Grain Market Insider: August 4, 2023
All prices as of 1:45 pm Central Time
| Corn | ||
| SEP ’23 | 484.25 | 3.5 |
| DEC ’23 | 497.25 | 3.75 |
| DEC ’24 | 513 | 3 |
| Soybeans | ||
| NOV ’23 | 1333.25 | 8 |
| JAN ’24 | 1342.75 | 8.5 |
| NOV ’24 | 1264.5 | 10.25 |
| Chicago Wheat | ||
| SEP ’23 | 633 | 6 |
| DEC ’23 | 660.25 | 5.25 |
| JUL ’24 | 706.75 | 2.25 |
| K.C. Wheat | ||
| SEP ’23 | 752.5 | -15 |
| DEC ’23 | 769.25 | -12.75 |
| JUL ’24 | 766.5 | -9 |
| Mpls Wheat | ||
| SEP ’23 | 822.25 | -11.25 |
| DEC ’23 | 837.75 | -9.75 |
| SEP ’24 | 815 | 4.25 |
| S&P 500 | ||
| SEP ’23 | 4510.25 | -11.5 |
| Crude Oil | ||
| OCT ’23 | 82.16 | 1.08 |
| Gold | ||
| OCT ’23 | 1956.1 | 6.7 |
Grain Market Highlights
- A Ukrainian drone attack on a Russian port spiked the grain markets higher overnight, and concern over the escalation in tensions gave the corn market strength to close higher on the day breaking its 8-day run of lower closes.
- Following Monday’s selloff, export sales picked up offering support to the soybean complex, which continued to consolidate today and closed mixed, with soybeans and soybean oil on the positive side of unchanged, while meal was lower on the day.
- The wheat markets also rallied initially following the reports of the Ukrainian drone attack, and while the K.C. and Minneapolis contracts closed lower, it’s likely that the attack triggered some short covering in the Chicago contracts to keep prices firm into the close.
- To see the current U.S. 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
Active
Exit Half DEC ’23 580 Puts ~ 87c
2024
No Action
2025
No Action
Corn Action Plan Summary
- For the 2023 corn crop, Grain Market Insider sees an active opportunity to sell half of the previously recommended DEC ‘23 580 puts. At the end of June, Insider recommended buying DEC ’23 580 puts for approximately 30 cents in premium, plus fees and commission. At the time, the US Drought Monitor was showing dryness across the Midwest and weather forecasts were calling for hot and dry conditions. Since then, forecasts have turned more favorable and DEC ’23 corn has dropped over 100 cents, with the recommended 580 puts gaining nearly 200% in value. The growing season isn’t over yet, and the Drought Monitor still shows dry conditions. Following the recent market drop and pick up in export sales, any further yield loss could rally prices. Insider recommends selling half of the previously recommended DEC ’23 580 puts to lock in gains in case prices rally back and holding the remainder, which will continue to protect any unsold bushels if prices erode further going into harvest.
- 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
- Corn futures held onto some of the overnight gains, breaking the streak of eight consecutive negative trading sessions. Despite the small gains on Friday, corn futures finished the week down 33 cents for the December futures.
- Corn futures saw some buying strength on the overnight session as Ukraine military triggered a drone attack against a military vessel in the Russian port of Novorossiysk. This caused the port to be closed for a short time, triggering buying strength in wheat and corn markets.
- Overall, weather forecasts are still non-threatening for the corn market. Weather models are forecasting the next 10 days to be cooler and wetter than normal for many areas of the Corn Belt.
- The on-going Brazilian corn harvest will keep fresh supplies of corn on the export market. This week, analysts raised production expectations for the Brazil crop, which will have a large impact on potential U.S. export corn business.
- The technical picture and price action remains weak in the corn market, as the path of least resistance is lower with December corn, failing to push back above the $5.00 level on Friday. The July $4.81 low in the December contract looks to be the next downside 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 is approaching oversold status on the stochastic indicator with key support near the 474 low. If the market receives more bullish input and turns 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 higher, but backed off the highs made in the overnight after Ukraine attacked a Russian warship near a Black Sea port. The attack did little damage, but shut the port down for a few hours and it was the first attack by Ukraine on a Russian port.
- Soybean meal ended the day lower, while soybean oil caught support from higher crude oil and a jump in Malaysian palm oil. Palm oil futures have fallen for eight days on expectations of record production and huge stocks, but Malaysia is beginning to export that palm oil.
- Brazil’s 23/24 soybean crop is now being estimated at a whopping 165.9 mmt compared to 157.3 mmt the previous year.
- Yesterday, the USDA reported a new sale of 4.9 mb of US soybeans to China, and export sales for last week were an impressive 97 mb of new crop beans, with primary destinations to China and unknown destinations.
Above: On 7/27/23, the market posted a bearish reversal, turning the market lower. Since then, September soybeans have consolidated and found support just above 1360 with further support near the June low around 1350. If prices break out to the upside, heavy resistance remains in the 1490 – 1505 area. If not, and prices trade through 1350, additional support could be found near 1318.
Wheat
Market Notes: Wheat
- Wheat was higher overnight after reports of a Ukrainian drone strike on military vessel in a Russian port. Most of these gains were given up by the close, but did allow Chicago wheat to stop the recent bleeding, with a close in positive territory today. The Minneapolis and Kansas City contracts did not fare as well though, ending with double digit losses.
- Putin has apparently said that he is willing to re-open the Black Sea grain export deal. The catch is that it would require sanctions to be eliminated and Russia let back into the SWIFT banking program.
- According to the Foreign Agricultural Service, the EU’s total grain harvest estimate has been reduced to 270.9 mmt, from its previous estimate of 281.3 mmt. Weather extremes have been cited as the main issue affecting production. Wheat production in particular is expected to be 134.6 mmt versus 138 mmt previously.
- Recent heavy rains in China’s grain growing regions have caused flooding issues that may damage crops and have already displaced thousands of people.
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
No Action
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.
- No action is currently recommended for the 2024 crop. Demand and supply concerns out of the Black Sea continue to dominate the market right now, and Insider suggested making a sale as prices closed below 817 to protect from further downside erosion due to a potential change in trend with cheap supplies continuing to flow from Russia and Ukraine hampering U.S. export demand. 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, Grain Market Insider would need to see prices north of 850 before considering recommending any additional sales, while also keeping an eye on the market to see if any major support is broken.
- 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: September K.C. wheat has retreated following the key reversal on 7/25 and is poised to test the 735 – 745 support area, which coincides with this year’s lows. Additionally, the market is showing signs of being oversold, and is considered supportive if prices reverse higher. If prices do reverse to the upside, overhead resistance lies near 830.
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: Following the bearish reversal on 7/25, the market has retreated and is oversold, which could be supportive if prices reverse higher. For now, support below the market may be found near the psychological support level of 800, while resistance remains above the market near 950.
Other Charts / Weather
