Grain Market Insider: June 2, 2023
All prices as of 1:45 pm Central Time
| Corn | ||
| JUL ’23 | 609 | 16.5 |
| DEC ’23 | 541.25 | 11.25 |
| DEC ’24 | 516 | 5.5 |
| Soybeans | ||
| JUL ’23 | 1352.5 | 23 |
| NOV ’23 | 1183.75 | 14.75 |
| NOV ’24 | 1148.25 | 13.25 |
| Chicago Wheat | ||
| JUL ’23 | 619 | 8.25 |
| SEP ’23 | 632.25 | 8 |
| JUL ’24 | 682.5 | 9.75 |
| K.C. Wheat | ||
| JUL ’23 | 812.25 | 9.75 |
| SEP ’23 | 807.25 | 9.75 |
| JUL ’24 | 778.75 | 7.75 |
| Mpls Wheat | ||
| JUL ’23 | 789 | 9 |
| SEP ’23 | 790.75 | 8.25 |
| SEP ’24 | 767.25 | 6 |
| S&P 500 | ||
| SEP ’23 | 4334.5 | 64.75 |
| Crude Oil | ||
| AUG ’23 | 71.72 | 1.52 |
| Gold | ||
| AUG ’23 | 1967.3 | -28.2 |
Grain Market Highlights
- Corn rallied sharply to end the week as weather models continued their dry bias for much of the Corn Belt through the next week to ten days.
- Soybeans continued their move higher with help from soybean oil, as well as outside markets.
- Soybean oil futures posted a second straight session of strong gains moving over 3% higher, while soybean meal slumped slightly despite once again strong weekly net export sales.
- All three wheat classes continued higher following the strength of the corn market and commodities as a whole.
- Total nonfarm US payrolls increased by 339,000 jobs in May, this was well above the expectations of the market and spurred buying in both commodities and the stock market.
- To see updated US 8-14 Day Temperature and Precipitation Outlooks from 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
New Alert
Exit (Sell) All DEC ’23 560 Calls ~ 37c
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 action is recommended at this time for Old Crop.
- No action is recommended at this time for Old Crop. July corn has had nearly a 60-cent rally in the last couple of weeks. The selloff from the recent high of 606-3/4 shows there is still a lot of volatility in the market, and that a changing weather forecast can push the market significantly in either direction. If you still have Old Crop to sell, consider using this rally to begin pricing some of those bushels. Don’t forget, there is about a 75-cent inverse between the July and September futures contracts, which could be lost when bids get rolled from one contract to the next in the next few weeks.
- For 2023 New Crop corn, Grain Market Insider recommends liquidating December ‘23 560 calls. Since our previous recommendation to purchase December ‘23 560 and 610 calls, the December ‘23 corn contract has rallied enough that you should be able to liquidate your 560 call position with enough equity to offset much of the original premium outlay for both options and leave you with a long December 610 call position for a nearly net neutral premium cost. The open long December 610 call position will afford you the potential to gain more equity in the event the December corn futures contract continues to rally, thus providing you with a level of “re-ownership” on previous sales and giving you more confidence to make further sales at higher prices. The recent rally off the May low of 490-3/4 shows how volatile December corn can be on the turn of a weather forecast with little risk premium built into prices and a full growing season ahead of us. With dryness building in the Midwest, and an estimated fund short position in excess of 95k contracts, we continue to target the 590 – 630 range in the December futures to suggest adding cash sales. If you don’t happen to have any New Crop sold, you should consider targeting the 550 – 560 area to begin pricing bushels.
- Continue to hold current sales levels for the 2024 crop year. We will look for opportunities to make further sales as we move through the 2023 growing season as weather volatility builds.
Market Notes: Corn
- Corn futures turned higher off early session lows as money flowed into the market, supported by “risk on” trade across the broader markets, and weather models turning drier for the eastern Corn Belt next week.
- The CBOE Volatility Index (VIX), which measures fear in the markets, pushed to its lowest level in over 23 months, allowing strong money flow into both equity and commodity markets.
- Demand concerns are still a major factor in the corn market. Weekly exports sales for corn were disappointing with old crop sales at only 7.4 mb and new crops sales 12.3 mb last week. Both were on the lower end of expectations as the U.S. struggles against foreign export competition.
- July corn futures had a strong close over the 50-day moving average for the first time since April 19th, and the strong price action could lead to additional buying support on Sunday night’s open.
- Next week, the corn market will likely stay volatile focusing on daily weather forecasts and preparing for the June WASDE report to be released on Friday, June 9.
Above: The July contract is beginning to show signs of exhaustion, but Wednesday’s bullish reversal is a positive sign that there is support near 575. If current prices can hold and close above the 50-day moving average near 610, the market would be poised to test April’s high of 647-1/2. Support below the market rests between 550 and 530, and again near the 2021 September low of 497-1/2.
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
- May was a rough month for soybeans with a 175 cent range, but the market is consolidating, and found support just above 1270. July soybeans continue to be oversold with a tight Old Crop balance sheet, and with dryness concerns building and a seasonal window that is conducive for upside volatility and opportunity, continue to hold on progressing any Old Crop sales for now.
- We recommend not adding to current sales levels for the new 2023 crop at this time. A quick planting pace with favorable conditions and South American competition have pressed US prices down nearly 17% from the beginning of the year. The potential remains for a tighter New Crop balance sheet, as the US Drought Monitor map remains concerning. We would consider recommending the next sales in the 1300 to 1350 area.
- Continue to hold off on pricing the 2024 crop. We look to make sales further into the 2023 growing season when selling opportunities tend to improve seasonally.
