Grain Market Insider: July 17, 2023
All prices as of 1:45 pm Central Time
| Corn | ||
| SEP ’23 | 499.25 | -7.25 |
| DEC ’23 | 506 | -7.75 |
| DEC ’24 | 510.75 | -6.25 |
| Soybeans | ||
| AUG ’23 | 1484 | 3.75 |
| NOV ’23 | 1378 | 7.25 |
| NOV ’24 | 1271.25 | 1.25 |
| Chicago Wheat | ||
| SEP ’23 | 653.75 | -7.75 |
| DEC ’23 | 673.75 | -7 |
| JUL ’24 | 699.75 | -8 |
| K.C. Wheat | ||
| SEP ’23 | 815.25 | -13.75 |
| DEC ’23 | 820 | -13.5 |
| JUL ’24 | 784.75 | -7.5 |
| Mpls Wheat | ||
| SEP ’23 | 878.25 | -6 |
| DEC ’23 | 885.75 | -3.75 |
| SEP ’24 | 805.5 | 5.5 |
| S&P 500 | ||
| SEP ’23 | 4555 | 18.25 |
| Crude Oil | ||
| SEP ’23 | 74.08 | -1.24 |
| Gold | ||
| OCT ’23 | 1978.4 | -5 |
Grain Market Highlights
- Corn traded lower for most of the day after it gapped higher on the evening’s open following the expiration of the Black Sea Grain Initiative, in a “buy the rumor, sell the fact” type of fashion, as traders likely felt the corridor’s closure was already priced into the market.
- The soybean market was caught between weak export inspections and NOPA crush demand, and a concerning weather forecast that shows hot and dry conditions in much of the WCB, and the northern and central Plains, two weeks out.
- Weak demand likely outweighed the anticipated closure of the Black Sea export corridor as all three wheat markets sold off after the morning’s reopening led by the K.C. contracts.
- The US Dollar continues to trade at its lowest levels in 15 months, which is generally supportive to the commodity sector as a lower USD makes US exports lower on the world market. The financial markets are currently predicting a 96% likelihood of a 0.25% rate increase at next week’s Fed meeting.
- To see the current US Drought Monitor and maps showing the current US 8 – 14 day Temperature and Precipitation outlook courtesy of NOAA, 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
No Action
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. In the month of June, December corn experienced a 137-cent high to low, swing primarily on weather and production concerns. Since then, planted acreage figures have increased by about 2 mil. acres and pushed the current 2023 carryout estimate north of 2.2 billion bushels, which hasn’t been seen since the 2018/19 crop year. 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, yielded a combination of options commonly known as a Strangle, which benefits from dramatic market moves either up or down. Considering crop conditions continue to be low with over 60% of the crop experiencing drought, changing weather can still affect final production and rally prices, at which point the 610 calls should gain in value and protect any already sold bushels if the market makes new highs.
- No action is currently recommended for 2024 corn. So far this year the market has seen an extreme amount of volatility with drought, less than stellar crop conditions, and supply and demand estimates that currently put 2023 ending stocks north of 2.2 billion bushels, which would carry over into the 2024 crop year. While growing conditions can still change in the weeks ahead, we are at the time of year when there are more headwinds to rising prices than tailwinds. Grain Market Insider recently recommended making a sale on your 2024 crop, and we currently see no present opportunity to recommend any additional sales at this time. We’ll be watching for another opportunity to suggest adding to early sales levels between now and the beginning of September.
Market Notes: Corn
- Export inspections for the week ending July 13 came in at the lower end of expectations at 14.3 mb. Though the number was an increase from the prior week, they are still light, and year-to-date totals are 33% behind last year, though in line with the updated USDA forecast.
- Russia terminated the Black Sea Grain Initiative that allowed Ukraine to ship ag goods out through the Black Sea. Russia claims the deal was terminated because their terms in the agreement were not fulfilled.
- Part of the sell off in the corn market may be, “buy the rumor, sell the fact,” in that the termination of the deal may have already been priced into the market. The USDA, in its latest report, may have already accounted for the closure by forecasting Ukraine’s 23/24 corn exports at only 19.5 mmt, down 30% from 22/23.
- Since the recent break in prices, China has been an active buyer of South American and Ukrainian corn which is supportive of US prices, in that overall prices may have fallen enough to stimulate demand. Relative to the world market, US prices have become much more competitive since Brazil’s export prices have risen about $1.25 on slow farmer selling. It’s also been reported that China bought 6 or 7 cargoes for July – Sept delivery.
- The USDA will release its updated estimate for US crop conditions this afternoon with some calling for a 1 – 2% increase in the Good/Excellent ratings from last week’s 55% rating.
Above: Favorable weather and an estimated 2023 carryout north of 2 bil bushels pushed the market through support that was in place since January 2021 and posted a double bottom at 474. This, and the fact that the market is oversold, is supportive if reversal action occurs. In that event, initial resistance could be found between 502 – 538, with heavy resistance up towards 595 – 625. Below the market there may not be much support above 390 – 415, the November ’20 lows, if the corn market falls below the recent low of 474.
