | 2.5 |
| DEC ’23 | 627.5 | 2 |
| JUL ’24 | 673.5 | 0.5 |
| K.C. Wheat | ||
| SEP ’23 | 740 | -1 |
| DEC ’23 | 747.75 | -0.5 |
| JUL ’24 | 739.75 | -1 |
| Mpls Wheat | ||
| SEP ’23 | 773.5 | -8.75 |
| DEC ’23 | 791.75 | -7.25 |
| SEP ’24 | 807.5 | -3 |
| S&P 500 | ||
| SEP ’23 | 4399.5 | -13 |
| Crude Oil | ||
| OCT ’23 | 79.63 | -0.49 |
| Gold | ||
| OCT ’23 | 1907.9 | 2.8 |
Grain Market Highlights
- Following its firm open and higher trade overnight, and despite near record temperatures over the next few days, a risk off sentiment in the grain markets helped to press the corn market lower throughout the day, though near-term profit taking likely helped it close 5 cents off the low.
- A break in the hot conditions for later this week and a sharply lower soybean oil market weighed on soybeans and soybean meal today after both traded higher in the overnight session, and opened higher this morning.
- The break in both soybean oil and meal also weighed on Board Crush margins, which lost 9 cents/bu for December. Although margins lost ground today, they remain strong at just over $2/bu.
- Both Chicago and K.C. contracts consolidated in today’s session following a two sided trade, while Minneapolis likely uncovered harvest pressure. Additionally, reports that European funds might be used to finance insurance on vessels in the Black Sea carrying Ukrainian exports may have added resistance to the market.
- To see the current U.S. 8 – 14 Day Temperature Outlook, and the U.S. 7-day precipitation forecast courtesy of NOAA, Weather 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 action is recommended for the 2023 corn crop. This year’s growing season has been marked by dry conditions and changing weather forecasts, which have swung prices nearly 150 cents from high to low. Though dry conditions remain, with a great amount of variability in crop conditions from region to region, it may not be until after harvest before we know the full effect this growing season had on yields. Just as Insider recently recommended selling half of the previously recommended DEC 580 puts to lock in gains in case the market turns higher, Insider will continue to monitor market conditions and may consider recommending selling the remaining DEC 580 puts if conditions warrant it. While many unknowns could still shock the market higher, seasonality and current trends suggest we may not see a shift to higher prices until after harvest.
- No action is currently recommended for 2024 corn. In 2012, the best pricing opportunities for Dec 2013 corn were during the 2012 summer runup. Despite the significant yield losses to the 2012 crop, and the fear of running out of corn, the Dec 2013 contract peaked in the summer of 2012, and by Jan 2 of 2013, the price was already down about 12% from the high. We continue to watch the calendar for 2024 corn as this 2023 summer volatility could provide some additional opportunities to get some good early sales on the books in the event of a 2013 type repeat. Insider recently recommended making a sale on your 2024 crop, and we’ll be watching for another opportunity to suggest adding to prior early sales levels between now and the beginning of September.
- 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
- After establishing a new low on the September contract, corn futures used some end-of-session profit taking to work off session lows. Market trade overall saw a “risk-off” mentality across multiple markets, which helped pressure grain prices. Dec corn was still 3 cents lower on the day, challenging the low established on 8/16.
- Pro Farmer crop tour is finding variable, but moderately good, yields, which may be confirming the possible corn supply available this harvest. Yesterday, Pro Farmer forecasted corn yield in South Dakota at 157.42 bu/acre and Ohio at 183.94 bu/acre, both above last year’s levels. Results for Nebraska and Indiana will be released this evening.
- Weekly crop progress showed good to excellent at 58%, off 1% on the week, with 15% poor to very poor, up 2% with 78% in the dough vs. 77% on average, and 35% dented vs. 33% on average, and 4% mature same as average. The hot weather will push maturity in most areas, and any impacts won’t likely be reflected until later.
- Demand will stay the focus of the market. The USDA announce a flash sale of 240,000 MT of corn to Mexico, split evenly between the 2024-25 and the 2025-26 marketing years.
- September corn options expire on Friday, which could lead to an increase in volatility as prices have a tendency to move to large areas of open interest. As of this morning, 13,900+ puts were open on the Sept 450 strike price.
Above: After trading mostly sideways since the end of July, December corn posted a bearish reversal on 8/21 after testing the 495 – 516 resistance level. The reversal is a bearish development, likely needing bullish input to turn prices back higher. Should that happen, resistance above the market remains between 495 – 516. If not and prices turn lower, support may be found near 460 and again near 415.
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 action is recommended for 2023 soybeans. This season the market has experienced a lot of volatility, not only from USDA reports but also from the changing weather forecasts, crop conditions, and export sales. We ended the month of July experiencing hot conditions with little rainfall and weak export sales. Since then, conditions have become more favorable, and export sales have picked up. While much of the crop remains in drought conditions, which can maintain upside potential, timely rains may come and push prices lower. Much like in 2012, when July was dry, and the pattern changed in August, when 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 recommended for 2024 crop. Grain Market Insider continues to monitor any developments for the 2024 crop, though it may not be until after harvest or toward year’s end before we will consider recommending any 2024 crop sales.
- 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 and were mainly dragged lower by a sharp selloff in soybean oil, which lost over 3% in the December contract. Soybean meal ended lower as well, as the hot and dry forecast is slated to end after Thursday of this week.
- It was a risk-off day for nearly all commodities today, with the stock market lower and the US dollar higher. This morning, more bank credit downgrades were reported with S&P Global Ratings downgrading several banks after Moody’s Investors Service downgraded 10 US lenders just two weeks ago.
