Grain Market Insider: July 12, 2023
All prices as of 1:45 pm Central Time
| Corn | ||
| SEP ’23 | 476.25 | -18.25 |
| DEC ’23 | 483.75 | -17.75 |
| DEC ’24 | 496 | -9.25 |
| Soybeans | ||
| AUG ’23 | 1444.25 | -27.25 |
| NOV ’23 | 1327.75 | -32.5 |
| NOV ’24 | 1227 | -24 |
| Chicago Wheat | ||
| SEP ’23 | 632.75 | -27.75 |
| DEC ’23 | 652.25 | -25.75 |
| JUL ’24 | 681.75 | -20.5 |
| K.C. Wheat | ||
| SEP ’23 | 803 | -14 |
| DEC ’23 | 807 | -13.5 |
| JUL ’24 | 767.75 | -14 |
| Mpls Wheat | ||
| SEP ’23 | 853.5 | -10.5 |
| DEC ’23 | 859.5 | -8.5 |
| SEP ’24 | 793 | 0.25 |
| S&P 500 | ||
| SEP ’23 | 4515 | 41.5 |
| Crude Oil | ||
| SEP ’23 | 75.6 | 0.89 |
| Gold | ||
| OCT ’23 | 1982.1 | 25.9 |
Grain Market Highlights
- A carryout projection of 2.262 billion bushels for the 23/24 crop year pushed traders into sell mode, sending DEC ‘23 corn prices to levels not seen since September 2021.
- The USDA’s carryout estimates for 22/23 and 23/24 crops far exceeded the upper end of trade expectations and sent the soybean complex lower, creating a bearish reversal following today’s report.
- The drag of the bearish soybean numbers pulled both soybean meal and oil lower, but had the effect of being friendly to DEC Board Crush, which traded 7-cents higher following the report.
- Higher 23/24 production estimates and carryout projections from today’s USDA report sent the wheat markets lower, with Chicago leading the way down with losses nearing 28 cents in the September contract.
- The June Consumer Price Index report was released today and showed a 0.2% increase versus an expected increase of 0.3%, reducing the chances of further rate hikes. The US Dollar Index tumbled on the news, which is supportive to commodities, though today’s USDA report outweighed any positive reaction in the grain markets.
- To see the current NOAA US 8 – 14 day Temperature and Precipitation outlooks, scroll down to the Other Charts/Weather Section.
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Corn
Action Plan: Corn
Calls
2022
No Action
2023
No Action
2024
No Action
Cash
2022
No Action
2023
No Action
2024
Active
Sell DEC ’24 Cash
Puts
2022
No Action
2023
No Action
2024
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. December corn rallied 139 cents from its May 18 low to its high on June 21 on weather and production concerns. The market is currently off that high on poor export sales figures and a forecast that shows increased chances of rain in the next couple of weeks. When Dec corn was trading over 620, Grain Market Insider recommended making a cash sale and buying Dec 580 puts to cover more downside. The Dec 580 puts, paired with the previously recommended Dec 610 calls, yields a combination of options commonly known as a Strangle, which benefits from dramatic market moves either up or down. Considering it is still early in the season, with drought and crop production uncertainty it is too soon to know if the market high is in or not. Either way, the Strangle position is prepared. If conditions improve from here and prices make new lows, unsold bushels will be protected with the 580 puts. If it doesn’t rain again and prices skyrocket to new highs, already sold bushels will be protected by the 610 calls.
- Grain Market Inside recommends selling New Crop 2024 Corn. While the market has seen some extreme volatility in recent weeks, we are entering a time of year when prices tend to have more headwinds than tailwinds to the upside. Also, with last week’s surprise acreage jump, continued rain in the forecast and slow demand, the size of the 2023 crop still has the potential to yield a carryout north of 2 billion bushels. A large 2023 carryout in the US, combined with the large corn crop in Brazil, could pose greater headwinds for 2024 prices. With it being the time of year to start getting early sales for next year on the books, and no recent bullish catalyst from the Stocks or Acreage reports, we are suggesting making a sale for the 2024 corn crop using either a DEC ’24 HTA contract or DEC ’24 futures, so the basis can be set at a later more advantageous date. While $5.00 futures is not the $6.00 or $7.00, we’ve become accustomed to the last few years, it’s still historically a good price to be getting some early sales on the books at.