Above: Money Corn Managed Money Funds net position as of Tuesday, July 11. Net position in Green versus price in Red. Managers net sold 44,843 contracts between July 3 – 11, bringing their total position to a net short 63,052 contracts.
Soybeans
Action Plan: Soybeans
Calls
2022
No Action
2023
No Action
2024
No Action
Cash
2022
No Action
2023
Active
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 sees an active opportunity to sell a portion of your 2023 soybeans. 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
- Soybeans ended the day higher, but backed off their early morning highs that were led by Russia’s exit of the Ukrainian grain deal. The news initially caused soybean oil to rally because Ukraine exports a large amount of sunflower oil, but by the end of the day, excitement wore off and soybean oil closed lower, while soybean meal maintained a higher close.
- Soybean export inspections were soft today which did not help support futures. Inspections totaled 5.7 mb for the week ending Thursday, July 13. Total inspections for 22/23 are now at 1.833 bb, down 5% from the previous year.
- NOPA crush numbers for the month of June were released this morning and only 165 mb of soybeans were crushed with 1.690 bil pounds in soybean oil stocks. The number of soybeans crushed was well below expectations of 170 – 173 mb as were oil stocks, which were expected to be closer to 1.8 bil. pounds.
- The 8 to 14-day forecast is showing drier and warmer conditions, but the rain over the past two weeks should be enough to improve the good to excellent ratings for this week’s Crop Progress report. The extended forecasts for August may give some insight into conditions for pod fill season.
- China’s economy has been a bearish factor as trade has been concerned over the lack of growth. Today those fears were confirmed after second quarter GDP readings showed a slowing economy, which grew at a lower-than-expected rate of 6.3%. China has been purchasing Brazilian beans, but purchases from the US have been very slow.
Above: The soybean charts have rolled from the August to the September contract where heavy resistance lies between 1390 – 1430 in September. To continue higher, the market continues to need an influx of bullish news to offset the negative influence of the bearish reversal that was posted on July 12. 1490 – 1505 remains the next heavy resistance area should the market break through 1390 – 1430. If not, and prices retreat, initial support below the market is near 1425 with further support being in the 1350 – 1390 area.
Above: Soybeans Managed Money Funds net position as of Tuesday, July 11. Net position in Green versus price in Red. Money Managers net sold 6,394 contracts between July 3 – 11, bringing their total position to a net long 82,748 contracts.
Wheat
Market Notes: Wheat
- Overnight, wheat traded higher based on news that Russia decided to end the Black Sea Grain Initiative. However, by the end of today’s session, all three US wheat futures classes posted losses. This could perhaps be due to the results of the deal already being “baked in” to prices, with many traders anticipating the corridor being closed.
- The USDA pegged weekly wheat inspections at 9.3 mb, bringing total 23/24 inspections to 65 mb, down 16% from last year. With the USDA estimating wheat exports at 725 mb, the current pace of exports is below what is needed to meet that number.
- The US Dollar remains below the 100 mark but may be finding some support after the recent sharp decline. In the long run, a lower US Dollar should help the export market, but if it begins to trend higher again, that will add to pressure on commodities, especially wheat.
- There is some concern, globally, about spring wheat supply. But here in the US, export demand is low due to other world origins being cheaper and may keep pressure on MPLS futures.
- According to the National Bureau of Statistics, China’s summer wheat harvest of 146.13 mmt, was 0.9% below last year’s. This is being attributed to the rain damage they received during the growing season.
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. 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 have fallen off their recent highs, 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: 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.
Above: Chicago Wheat Managed Money Funds net position as of Tuesday, July 11. Net position in Green versus price in Red. Money Managers net bought 1,878 contracts between July 3 – 11, bringing their total position to a net short 52,128 contracts.
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 conditions have improved and there are reports of better-than-expected US yields, questions remain about the world wheat supply with the closure of the Black Sea corridor, dryness in Russia, the Canadian Prairies/Northern US Plains, and Europe. 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.
- 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.
Above: K.C. Wheat Managed Money Funds net position as of Tuesday, July 11. Net position in Green versus price in Red. Money Managers net bought 824 contracts between July 3 – 11, bringing their total position to a net long 14,584 contracts.
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.
- No action is recommended for the 2024 crop. With weather dominating the market right now, 2024 prices can be heavily influenced by 2023 carryover estimates and prices. As dryness increases in the spring wheat areas and with major exporting countries’ stocks at 11-year lows, Grain Market Insider would like to see September futures prices in the 800 – 825 range before we would consider suggesting making any sales recommendations, while keeping an eye on the recent lows for any violation of support.
Above: In the month of June, the September contract rallied towards the 200-day moving average and into resistance between 889 and 940, the April and December highs respectively. The market has since retreated and slowly climbed back, and it will need additional bullish news to be able to trade through the recent highs. Should the market fall back, initial support may be found between 805 – 845 with further downside support between 770 and 730.
Above: Minneapolis Wheat Managed Money Funds net position as of Tuesday, July 11. Net position in Green versus price in Red. Money Managers net bought 2,311 contracts between July 3 – 11, bringing their total position to a net long 4233 contracts.
Other Charts / Weather
