Grain Market Insider: July 26, 2023
All prices as of 1:45 pm Central Time
| Corn | ||
| SEP ’23 | 540.25 | -17.25 |
| DEC ’23 | 548.25 | -17 |
| DEC ’24 | 532 | -9.5 |
| Soybeans | ||
| AUG ’23 | 1546.25 | 30.75 |
| NOV ’23 | 1420 | 0 |
| NOV ’24 | 1306.75 | -1.25 |
| Chicago Wheat | ||
| SEP ’23 | 720 | -40.25 |
| DEC ’23 | 742.25 | -38.5 |
| JUL ’24 | 760.75 | -27.5 |
| K.C. Wheat | ||
| SEP ’23 | 865.25 | -47.5 |
| DEC ’23 | 877.25 | -43.5 |
| JUL ’24 | 837.75 | -31.5 |
| Mpls Wheat | ||
| SEP ’23 | 895.75 | -36.25 |
| DEC ’23 | 907.5 | -34.5 |
| SEP ’24 | 851.25 | -16.25 |
| S&P 500 | ||
| SEP ’23 | 4586.5 | -9.5 |
| Crude Oil | ||
| SEP ’23 | 78.74 | -0.89 |
| Gold | ||
| OCT ’23 | 1989.4 | 6.3 |
Grain Market Highlights
- Beneficial rain in parts MN, WI, and northern IL, a lack of fresh bullish news, and carryover weakness from the wheat market led to weakness and profit taking in the corn market.
- The soybean market closed wildly mixed with August and September likely getting support from strong crush margins, while November and the deferred contracts were unchanged on weakness from soybean oil and neighboring grain markets.
- Despite the mixed close in soybeans, strong demand for soybean meal continues to support meal prices, while reports of a 51% increase in Indonesian palm oil exports vs last month weighed on soybean oil.
- High initial spring wheat yield estimates from the North Dakota spring wheat tour, and no new reports of Russian attacks on Ukrainian grain terminals led to a sharply lower close in all three wheat classes with K.C. leading the way.
- Some of the general weakness in the markets today could be contributed to the anticipation of today’s .25% interest rate increase by the Federal Reserve. While it has been generally thought that the Fed would pause any further increases after today, the Fed left the door open for another rate hike down the road.
- To see the current US 6-10 and 8-14 day temperature and precipitation outlooks courtesy of the Climate Prediction Center, 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 likely saw some profit taking following the recent runup and yesterday’s choppy price action since there was little fresh news to help the bull camp push prices higher. Additionally, pressure from a sharply lower wheat market spilled over into the corn market and helped lead prices lower.
- Ethanol production for the week ending July 21 in today’s EIA report was friendly at 1.094 mil. barrels/day, 36k b/d above expectations and exceeded the 2018 record of 1.074 mil. b/d. Corn used for ethanol production reached 110 mb, which is above the pace needed to reach the USDA’s forecast. Despite the strong production numbers, ethanol stocks were steady at 23.2 mil. barrels, suggesting strong gasoline demand.
- The lack of any reports of new attacks on Ukrainian grain facilities along the Danube River likely contributed to the selling in the corn and wheat markets as participants took out some near-term risk premium. Also in response to the recent attacks on the Danube River facilities, the EU has also pledged to help Ukraine export almost all its grain via road and rail connections through bordering countries.
- According to Britain’s UN ambassador Barbara Woodward, Russia may have laid new mines in the waters near Ukrainian ports in the Black Sea and that the Russian military may target civilian ships in the area.
- Parts of Minnesota, Wisconsin, and northern Illinois received between 1.5” – 3” of rain over the last 24 hours. Michigan and Wisconsin again are expected to receive decent amounts over the next few days, while much less is expected for the rest of the Midwest, with hot temperatures expected in the Western Corn Belt.
Above: In mid-July the corn market was oversold and posted a double bottom at 474. Since then, it has rallied and retraced about 62% of the prior down move toward the 50-day moving average. While the short-term trend remains up, the market is consolidating and becoming overbought. More bullish news will be needed for the market to forge through the recent highs toward the 595 – 625 resistance area. Below the market, nearby support may be found near 520, with key support near the recent 474 low.
Soybeans
Action Plan: Soybeans
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
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 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 mixed with August and September posting significant gains, while the deferred contracts ended relatively unchanged. Soybean meal supported soybeans today with a higher close, while soybean oil ended lower. While August Board Crush was down 32 cents, closing at 249 cents/bu today, soybean crush incentives have also been very high, adding to the support of nearby soybeans.
- Soybeans also received support from news on the export wire with two soybean sales reported today. The first sale was for 272,000 metric tons sold to unknown destinations for 23/24 and the second sale was for 229,000 metric tons again to unknown destinations for the 23/24 marketing year. The purchaser could have been China stocking up on supplies.
- Soybean oil was dragged lower by another poor close in palm oil futures, but soybean meal closed higher for the ninth time in the past ten trading days on good export sales and new crop sales that are reportedly 32% higher than a year ago.
- Weather forecasts are hot and dry into Saturday for most of the Midwest, but some northern states have been receiving rain, and the 2-week forecast is showing precipitation levels closer to normal. Private yield scouts are estimating yields between 50.5 bpa and 51 bpa, below the USDA’s estimate of 52.0 bpa.
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. Since the roll the September contract has rallied to fill the gap and is poised to test the 1490 – 1505 resistance area of the recent highs. If prices retreat, initial support below the market is near 1400 with further support being in the 1350 – 1390 area.
Wheat
Market Notes: Wheat
- Wheat closed sharply lower in all three US futures classes. Ealy weakness may have stemmed from anticipation that the Fed would issue another interest rate increase today. This afternoon it was announced that they did in fact raise rates to help tame inflation, but this also renewed recession fears by leaving the door open for another rate hike.
- The first day of the spring wheat crop tour in North Dakota resulted in a yield estimate of 48 bushels per acre. While the average is around 40 bpa and last year’s yield was 48.9 bpa.
- Putin met with African leaders to discuss grain exports to their nations. Meanwhile, Ukraine continues to ask the EU for alternative methods of exporting their grain. So far, there have been no additional headlines of Russian attacks on Ukrainian ports or grain facilities.
- Russia remains the world’s cheapest source of wheat and is reportedly $50 per ton below that of Baltic or European offers.
- According to the International Monetary Fund, Russia’s withdrawal from the Black Sea grain deal could result in grain prices increasing by 10-15%.
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 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: Rising tensions in the Black Sea have fed the rally that tested the June high. Prices have become overbought and retreated. New bullish input will likely be needed to turn prices back higher and test the heavy resistance area of 777 – 807-1/2 between the recent high and the February high. If prices do retreat, initial support may be found near 690 – 700, and again around 610 – 650.
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 at 11-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 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 September K.C. wheat contract posted a bearish reversal on 7/25 after testing heavy resistance near 920. Prices have become over bought and retreated. Support below the market is near 830 – 842, with further support near 763 – 778. Should prices reverse higher, heavy resistance remains in the 920 – 930 area.
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. This year has been marked with volatility from adverse weather to geopolitical disruptions and has given us historically good prices to begin making early sales. 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 will continue to consider making sales recommendations if prices improve while also keeping an eye on the downside should prices break support.
Above: September Minn. wheat’s rally of nearly 180 cents to test last winter’s highs culminated in a bearish reversal after the contract became mildly overbought. Prices have since retreated and may test the 865 – 845 initial support area, with further support near 800. If more bullish input is received, the market could turn higher again to retest the heavy resistance area near 950.
Other Charts / Weather
