Grain Market Insider: July 19, 2023
All prices as of 1:45 pm Central Time
| Corn | ||
| SEP ’23 | 545.5 | 16.75 |
| DEC ’23 | 553 | 18.5 |
| DEC ’24 | 541 | 11 |
| Soybeans | ||
| AUG ’23 | 1491.5 | -0.5 |
| NOV ’23 | 1408.75 | 13.5 |
| NOV ’24 | 1295 | 13.75 |
| Chicago Wheat | ||
| SEP ’23 | 727.75 | 57 |
| DEC ’23 | 745.5 | 55 |
| JUL ’24 | 762.5 | 45.25 |
| K.C. Wheat | ||
| SEP ’23 | 866.75 | 39.5 |
| DEC ’23 | 872.5 | 40.25 |
| JUL ’24 | 840.25 | 40.5 |
| Mpls Wheat | ||
| SEP ’23 | 897.25 | 19.75 |
| DEC ’23 | 906 | 19.5 |
| SEP ’24 | 838.5 | 23.5 |
| S&P 500 | ||
| SEP ’23 | 4596.25 | 8.5 |
| Crude Oil | ||
| SEP ’23 | 75.34 | -0.32 |
| Gold | ||
| OCT ’23 | 1999.8 | 0 |
Grain Market Highlights
- A continued hot and dry forecast, and the addition of more war premium due to rising tensions in the Black Sea, led December corn to close above its 100-day moving average.
- Soybeans closed higher for the fifth day in a row as concerns increase over hot and dry conditions for the remainder of July and the closure of the Black Sea corridor.
- Soybean oil likely gained strength in reaction to damage at an Odesa veg oil terminal in Ukraine, while December soybean meal posted a bearish reversal on the daily chart, closing lower on the day after making new highs for the move.
- Increased tensions in the Black Sea region led to more short covering in Chicago wheat which traded limit up at one point in the session, like KC, and led the wheat complex to a strong close for all three classes.
- To see the current US 6 – 10 day and 8 – 14 day Temperature and Precipitation outlooks 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. 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. Now, the threat of dry weather again has rallied Dec corn more than 80 cents off that July 13 low. 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 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 January 2, 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.
Market Notes: Corn
- The corn market added weather and war premium to its value for another session on Wednesday, as prices pushed through resistance, triggering strong money flow into the corn market.
- Increasing tensions in the Black Sea region helped trigger short covering. A second attack on the Odesa port in Ukraine may have damaged some wheat supplies, and an announcement by the Russian Defense ministry regarding ship traffic in the region to be treated as military supply ships triggered a limit higher move during the day in wheat futures, helping support corn prices as well.
- Weather forecasts have turned significantly drier over the next couple weeks, and temperatures are moving to a warmer trend. Weather models have moved potential rainfall out of the forecast or pushed the potential further south on maps.
- Technically, the corn market traded through the 100-day moving average on Dec futures and may be targeting the 200-day moving average at $5.75. The strong close will likely lead to additional buying and short covering in the market.
- Demand remains a concern and the USDA will release weekly export sales on Thursday morning. Expectations for corn export sales to stay at a slow pace, which will now be limited by the recent price rally.
Above: In mid-July the corn market was oversold and posted a double bottom at 474. Since then, it has rallied significantly toward the 50-day moving average. While the market has upward momentum, it may run into resistance near the 50-day MA. If the market closes above the 50-day MA, it could signal a change in trend to higher, though heavy resistance remains up towards 595 – 625 and it would need further bullish news to break through. Below the market, key support lies near the recent 474 low.
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 along with both corn and wheat but slipped from their earlier highs. Soybean meal had early gains but ended only slightly higher in the front two months and lower in the deferred contracts, while soybean oil gained over 3% in Aug.
- Today marks the fifth consecutively higher close for soybeans in a market that is mainly being driven by weather which is forecast to be hot and dry over at least the next two weeks, along with the cancellation of the grain deal which will impact sunflower meal and oil exports out of Ukraine.
- The forecast analysis released today is expecting hot and dry conditions over the next 10 days, and early August is expected to produce much of the same weather. Late August is more difficult to forecast due to tropical cyclones and cooler air out of Canada, and this period will be critical for pod filling.
- Brazilian soy exports reached 8.8 mmt in July compared to 7.0 mmt the same month a year ago as demand from China picks up, and Brazil maintains the competitive advantage with prices far below offers from the US.
Above: The soybean charts rolled from the August to the September contract on 7/17 with the 75-cent discount to the September represented by the 52-cent gap on the chart between 7/14 and 7/17. To fill the gap, the market will need additional bullish news to continue higher and trade through the heavy resistance area of 1490 – 1505. If not, and prices retreat, initial support below the market is near 1400 with further support being in the 1350 – 1390 area.
Wheat
Market Notes: Wheat
- Both September Chicago and KC wheat briefly traded limit up at 60 cents higher, 730-3/4 and 887-1/4, before closing just below. News broke mid-morning that Russia stated as of July 20th any Black Sea vessel en route to Ukraine would be considered carriers of military cargo. With the recent closure of the export corridor, this further heightens tensions and is adding war premium to the market.
- In addition to the statement by Russia, it was reported that a Russian missile attack destroyed 60,000 tons of grain in the port city of Odesa, Ukraine. This added fuel to the fire, with more support for the wheat rally.
- The US Dollar index is beginning to trend higher again and is back above the 100 level (at the time of writing). By some technical indicators it could also be considered oversold, meaning that it could be due for a correction higher, which may lead to more pressure on the already struggling export market down the road.
- Paris milling wheat futures gapped higher, with the front month September contract gaining 19.25 Euros per metric ton. This is a massive jump and is likely tied to the Russia / Ukraine news as well and is the highest close for that contract since April.
- Aside from today’s headlines, US Midwest weather looks warm and dry for the next week or two, which should provide support to the grain markets as a whole. The second week of the forecast also brings hotter temperatures, with the potential for 90 degrees and higher in many spots.
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 recent closure of the Black Sea corridor, and continued weather concerns in the northern Plains, Canada, Europe, and Russia, still leave 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 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. While prices have been relatively range bound recently, heavy resistance remains near 730 – 770, the June high, with nearby resistance around 690 – 700. If prices fall back, support below the market may be found between 650 – 610, and again near 570, the May low.
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.
Action Plan: Mpls Wheat
Calls
2022
No Action
2023
No Action
2024
No Action
Cash
2022
No Action
2023
No Action
2024
Active
Sell SEP ’24 Cash
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.
- Grain Market Insider recommends selling a portion of your 2024 spring wheat crop. So far this year we have seen some of the volatility from the 2023 crop, with its challenges from late planting and now dryness, be carried over to the 2024 crop. We are now at that time of year where there are typically more headwinds to prices than tailwinds, and to begin getting some early sales on the books. Now that the market has rallied to within 15 cents of the June high where there is significant overhead resistance, Insider recommends making a sale on a portion of your 2024 spring wheat production by using either SEPT ’24 Minneapolis Wheat futures contracts or a SEPT ’24 HTA contract, so basis can be set at a later, more advantageous time. While $8 prices are not the $9 or $10+ that we have seen in recent years, and weather and geopolitical disruptions can still shock the market higher, they still represent historically good prices to begin making sales.
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.
Other Charts / Weather