- Crop progress was released yesterday, and the ratings were interesting given the hot and dry conditions. The good to excellent rating stayed the same at 59% when analysts were expecting a slight decline.
- The Pro Farmer tour in South Dakota found an average of 1,013 pods within 3 square foot averages, which is only slightly below the 3-year average. In Ohio, the counts came in at 1,049 pods.
- September soybeans on the Dalian exchange hit a new 2023 high today and are trading at the equivalent of $19.82 a bushel. This could explain the recent string of purchases from the US.
Above: Since the end of April, the soybean market has been trading sideways. If nearby soybeans can break out of the range to the upside, resistance can be found near 1400 and again around 1450. If prices break to the downside, support below the market may be found between 1318 – 1300.
2023/24 Soybeans condition percent good-excellent (red) versus the 5-year average (green) and last year (pink).
Wheat
Market Notes: Wheat
- After a two sided trade, Chi wheat managed to eke out a positive close for the day, despite media outlets reporting that European public funds may be used to insure Black Sea vessels out of Ukraine. Despite the danger, this may mean more exports traveling along the coasts of Romania and Bulgaria.
- Spring wheat harvest has advanced to 39% complete, but this is behind the 46% average. Interestingly, the decline of 4% in good to excellent condition to 38%, did not create much buying interest from traders today in the HRS contracts.
- SovEcon increased their projection for the 2023 Russian wheat harvest from 87.1 to 92.1 mmt. This is adding to pressure in futures prices, as Russia continues to dominate the world export market.
- Northern Europe has had a significant amount of precipitation that has slowed harvest of winter crops, including wheat and rapeseed. The moisture has also caused concern about quality, as it has created optimal conditions for fungal growth.
- According to the India Meteorological Department, their monsoon rainfall is 7% below the norm, as of August 21, and supports recent talks that they are looking to import wheat from Russia due to a lack of supply.
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 crop. Since the end of May, the wheat market has been largely rangebound, influenced by weak demand, changing headlines from the Black Sea region, and the corn market with its own demand and weather concerns. With harvest in the rearview mirror, U.S. production has been better than expected and demand remains weak. Still, many supply questions remain unanswered from the Black Sea region, which could push prices in either direction. While Insider will continue to monitor the downside for any breach of major support, we would need to see prices pushed toward the 660 level before considering any additional sales.
- 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, the world stock to use ratio is the lowest in 8 years, 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: The Chicago wheat market shows signs of additional short positions entering the market with open interest rising as prices decline. Additionally, the market is showing signs of being oversold, which could be supportive if bullish news enters the market and prices turn higher. Key support remains below the market around 573, with resistance above the market between 658 – 684.
Action Plan: KC 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
Active
Enter(Buy) JUL ’24 KC 660 Puts ~ 30c
2025
No Action
KC Wheat Action Plan Summary
- We continue to look for better prices before making any 2023 sales. As 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 a world stock to use ratio at its lowest level in 8 years, we continue to target 950 – 1000 in the July futures as a potential level to suggest the next round of New Crop sales. At the same time, we continue to watch the bottom end of the range that prices have traded in since late 2022. A close below the bottom end would reduce the probability of getting to 950 – 1000 and would increase the risk of prices falling into the 600 – 650 range.
- Grain Market Insider sees an active opportunity to buy July ’24 660 K.C. wheat puts on a portion of your 2024 HRW wheat crop for approximately 30 cents plus commission and fees. While weather has been a dominant feature of the market this year with dry growing conditions and harvest delays, slow export demand and cheap Russian exports remain major headwinds to prices. The market has turned lower in recent weeks and July K.C. Wheat has traded through a major support area around 738. Trading below 738 support signals that the major trend may be turning down and poses the risk that prices could erode further in the weeks ahead, possibly to the next level of support, the September ’21 low of 678. If the 678 level were to fail, next support could be the 560 – 573 level. Buying July ’24 660 K.C. Wheat puts on a portion of your HRW wheat production should help protect future sales from further downside erosion, while still allowing for upside appreciation should the market turn higher.
- 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 K.C. wheat market continues its sideways trend between 733 – 780, with the low end of the range acting as initial support, while the upper end of the range acts as initial resistance. If prices break out to the upside, psychological resistance sits around the 800 area. While below the market, the next area of major support is near the September ’21 low of 670.
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
Active
Enter(Buy) JUL ’24 KC 660 Puts ~ 30c
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. While there typically isn’t a strong likelihood of higher prices until after harvest is complete, 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.
- Grain Market Insider sees an active opportunity to buy July ‘24 660 K.C. wheat puts on a portion of your 2024 Spring wheat crop for approximately 30 cents plus commission and fees. While weather has been a dominant feature of the market this year with a wet spring, late planting, and growing conditions that have been less than ideal, slow export demand and cheap Russian exports remain major headwinds to prices. The market has turned lower in recent weeks and July K.C. Wheat has traded through a major support area around 738. Trading below 738 support signals that the major trend may be turning down and poses the risk that prices could erode further in the weeks ahead, possibly to the next level of support, the September ’21 low of 678. If the 678 level were to fail, next support could be the 560 – 573 level. The K.C. wheat market is highly correlated to the Minneapolis wheat market and much more liquid, which makes it a better choice when employing options strategies for Spring Wheat. Buying July ’24 660 K.C. Wheat puts on a portion of your spring wheat production should help protect future sales from further downside erosion, while still allowing for upside appreciation should the market turn higher.
- 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: Since 7/25, the market has been in a down trend and is oversold. Currently, key support below the market lies near the May low of 769, with the next support level near the June ’21 low of 730. Above the market, nearby resistance could be found near 820 – 837.
2023/24 Spring wheat percent harvested (red) versus the 5-year average (green) and last year (purple).
Other Charts / Weather