Market Notes: Corn
- The corn market saw strong selling pressure with double digit losses on the session after the USDA WASDE report triggered selling. December corn closed 17-¾ cents lower and established a new low for the move. December corn traded to its lowest point since September 2021.
- The USDA lowered the potential corn yield to 177.5 bushels/acres (-4.0 bu/acre), just above market expectations, but did not adjust the demand side of the balance sheet to establish a new carry out projection of 2.262 billion bushels for the 2023-24 marketing year. This total was in line with analysts’ expectations.
- The USDA lowered old crop export demand by 75 million bushels, and traders in the market pressured corn prices feeling that a projected new crop export demand of 2.100 billion bushels, up 450 mb from 2022-23 projections, will be difficult to reach at current corn price levels.
- The weak price action with corn futures trading near the bottom end of the range on the close will likely trigger additional selling pressure in upcoming sessions.
- The weather stays negative price as a beneficial rain system moved across key areas of the Corn Belt on Wednesday. Forecasts are still looking at an active weather pattern for the majority of the corn belt through the end of July.
Above: The USDA added a bearish 4 million acres to its planted acreage estimate on June 30. The September contract is now extremely oversold and consolidating in the 480 – 505 support level that has been in place since January 2021. The oversold condition of the market would be considered supportive to higher prices if reversal action occurs; if not, there may not be much support until 390 – 415. Overhead lies strong resistance between 595 and 625.
Soybeans
Action Plan: Soybeans
Calls
2022
No Action
2023
No Action
2024
No Action
Cash
2022
No Action
2023
New Alert
Sell NOV ’23 Cash
2024
No Action
Puts
2022
No Action
2023
No Action
2024
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.
- Grain Market Insider recommends selling a portion of your 2023 soybeans today. The USDA shocked the market with bearish expectations for the 2023 soybean crop’s supply and demand. Demand was lowered for both 2022 and 2023 crop years, with an added 25 mbu of 2022 inventory carried over to 2023. The net result being a current ending stocks estimate of 300 mbu for the 2023 crop, a full 50% higher than trade expectations. While the key part of the growing season is still ahead, and production concerns remain, that could turn the market higher again, continued favorable forecasts and improving crop conditions may lead the market to further price erosion. With the very dry conditions that many of you continue to experience, and the tremendous uncertainty that brings to what you’ll have for bushels this fall, we understand if there’s hesitancy to sell anything here. If you are worried about committing physical bushels with a cash sale, consider selling futures or buying put options.
- 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.
Market Notes: Soybeans
- The USDA surprised the market by adding 25 mb to the 22/23 carryout versus an expected 2 mb (255 mb actual carryout vs 232 mb expected), and only dropping 50 mb from the 23/24 carryout numbers from last June to 300 mb, with an estimated yield of 52 bpa. Trade expectations were about 200 mb for 23/24 carryout with a 51.3 bpa yield.
- South American production for 22/23 was left unchanged in today’s report with Brazil’s crop estimated at 156 mmt versus 156.2 mmt expected, and Argentina’s crop estimated at 25 mmt versus 23.6 mmt expected.
- Also in today’s USDA report, global ending stocks for the 22/23 season came in above expectations, as well with an increase of 1.6 mmt to 103 mmt. For 23/24, global stocks were estimated to decrease 2.3 mmt from June to 121 mmt, which is still a record.
- The USDA reported this morning that private exporters reported sales of 105,000 metric tons of soybean cake and meal for delivery to unknown destinations for the 23/24 marketing year. There has been no confirmation yet of China’s rumored purchase of 10 – 14 cargoes of US soybeans off the PNW for October delivery for their reserves.
- Additionally, as of June 29, China has bought just 1.72 mmt of 23/24 US soybeans versus 7.77 mmt for the same time last year.
Above: The soybean market is struggling with heavy resistance in the 1490-1505 area and posted a bearish reversal following the July 12 USDA report. The market reversal is a bearish development and could lead to further price erosion without other bullish information. Initial support below the market is near 1425 with further support being in the 1350 – 1390 area.