Market Notes: Soybeans
- Soybeans ended the day higher thanks to strong gains from soybean oil, while soybean meal closed lower. July soybeans gained 14-¾ cents on the week, while Nov beans lost 6 cents. The stock market posted significant gains, which helped support commodities.
- The debt ceiling bill being passed by both the House and Senate calmed many traders’ fears and resulted in a 600-point gain in the Dow and spurred buying in the commodity market. The debt ceiling deal will be good until January 1, 2025.
- The Midwest has been dealing with dryness and has only received very sparse scattered showers. The dryness has helped support prices, but good rains are forecast for the second half of June. If those promised rains don’t fall, futures could continue higher.
- Export sales for the week ending May 25 showed an increase of 4.5 mb for soybeans in 22/23, which was up 7% from the previous week. Sales for 23/24 were 11.1 mb and export shipments of 8.5 mb and were below the 13.3 mb needed each week to achieve the USDA’s estimates.
Above: The market continues to show signs of being oversold and Wednesday’s bullish reversal indicates there is support near 1270 and follow through buying could lead to a market bounce. The next area of support could be found between 1237 – 1214 with nearby resistance near 1350 and 1420.
Wheat
Market Notes: Wheat
- The USDA reported net cancellations of 7.7 mb of wheat export sales for 22/23, but an increase of 17.1 mb for 23/24.
- Wheat traded both sides of neutral today, but ended with a positive close. Spillover from higher corn and soybeans was likely a contributing factor.
- A combination of weather and higher outside markets also lent support to the grain markets today. As of writing, the Dow is up over 700 points and crude oil is up about $1.50 per barrel, coming after the debt ceiling deal was passed by congress and strong jobs data this morning.
- Paris milling wheat was also higher today, as it is being reported that Russia is again refusing to register Ukrainian grain vessels. Tensions between the two warring nations are high, despite the recent extension of the export deal.
- Managed funds are said to be short 605 mb of SRW wheat – that is more than the USDA’s estimate of 2023 production (406 mb). This could lead to a short covering rally if there is a catalyst to light the fuse.
- The rains have subsided in China’s wheat growing regions. However, the damage may already be done. Crop damage is likely, and at a minimum, there will be quality downgrades.
Action Plan: Chicago 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
Chicago Wheat Action Plan Summary
- No new action is recommended for the 2022 crop. The market is down more than 300 cents from its October high and has become extremely oversold. The July contract may also post its 8th consecutive down month in a row at prices not seen since early 2021, even though wheat inventories of major exporting countries are anticipated to fall to 16 year lows. With the market being this oversold and a fund net position short nearly 113k contracts, we continue to eye the 640 – 670 range to clean up and market any remaining Old Crop inventory.
- We recommend not taking any action on the 2023 crop at this time. While the window of opportunity is quickly closing for Old Crop, it is still wide open for better opportunities ahead for New Crop. We are currently targeting a more aggressive window of 720 – 800 to suggest advancing sales and move more New Crop inventory.
- No action is currently recommended for the 2024 crop. Although the market is down nearly 17% from the beginning of the year, the July ’24 contract is finding support near 2021 lows. With major exporting countries’ stocks expected to fall to 16 year lows, and the great amount of economic and geopolitical uncertainty in the world, it wouldn’t take much to trigger a 23% retracement of the 2022 highs, toward the 700-750 level, which we are targeting to suggest adding coverage on next year’s crop.
Above: The market is currently oversold and testing support between 593 and 565, with the next area of possible support below the market near the September ’20 low of 533-1/4. Resistance above the market could be found between 670 and 724.
Action Plan: KC 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
KC Wheat Action Plan Summary
- No new action is recommended for the 2022 crop. Though most, if not all, of your Old Crop 2022 wheat may be sold, consider storing any remaining Old Crop, if possible, in anticipation of a short new crop this year, and marketing it along with the new crop.
- We continue to look for better prices before making any 2023 sales. Crop ratings overall are at historically low levels, and production concerns persist. Additionally, any unforeseen geopolitical changes in the Black Sea region could cause the market to bounce and retrace 25% towards the 2022 high.
- Patience is warranted for the 2024 crop. The 2024 market has limited liquidity, and it may be until mid-summer before recommendations are posted.
Above: Wednesday’s bullish reversal indicates that there is support near 760, and any follow through buying could be supportive with the market showing signs of being oversold. Resistance may be found above the market between 833 and 850, with further support resting below the market near 736-1/4.
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 action is currently recommended for the 2022 crop. With planting concerns and a seasonal tendency for old crop prices to increase over the next 4-5 weeks, we are continuing to wait for better prices to develop. The calendar is becoming a constraint though, and we’ll be looking to part with any remaining old crop bushels by mid-June or so.
- No action is recommended on the 2023 crop at this time. The September ’23 contract had a 120-cent range in the month of May where it found support just above 770. While the planting pace has largely caught up to the 5 year average, dryness in some areas is increasing. With the market still largely oversold and a full growing season ahead of us, we are not looking to make any sales right now.
- We continue to be patient to market any of the 2024 crop. The market for the 2024 crop continues to be illiquid, and it may be early summer before we post any recommendations, continue to be patient.
Above: The July contract continues to be weak and showing signs of being oversold. Additionally, open interest is falling, indicating liquidation. The market is showing signs of being oversold, which could be supportive if buying returns. Resistance currently sits between 820 and 855 and then the recent high of 888-1/2. Support below the market may be found between 770 and 760.
Other Charts / Weather