Wheat
Market Notes: Wheat
- The USDA estimated 23/24 all wheat production at 1.739 bb versus expectations of 1.677 bb, and 1.665 on the June report. 22/23 wheat carryout was estimated at 580 mb versus expectations of 583 mb. 23/24 carryout came in at 592 mb when the trade was looking for 565 mb.
- The USDA estimated the winter wheat yield at 46.9 bpa, up 2.0 bu from last month’s projection, and for reference, last year’s average yield was 47.0 bpa.
- Aside from today’s WASDE report, weather looks like it will still be a factor for the spring wheat crop. The next 7 days look mostly dry for the northern US Plains and Canadian Prairies.
- Recent Russian drone attacks on the Ukraine port of Odessa are leading to increased tensions and concern that the Black Sea export corridor will not be renewed next week.
- The sharply lower US Dollar Index was not enough to outweigh the negative results of today’s report. Down the road, however, if it continues to trend lower, it may benefit the export market.
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. In the month of June, the September Chicago wheat contract posted a 163-cent range and has largely been a follower of the corn market which has been mostly driven by weather. While demand remains weak, production concerns in parts of the country remain, as does uncertainty surrounding the Black Sea region and the potential for major exporting countries’ inventory to hit 16-year lows. 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. Price volatility has risen in the last couple of weeks due to the changing weather forecasts and current events in the Black Sea. While prices have fallen off their recent highs, plenty of time remains to market next year’s crop. War continues in the Black Sea region, major exporting countries’ stocks expected to fall to 16-year lows, and no one knows what the weather will bring, leaving the market vulnerable to many uncertainties. For now, after recently 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: September wheat rallied nearly 200 cents from the May low to its June high when it encountered heavy resistance and posted a bearish reversal. This technical formation on the price chart is considered bearish and momentum may be adding to the bearish tone. Support below the market may be found between 650 – 610, while resistance above the market rests between 770 – 810.
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. While Crop ratings have improved and the Black Sea export corridor remains open, questions remain about the size of the HRW crop, whether Russia will continue to agree to keep the Black Sea corridor open, and what production looks like in Europe and Australia. We continue to target 950 – 1000 in the July futures as a potential level to suggest the next round of New Crop sales.
- Patience is warranted for the 2024 crop. With continued issues in the Black Sea region and with major exporting countries’ stocks expected to fall to 16-year lows, we are willing to be patient with further sales of New Crop HRW wheat. We are targeting just below the 900 level on the upside while keeping an eye on recent lows for any violation of support.
- 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: Balancing both production and demand concerns, the September contract continues to trade within the 736 – 919 range established in May. The recent downturn in the market has established heavy resistance above the market between 890 – 920, with initial support coming in between 778 – 763 and key support near the May low of 736.
Action Plan: Mpls Wheat
Calls
2022
No Action
2023
No Action
2024
No Action
Cash
2022
No Action
2023
No Action
2024
No Action
Puts
2022
No Action
2023
No Action
2024
No Action
Mpls Wheat Action Plan Summary
- No new action for 2022 Old Crop MINNEAPOLIS Wheat. The market had a nearly 116-cent swing from the May low to the June high and back on weather. While weather and geopolitical events can still affect Old Crop prices, the marketing year for Old Crop is quickly winding down, and any additional upside opportunities may be more difficult to come by before New Crop harvest. 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 the 2022 crop (Cash, Calls, or Puts) as we have moved focus onto 2023 and 2024 Crop Year opportunities.
- 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.
- We continue to hold on pricing the 2024 crop. With the September ‘24 contract about 60 cents from its May 22 low, continued issues in the Black Sea region and major exporting countries’ stocks expected to fall to 16-year lows, we are entering the time frame where we would consider suggesting making sales recommendations while also keeping an eye on the recent lows for any violation of support.
Above: The September contract rallied out of its congestion area on the Front Month Continuous chart towards the 200-day moving average and into resistance between 889 and 940, the April and December highs respectively. With the market off those highs, it will need additional bullish news to be able to trade through them. Should the market continue to fall, support may be found between 770 and 730.
Other Charts / Weather
